The argument that social democracy is only possible in socially homogenous states contains an element of truth but misses the key point. Social gains happen when working people politically fight for them.
The instrument of progress in the first three-quarters of the last century across Europe was the workers movement. Capitalist power, in Northern Europe in particular, found the easiest path to be a compromise with or an acceptance of social democracy. That was especially true in those zones which bordered the old iron curtain: Scandinavia Germany and Austria.
With the demise of reforming left parties (often through self-destruction carried out by the likes of Tony Blair) and the disappearance of the Soviet threat, the balance of power has shifted in favour of capital; and hence workers’ rights are diminishing.