Why do some countries have more skill-selective labour immigration policies than others? Despite general agreement that high-skilled immigrants are economically and socially desirable, some countries extensively select high-skilled from low-skilled labour immigrants, while others do not. While most political economy accounts indicate an explicit connection between relative skill selectivity and welfare states, two different hypotheses emerge regarding the direction of this relationship. The fiscal cost hypothesis puts forward that the tension between welfare state generosity and immigration motivates greater selectivity as states try to reconcile fiscal pressures for closure with continuing needs for immigration. The decommodification hypothesis, in contrast, holds that the capabilities of generous welfare states to decommodify their citizens also decrease rationales to be more skill-selective towards labour immigrants. Developing an original measure of skill selectivity in labour immigration policies for 20 developed democracies from 2000 to 2010, we test these two hypotheses. Our results indicate that differences in decommodification levels appear to be substantively and negatively associated with differences in skill selectivity levels, while changes in welfare spending over time, particularly among high-spending countries, rather than differences in spending levels, seem to be positively associated with increasing skill selectivity. This suggests potential tensions between the political responses to economic and demographic changes in the form of immigration policy adjustments and the underlying social logic of modern welfare states. The findings contribute not only to the study of high-skilled immigration, but also advance the current research on the tension between immigration and the welfare state.