Abstract
This chapter analyses the development of dualised labour markets consisting of insiders in standard employment relationships and outsiders in non-standard employment. Existing research has explained this outcome by pointing to the representational interests of trade unions or social-democratic parties. In contrast, in this chapter we argue that unions' institutional power resources are the crucial variable explaining this outcome. In difficult economic times, when unions are asked to make concessions, they will assent to labour market reforms, but only to those reforms that do not threaten to undermine their institutional power resources. This second best solution allows unions to protect their organisational interests both by retaining their institutional role in the administration of dismissals and by living up to their institutional role as one of the organisations responsible for the direction of labour market policy.
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