Labour Market Insiders Research Articles

Health-related exit from employment before and during the COVID-19 pandemic in Norway: Analysis of population-wide register data 2013–2021

People with health problems experience various labor market disadvantages, such as hiring discrimination and heightened risk of firing, but the impact of deteriorating economic conditions on health-related labor market mobility remains poorly understood. The strength of the downturn/crisis will most likely make a difference. During minor downturns, when few employees are made redundant, health-related exit may occur frequently since employers prefer to keep those with good health on the payroll. However, during major economic crises, when large-scale downsizing and firm closures abound, there will be less discretionary room for employers. Thus, some mechanisms that usually are damaging for people with health problems (e.g., seniority rules and negative connotations), can be neutralized, ultimately leading to smaller health differentials in labor market outcomes. The current study used population-wide administrative register data, covering the years 2013–2021, to examine health-related exit from employment (to unemployment/social assistance) before and during the COVID-19 pandemic in Norway. The pandemic spurred a major crisis on the Norwegian labor market and led to a record-high unemployment rate of 10.6 percent in March 2020. Restricting the analytical samples to labor market insiders, linear probability models showed that previous recipients of health-related benefits had a higher unemployment likelihood in the pre-crisis year 2019. The relative importance of poor health changed non-negligibly, however, during the COVID-19 pandemic. When identical statistical analyses were run on the crisis year 2020, health-related exit from employment was dampened. Yet, this labor market equalization was not followed by smaller health differentials in work income in 2021, mainly because people with good health retained or regained decent-paying jobs when the economic conditions improved again. In conclusion, major economic crises can lead to an equalization of labor market disadvantages for people with health problems, but health-related inequalities may reemerge when the economy recovers.

The role of the left to the path to a minimum income policy in Italy

ABSTRACT In 2018, Italy became the last of the E.U. member states to introduce a minimum income policy. Our work helps explain why Italy was a laggard in this field by investigating the role the Italian left played, historically, in the evolution of policies to combat poverty. This is a surprisingly neglected topic. We argue that until the fall of the Berlin Wall, the Italian left focused on labour-market insiders – that is, full-time core workers – and appeared largely unconcerned about the most vulnerable individuals, the outsiders, thus accepting the lack of policies to combat poverty. The policy status quo, however, dovetailed with a lively debate among left-wing intellectuals and politicians. This debate paved the way for several attempts by left-wing governments in the 1990s to implement a national pilot scheme (called the Reddito Minimo di Inserimento [R.M.I.]) along with local minimum income policies. The electoral success in 2013 of a new populist movement, the Five-star Movement (M.5.s.), campaigning on the flagship project of the Reddito di Cittadinanza (R.d.C.), fuelled the political debate on anti-poverty policies. This electoral ‘threat’ finally convinced the centre-left government under Paolo Gentiloni to establish in 2018 the Reddito di Inclusione, the first minimum income scheme in Italy. Our work demonstrates the importance of political variables, such as the structure and dynamics of party competition, in the fight against poverty. It also highlights the role of the Italian left as a political innovator in this field.

Anti-austerity riots in late developing states: Evidence from the 1977 Egyptian Bread Intifada

In late developing states, labor markets are often segmented as a result of import substitution and political coalitions centered on the formally employed. Building on insider–outsider and moral economy frameworks from political economy, we theorize that in such contexts labor market insiders develop strong expectations about welfare provision and public transfers that make them more likely to riot against proposed austerity measures. We test our argument with the case of Egypt during the 1977 Bread Intifada, when the announcement of subsidy cuts sparked rioting across the country. To conduct our analysis, we match an original event catalog compiled from Arabic-language sources with disaggregated employment data. Spatial models, rich micro-level data, and the sudden and short-lived nature of the rioting help us to disentangle the importance of an area’s labor force from its location and wider socio-economic context. As we show, despite the diffuse impact of the subsidy cuts, rioting was especially concentrated in areas with labor market insiders – and this is after accounting for a range of plausible alternative explanations. The results suggest that moral economies arising from labor market segmentation can powerfully structure violent opposition to austerity.

Does collective bargaining reduce health inequalities between labour market insiders and outsiders?

AbstractCollective bargaining institutions are correlated with better population health. However, there are still major gaps in our understanding regarding the impact of collective bargaining on health inequalities, particularly between labour market ‘insiders’ and ‘outsiders’. In this study, we investigate the effect of collective bargaining coverage on individuals’ self-rated health, and whether the impact varies according to labour market status. We use four waves of the European Values Survey (1981–2018) and three-level nested random intercept models across 33 OECD and European countries (N = 66 301). We find that stronger and more inclusive collective bargaining institutions reduce health inequalities between the unemployed and the employed by disproportionately improving the health of the unemployed. This study implies that targeting the political institutions that shape the distribution of power and resources is important for reducing health inequalities.

Insider–Outsider Politics and Support for Universal Health Coverage in Low- and Middle-Income Countries

When and why does the public support redistributive policies that seek to provide social risk protection through universal health financing? One central political dilemma in establishing systems of universal health coverage (UHC) in low- and middle-income countries is the small tax base available to contribute to pooled financing of healthcare. Middle-class workers in the formal sector (labor market insiders) may already get health coverage through the state or private insurers, leaving them little incentive to contribute to UHC that will primarily benefit indigent workers in the informal sector (labor market outsiders). Applying the insider–outsider politics framework, we explore attitudes toward UHC using recent data from Afrobarometer surveys in 36 countries in Sub-Saharan and North Africa. We find that, in spite of growing attention to universal coverage among policymakers, support from the average citizen is low, though variable, across countries. Further, in contrast with expectation, economically secure labor market insiders are more willing than labor market outsiders to pay more in taxes to finance health coverage. However, support for more tax financing of health services was dependent on trust in government and perceptions of government efficacy. Trust in the government’s capacity to use tax financing effectively may be a more important determinant of support for UHC than rational self-interest.

Widening double dualisation? Labour market inequalities and national social policy responses in Western Europe during the first wave of the COVID-19 pandemic.

Europe is witnessing a ‘double dualisation’ process, whereby inequalities have increased both between labour market insiders and outsiders, and between core and peripheral countries. We test the double dualisation hypothesis in the context of the first wave of the COVID‐19 pandemic. Did the COVID crisis exacerbate income inequalities between insiders and outsiders? Did cross‐country territorial divides also increase? Did national governments' emergency measures contribute to containing or widening double dualisation? We deploy a multi‐method research design that combines original survey data on seven old EU member states with three case studies on Germany, Italy, and the Netherlands. Results show that, in the short term, the COVID‐19 pandemic has been a catalyst of double dualisation: outsiders bore the greatest burden, especially in southern European countries. National emergency measures largely depended on the fiscal leeway available to governments and followed pre‐existing welfare trajectories, thus worsening cross‐country inequalities, with potentially severe consequences for the European integration process.

Insiders, Outsiders, Skills, and Preferences for Social Protection: Evidence From a Survey Experiment in Argentina

Standard theories in comparative political economy predict that labor market insiders oppose redistribution to poorer, often informal, labor market outsiders. In contrast, I argue that not all insiders oppose redistribution to outsiders. Extending recent work emphasizing the importance of economic insecurity for insiders, I argue that exposure to risk leads to greater polarization regarding preferences for non-contributory social policy between low- and high-skilled insiders. I test implications of this logic using a survey experiment from a nationally representative sample in Argentina and complement this with analysis of observational data for 16 Latin American countries. I find strong evidence of polarization regarding preferences over social protection among low- and high-skilled insiders. The experiment reveals that low (high)-skilled insiders primed about the risk of becoming outsiders become more supportive of transfers to outsiders (insiders). The article provides new micro-foundations for insider–outsider coalitions in support of social policy expansion in middle-income countries.

Dualisation versus targeting? Public transfers and poverty risks among the unemployed in Germany and Great Britain

The paper analyses changes in the generosity of public transfers to the unemployed and their effectiveness for the alleviation of poverty risks in Germany and Great Britain between the 1990s and the 2000s. In the light of changing poverty risks among the unemployed, the contribution of policy changes is assessed using individual-level data on household incomes. The results indicate that the introduction and expansion of the tax credit programmes in Britain led to an increase of public transfers especially for those with low household market incomes and thereby also improved the effectiveness of transfers in combating poverty. In Germany, the generosity of transfers to the unemployed hardly changed over time, whereas the effectiveness of transfers to prevent households from falling into poverty declined. This can be explained by changes in the composition of the unemployed by recent labour force participation and household market incomes. As former labour market insiders are consistently better protected from poverty than former outsiders, the results confirm the stratified nature of unemployment protection in Germany, albeit no significant trend towards increasing dualisation in public benefits is found. Thus, the results do not support notions of a fundamental shift of the system of unemployment protection with respect to the generosity of transfers in Germany but emphasise the importance of changes in the German labour market.

Electoral accountability, clarity of responsibility and labor market policy

Abstract Does the exercise of accountability in elections have palpable policy effects? Building on recent advances in the economic voting literature, we show that electoral accountability leaves an imprint on labor market policy when left-wing governments are in office. When responsibility for the economy is clear and elections offer an opportunity to claim credit for economic expansion, labor protections and benefits become more generous. However, when clarity of responsibility is low and incumbents can expect to veer electoral responsibility, left-wing governments are more likely to retrench labor market policy. These results hold for policies benefiting both labor market insiders and outsiders. Consistent with evidence that the labor market is the purview of the left, electoral accountability does not condition labor market policy under right-wing governments. We discuss the implications of these results in the context of growing party system fragmentation and weaker accountability across advanced industrial democracies.

Insiders under pressure: Flexibilization at the margins and wage inequality

AbstractThe rise of flexible employment in advanced democracies has been predominantly studied in the insider-outsider framework of the dualization literature. However, against the background of rising income inequality, it seems questionable to assume that all labor market insiders are equally affected by flexibilization. This paper explores whether flexibilization increases wage inequality among labor market insiders. I argue that flexibilization exposes insiders to a set of wage risks that are concentrated among low- and middle-income insiders, creating downward wage pressure on those insiders. The empirical analysis, covering 22 democracies between 1985 and 2016, finds that the deregulation of non-standard employment is associated with declining wage shares of low-income and middle-income earners, while top earners benefit. These major distributional shifts imply an important qualification of the dualization literature: rather than pitting insiders against outsiders, flexibilization ‘at the margins’ seems to exacerbate divides among insiders.

Economic and fiscal policy coordination after the crisis: is the European Semester promoting more or less state intervention?

ABSTRACTThe European Union (EU) – and its Economic and Monetary Union (EMU) in particular – is often criticized as a predominantly market-oriented project. We analyse to what extent such claims can be substantiated by focusing on one key aspect of the EU’s post-crisis framework for economic governance: the country-specific recommendations (CSRs) that the EU has been issuing annually since 2011. Based on an original dataset, we analyse more than 1300 CSRs, which show that the EU does not push uniformly for less state intervention. Rather, the CSRs tend to suggest fiscal restraint and less protection for labour market insiders, while simultaneously promoting measures that benefit vulnerable groups in society. During the second decade of EMU, CSRs have gradually become more permissive of higher public spending and more in favour of worker protection, while the share of recommendations advocating more social protection has stagnated at a high level.

How stable is labour market dualism? Reforms of employment protection in nine European countries

Labour market segmentation is at the forefront of national and European policy debates. While the European Commission and the OECD claim to promote what they see as more inclusive policies, academic observers remain sceptical. The dualization literature in particular points to stable equilibria that sustain divisions between labour market insiders and outsiders. In this article, we trace recent reform trajectories in a diverse group of nine European countries marked by a high share of temporary employment: France, Germany, Italy, the Netherlands, Poland, Portugal, Slovenia, Spain and Sweden. Our case studies show that recent reforms of employment regulation involve much more dynamism than one would expect based on the experiences of the two preceding decades, or from dualization or insider–outsider theories. The reform trajectories display rather contradictory approaches, sometimes in close succession.

Housing market dualization: linking insider–outsider divides in employment and housing outcomes

Past decades of economic growth, relatively widespread employment security and expanding mortgage markets promoted growing homeownership. Recent years have witnessed this growth undercut across advanced economies, evidenced by a rise in other tenures and increasing housing precarity. Studies have shown that these housing outcomes follow more fundamental changes in labour markets. By adapting the established concept of labour market dualization to housing, this paper examines how employment and housing positions are intertwined under late capitalism, and how their relationship has changed through the Global Financial Crisis. Examining the salient case of the Netherlands through household-level data from the LISS panel, we demonstrate that being a labour market ‘outsider’ vastly increases the likelihood of being an ‘outsider’ across housing market dimensions, in terms of housing equity, affordability and prospective asset accumulation. Comparing housing and labour dualization over 2008 and 2016, we further show that the share of multiply disadvantaged households has grown substantially, both among labour market insiders and outsiders.

Insider–outsider representation and social democratic labor market policy

AbstractPostindustrialization and occupational change considerably complicate partisan politics of the welfare state. This article asks about the determinants of contemporary social democratic labor market policy. We argue that the composition of their support base is a critical constraint and empirically demonstrate that the actual electoral clout of different voter segments decisively affects policy outcomes under left government. We calculate the electoral relevance of two crucial subgroups of the social democratic coalition, labor market insiders and outsiders, in 19 European democracies and combine these indicators with original data capturing the specific content of labor market reforms. The analysis reveals considerable levels of responsiveness and demonstrates that relative electoral relevance is consistently related to policy outcomes. Social democratic governments with a stronger support base among the atypically employed push labor market reforms on their behalf—and vice versa. Our findings have important implications for our understanding of policy-making in postindustrial societies.

Immigrant sentiment and labour market vulnerability: economic perceptions of immigration in dualized labour markets

Recent years have seen an increase in concerns that labour market vulnerability and national economic performance might be interacting to foment more polarized opinions about immigration. This article uses European Social Survey and EU-SILC data from 23 countries to explore this potential relationship, examining attitudes about the economic impact of immigration. In doing so, it seeks to investigate how the link between labour market vulnerability and anti-immigrant sentiment may be shaped by both resource scarcity (in the economy as a whole) and job scarcity (on the labour market). Findings from the analysis are twofold. First, labour market vulnerability is indeed correlated with more negative beliefs about the economic contribution of immigrants, even controlling for related factors such as education and contract type. Second, this effect is moderated by GDP per capita (though not unemployment rates), with labour market insiders and outsiders holding more distinct attitudes in higher GDP countries; thus, although attitudes towards the economic contribution of immigrants are generally more negative in poorer countries, labour market vulnerability contributes to greater opinion polarization in stronger economies. It is therefore resource availability in the economy, rather than on the labour market, that appears to be crucial.

How Stable is Labour Market Dualism? Reforms of Employment Protection in Nine European Countries

Labour market segmentation currently is at the forefront of national and European policy debates. While the European Commission and the OECD try to promote what they see as more inclusive policies, academic observers remain skeptical. Particularly the dualisation literature points to stable political economy equilibria that stack the cards against overcoming divisions between labour market insiders and outsiders. Other contributions point to a more dynamic political setting, in which negative feedback effects tend to challenge any 'dualisation consensus'. Against this background, this paper traces recent reform trajectories in a diverse group of European countries that are characterised by a high share of temporary employment: France, Germany, Italy, Netherlands, Poland, Portugal, Slovenia, Spain, and Sweden. Our case studies show that recent reforms of employment regulation are characterised by much more dynamism than one would expect based on the experiences of the two preceding decades - or based on dualisation or insider-outsider theory. The reform trajectories are characterised by rather contradictory approaches, sometimes in close succession. This even includes, in several cases, substantive deregulation of dismissal protection for open-ended contracts.

Labor Market Insiders or Outsiders? A Cross-National Examination of Redistributive Preferences of the Working Poor

Prior research on attitudes toward redistribution documents an association between one’s policy preferences and socioeconomic position, as well as an impact of welfare policy on the mean level of support for redistribution. Building on both traditions, the current paper aims to expand our understanding of the sources of public support for welfare policies by examining the role that social policy plays in shaping the policy preferences of the working poor. Building on the distinction between labor market insiders and outsiders, this paper examines whether preferences by the working poor more closely resemble those of non-poor workers or those of non-working poor individuals. Results from this study show that the degree of support for redistribution among the working poor is notably closer to the average degree reported by non-working poor individuals than the mean level reported by non-poor workers. Moreover, utilizing cross-national data from 31 countries in 13 different time-points between 1985 and 2010, the paper documents a much smaller preference gap between non-poor workers and the working poor and a higher overall level of support for redistribution in countries providing a greater degree of employment protection.

Labor Market Dualization and Insider–Outsider Divides: Why This New Conflict Matters

Reflecting the importance of inequality for individuals’ lives, the implications of labor market inequality for core elements of democracy are crucial topics in comparative politics and comparative political economy. This article critically reviews the main findings of the emerging literature on insider–outsider divides to highlight its possible contributions to adjacent fields, in particular the research on party politics, the literatures on economic voting, political participation, and democratic representation or the study of social movements. The conflict between labor market insiders and outsiders demonstrates that in today’s societies with their diversified risk structure and sophisticated welfare states, distributive conflicts are about specific social and regulatory policies that have different implications for individuals depending on their situation on the labor market. By drawing our attention to new divides within the social democratic electorate, the insider–outsider literature reveals an additional argument why the social democratic parties find it hard to mobilize their voters and to win elections. Moreover, the insider–outsider literature can help to bring the economic dimension of politics back to the study of social movements and to light on the relationship between contentious and conventional politics.

How to retrench the welfare state: Attitudes in the general population

AbstractIn recent years, many countries have faced pressure to cut the costs of the welfare state, and different strategies have been utilized to achieve this, including stricter eligibility requirements, reduced level of benefits, and reduced maximum duration of benefits. This contribution reports the results from a Norwegian survey designed to measure which of these strategies the general population would prefer in a situation where the government has to tighten various social security schemes. For a given reduction in total costs, there is a trade‐off between the desire to avoid large individual benefit reductions and the desire to protect some groups of benefit recipients from any cuts. Different preferences for how to retrench the welfare state will reflect how individuals trade off these concerns. We find a striking association between political affiliation and preferred retrenchment strategy. Right‐wingers typically prefer to tighten the eligibility criteria, while left‐wingers typically prefer to reduce the benefit level. Furthermore, our results indicate that labor market outsiders are less in favor of tightening the eligibility criteria, but more in favor of reducing the maximum duration of benefits, than labor market insiders. This article contributes to the literature on welfare state retrenchment by examining which retrenchment strategy that the public prefers, which in turn sheds light on which measures that are likely to receive popular support from different demographics in the population.

Labor market institutions, the insider/outsider divide and social inequalities in employment in affluent countries

Abstract This article investigates the role of labor market institutions for social inequalities in employment. To distinguish institutional impacts for men and women, age groups and educational levels the analysis draws on data from 21 countries using the European Union Labor Force Survey and the Current Population Survey 1992–2012. The analysis demonstrates that there is significant heterogeneity in the relationship between institutions and employment across social groups. In line with the literature on dualization, institutions that arguably protect labor market insiders, i.e. employment protection, unionization and unemployment benefits, are frequently associated with greater inequality between typically disadvantaged groups and their insider peers. By contrast, institutions that discriminate less between insiders and outsiders, i.e. active labor market policies, minimum income benefits and centralized wage bargaining at times boost social equality on the labor market. The insider/outsider argument provides a valuable heuristic for assessing heterogeneity in institutional impacts, yet in several instances the results deviate from the expectations.