137 ‘Divided We Stand’: The Political Economy of Dualised European Labour Markets

Wednesday, June 26, 2013: 11:00 AM-12:45 PM
D1.18B (Oudemanhuispoort)
The current economic crisis is affecting labour market structures in profound ways. Workers are not equally harmed by the sharp rise in unemployment, as its impact tends to concentrate on the most vulnerable of them, i.e. workers with precarious contracts or in declining industries. In this respect, the crisis has accentuated the previous trend of labour market dualisation and has heightened inequalities. Furthermore, the concomitant increase in welfare expenditures and drop in tax revenues have put social protection regimes under increased stress. While the question of the political sustainability of these regimes in the crisis has become a salient issue for political economists, it is crucial to understand whether and how labour market dualisation might undermine the support for welfare policies. Indeed, dualisation is likely to lead to non-trivial changes in workers’ preferences and hence threaten traditional welfare state arrangements.

This panel gathers contributions that explore how labour market dualisation and economic institutions interact. It builds on the premise that one should distinguish between the determinants of dualisation and its effects on political outcomes. It also seeks to enhance our understanding of how objective differences between workers feed into their preferences, potentially paving the way for welfare state reform. What kind of institution is likely to foster, or hamper, this process of dualisation? How does dualisation impact political and economic outcomes such as labour market policy or job security regulations or wage distribution? Is it the case that dualisation always generate political divides? Can workers’ interests and preferences stay aligned for some economic policies, while they differ for others?

The first paper by Guillaud studies the formation of preferences among workers with non-standard job contracts. The expansion of those contracts indeed represents a key element in the process of labour market dualisation. Using a novel data set, she investigates attitudes towards dismissal regulation and other labour market policies, testing the empirical relevance of the insider/outsider divide. The second paper by Vlandas looks at dualisation in wages by considering the case of wage inequality between median income and low income workers. More specifically, the paper shows that coordination does no longer ensure egalitarian outcomes as institutions become less inclusive for outsiders. The third paper by Zemmour and Françon analyses the determinants of the recent trend of unemployment insurance reform in Europe. They show that it typically entailed a significant increase in degressivity, understood as the extent to which unemployment benefits fall as the unemployment duration lengthens. Drawing on a formal model of collective choice for unemployment benefits, they show that degressivity increases as the heterogeneity of workers’ unemployment risk rises. The last paper by Benassi investigates the growth of precarious work in core sectors of coordinated market economies. She argues that this phenomenon is due to the increased replaceability of the core workforce, mainly caused by neo-liberal labour market reforms and by changes in the labour process.

Paul Marx
Hanna Schwander
Preferences for dismissal protection and the insider/outsider divide
Elvire Guillaud, Université Paris 1 Panthéon-Sorbonne
The Political Economy of Degressive Unemployment Benefits
Michaël Zemmour, Université Paris 1 Panthéon Sorbonne; Baptiste Françon, Université Paris 1 Panthéon Sorbonne
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