The Politics of Labor Market Dualization: Spanish and German Lessons from the Great Recession

Comparative political economists worry about the dualization of labor markets as a rising threat to egalitarian forms of capitalism. Rather than countering capitalism’s long-standing tendencies toward dualist segmentation, labor market reforms across the rich democracies appear to have institutionalized them. For many scholars, unions have played a particularly problematic role driving these outcomes. One line of interpretation sees them as defenders of “insider”-workers’ privileges. Their frequent defenses of “passive” employment and job protections, as well as their support of early-retirement and generous disability policies, are viewed as undermining the economic viability of social protections and relegating “outsiders” to low-paying and temporary jobs. A more complex causal perspective characterizes unions as junior partners in cross-class efforts to shore up high levels of coordination, which end up undermining social inclusion by preventing “embedded” forms of flexibilization. This paper tests these arguments by probing the adaptation processes to the Great Recession in high-coordination (but dualizing) Germany and low-coordination (and strongly dualist) Spain. Displaying structurally similar outcomes but very different starting positions, the paired comparison provides crucial leverage to improves the literatures’ specification of employers’ preferences, the scope for unions’ choices and the relative strength of different effects in processes of conjunctural causation. In short, the paper uses comparison to provide a revisionist perspective on unions’ role in the politics of dualization.