Barriers to entry: insider/outsider politics and the political determinants of job security regulations

Abstract

Job security regulations, here understood as restrictions on hiring and firing, figure prominently in the policy recommendations of international organizations or national reform programmes. However, in contrast to the prominence of job security regulations in the current reform discourse, hardly any attention is paid to their determinants. In this article, the insider/outsider theory of employment and unemployment is examined. Advocates of this approach argue that job security regulations mainly benefit the labour market insiders. As a consequence, insiders will fight all reforms that aim to dismantle these regulations. The insiders are supported by Social Democratic parties, which only represent the interests of the insiders. In this article it is maintained that this simple argument is wrong. Labour market outsiders can be expected to be equally supportive of job security regulations and Social Democratic parties as labour market insiders. This claim is supported by the empirical analysis using survey data.