Preferences for Employment Protection and the Insider–Outsider Divide: Evidence from France

Abstract

Insider–outsider theory argues that in dual labour markets there are two groups with opposing preferences regarding protection against dismissal: (i) insiders with permanent work contracts who defend employment protection, because it increases their rents, and (ii) outsiders (temporary workers and the unemployed) who see protection as barriers to mobility and demand deregulation. Although this argument is influential in the political economy literature, there is little empirical research on outsiders’ preferences regarding employment protection. This article tests the argument using French data on support for a proposed reform of employment protection. The results show that permanent and temporary workers do not differ significantly in their support for employment protection, while some evidence indicates that the unemployed do show greater support for deregulation. The article concludes that insider–outsider theory overemphasises the relevance of employment protection for temporary workers and that care should be taken not to place these workers in a composite outsider group with the unemployed.

Acknowledgements

We gratefully acknowledge helpful comments by Baptiste Françon, Hanna Schwander, Michaël Zemmour and two anonymous reviewers. Paul Marx’s research was supported by a grant from the Carlsberg Foundation.

Notes

1. Some outsider definitions include (involuntary) part-time workers. However, part-time employment is theoretically unrelated to employment protection, which is why we do not consider it in our analysis.

2. The survey question reads as follow: ‘Concerning public spending on unemployment insurance and measures to improve job seekers’ employment prospects, should there be much more, somewhat more, the same, somewhat less or much less spending than now?’