Influence of labour market institutions on the insecurity inequalities

Mind the gap: Influence of labour market institutions on the
insecurity inequalities of permanent and temporary workers
Heejung Chung(SSPSSR)
(Work in progress, please do not cite yet but all comments and critique very welcome…)
Although many studies examine the impact of institutions on individual’s job and income
insecurities, most presume an equal impact of institutions to different groups in the labour
market. Based on the dualisation and labour market segmentation literature, I expect that
the protective mechanism of institutions will have different effects on the insiders and
outsiders of the labour market – measured as permanent vs temporary workers. This is
tested using the European Social Survey from 2008/9 – the initial stages of the financial
crisis. Results show that the employment insecurity gap between the permanent and
temporary workers vary across different countries. In countries with higher collective
bargaining coverage rates – i.e., centralised bargaining system that covers a larger group of
the population – all workers have been protected from feelings of insecurity. However, this
protective mechanism seems to be much stronger for permanent workers compared to
temporary workers. On the other hand, although labour market policies and economic
conditions explain the different levels of insecurity across countries, they do not explain the
differing level of insecurity gap between permanent and temporary workers.
Key words: Employment insecurity, Dualisation, Institutions, Industrial Relations, Multi-level
The past decade can be characterised by globalisation, increased competition, and postindustrialisation of labour markets in Europe. This has had a major impact in the fullemployment model of the welfare states with increased levels of unemployment and longterm unemployment (Nickell et al., 2005), as well as increase in atypical employment and
job instability across countries (Auer and Cazes, 2000; Kalleberg, 2000, 2009). This rise in
insecurity has only been exacerbated by the recent and on-going financial crisis which
started in 2008 and the series of austerity measures that followed. What is more, this
precarity is no longer considered a temporary stage in which one goes through before
obtaining stability, but a persistent state or even a new social class (Standing, 2011).
As policy scholars, our interest lie in the role institutions play in explaining levels of
insecurity of workers- in other words, if institutions help reduce the repercussions of market
shocks or exacerbate the issue. We know, however, from previous literature that
institutions set up to protect workers do not necessarily protect all workers equally (Boeri et
al., 2004; Esping-Andersen, 2000; Nickell, 1997). The increase in labour market instability
also influence workers of different socio-economic backgrounds to different degrees (Auer
and Cazes, 2000; Doogan, 2001). Labour market segmentation and dual labour market
theorist go on to say that institutions cause polarisation of the labour market resulting in
insecurity inequalities across different groups of workers (Doeringer and Piore, 1975;
Lindbeck and Snower, 1989; Saint-Paul, 1996). This can be referred to as the so-called
insider-outsider theories. The differing impact of institutions for different segments of the
labour market is not something entirely new. However, previous studies that examine this
issue mainly focus on objective measures of insecurity, examining the role of institutions in
explaining the volume of outsiders – measured as (long-term) unemployed or temporary
workers in the labour market (e.g., Blanchard, 2006; Nickell, et al., 2005; Polavieja, 2006;
Scarpetta, 1996), or the persistence of outsiderness – i.e., mobility issues (e.g., Booth et al.,
2002; Guell and Petrongolo, 2007; Zijl and Van Leeuwen, 2005). What is still missing from
the literature is the gap of subjectively perceived insecurity between the objectively secure
and precarious workers.
The assumption here is that there are large cross-national differences in the extent to which
objective insecurity translate to subjective insecurity. In some countries, the objectively
insecure workers will not differ much in their subjective feelings of insecurity from the
objectively secure workers. In other countries this gap is expected to be much larger. On
one hand, this paper poses a direct critique of the literature in the measurement of insiders
and outsiders in the labour market segmentation or dualisation literature. The current large
volume of literature on labour market segmentation presume that objective measures of
insecurity, mostly measured through unemployment and employment contract statuses,
will be directly related to subjective insecurity – i.e., the outsiders feel always more insecure
than insiders. What is more, this difference in feelings of security between the insiders and
outsiders are expected to be equal across different countries, with different institutional
frameworks. However, this premise has yet to be empirically tested. On the other hand, this
paper poses a critique of the literature on subjective insecurity and the roles institutions
play therein. Although many studies examine the influence of institutions in explaining
cross-national variance in insecurity levels (e.g. Anderson and Pontusson, 2007; Chung and
Mau, 2014/forthcoming; Chung and van Oorschot, 2011; Clark and Postel-Vinay, 2009;
Erlinghagen, 2008; Mau et al., 2012) most presume an equal impact of institutions across
different groups of individuals. In other words, institutions that protect individuals from the
negative consequences of labour market shocks are seen to secure all workers throughout
the labour market to an equal extent. However, as we know from the labour market
segmentation literature, this is not necessarily the case where institutions could potentially
increase the insecurity gap between workers.
Thus, the research questions asked in this paper are three-fold. Are there cross-national
variance in the gaps of subjective employment insecurity between insiders and outsiders?
Can institutions explain this variance? More specifically given that the paper looks at data
from the end of 2008 and early 2009 the focused question would be; have institutions been
successful in buffering the subjective insecurity during times of crisis - and was this for all
workers – or only for insiders?, This is tested through the use of a multilevel random slopes
model, using the 4th wave of the European Social Survey from 2008/9 – which is when the
recent financial crisis started off. The results show that the outsiders-workers on temporary
or no contracts - feel less secure about their employment than the insiders - those on
permanent contracts. However, as assumed the subjective insecurity gap between the two
vary largely across countries. In countries with stronger unions with a centralised collective
bargaining system, workers were protected from the forces of liberalisation compared to
other countries. However, this protection was especially stronger for the insiders of the
labour market. On the other hand, countries with a decentralised bargaining system with
weaker unions, all workers face flexiblisation of the market to a more equal degree. This
confirms the theories set forth by dualisation scholars(Emmenegger et al., 2012; Palier and
Thelen, 2010) where it is argued that bargaining structured that once help corporatism to
develop were used to increase gaps between workers, due to that the unions were only able
to protect their core workers through negotiations with employers.
The next section will define the main concepts used in this paper and the theoretical
underpinning of this paper – namely, the insider and outsider theories and the roles of
institutions. The third section examines the data and methods used in the paper, and
section four provides the analysis outcomes. The paper ends with conclusions and
Definitions & Theoretical considerations
Job and Employment insecurity
There are multi-dimensions to subjective job insecurity (Anderson and Pontusson, 2007;
Ashford et al., 1989; Näswall and De Witte, 2003). Affective job insecurity refers to the fear,
worry or anxiety of losing one’s job. Cognitive job security refers to the individual’s estimate
of the probability that one will lose their current job in the near future or on their perceived
stability of their current job. A third concept is “labour market security”, which concerns the
individual’s perception of their probability of finding another job with more or less
equivalent characteristics (Anderson and Pontusson, 2007: 214-215). In most studies, the
focus has been on cognitive job insecurity, although some studies (e.g., Anderson and
Pontusson, 2007: 214-215) have examined all three dimensions.
The problem with using cognitive job insecurity is that it fails to filter out people who
believe that the possibility of losing their current job is high, but are likely to find a new job
relatively quickly after losing their current job. Cognitive job insecurity has the potential to
categorise those who might lose their current job but will not go through a period
unemployment as being insecure. Thus, Chung & van Oorschot (2011) propose to use the
concept “cognitive employment insecurity”. Here individuals who are likely to experience a
significant duration of unemployment or job loss are considered to be insecure. It combines
cognitive job insecurity with labour market insecurity; individuals must perceive that they
will lose their job with their current employer, and not be able to find another one relatively
easily or quickly. This concept allows us to capturing those with “true insecurities”.
Insiders and outsiders
The main idea behind dual labour market theory (e.g., Berger and Piore, 1980; Doeringer
and Piore, 1975) and labour market segmentation theory (Reich et al., 1973) is that labour
markets are divided into two segments – the primary and the secondary sector, and that
there are limited chances for mobility between the two (see Davidsson and Naczyk, 2009).
The workers in the primary sector – the insiders- enjoy high wages, good working conditions,
prospects for advancement, and most importantly job stability. On the other hand, Workers
in the secondary market – the outsiders – have so-called dead-end jobs, with low-pay, bad
working conditions, few career advancement prospective, and unstable jobs or frequent layoffs i.e., unemployment (Doeringer and Piore, 1975:70-71). One of the core ideas behind
these theories is that insiders and outsiders do not compete in the same market. Insiders
are protected and guarded by institutions, whereas outsiders will experience continuous
instability and not be able to overcome the barriers that stand between the two markets.
The insiders in fact can enjoy the security of the primary market, due to the fact that the
outsiders act as a buffer from the fluctuations in the business cycle (Rueda, 2005).
Who are the outsiders? As a definition, those in persistent unemployment, or long-term
unemployment, and in low-wage, dead-end jobs with low prospects and little job security
can be considered as outsiders (Doeringer and Piore, 1975; Lindbeck and Snower, 1989;
Saint-Paul, 1996). Within this rather broader definition, many scholars focus on the job
insecurity aspect – thus measuring outsiders as those in unemployment and long-term
unemployment. More recently, many operationalize outsiderness as being outside of the
standard employment relations. For example, Rueda(2005: 63) defines outsiders those as
who are unemployed, in involuntary fixed-term or temporary jobs, part-time jobs, and
students. Of this definition, given that my interest lies in those in those in employment, I
define outsiders as those with unstable jobs – thus workers with temporary or no contracts.
Importance of measuring subjective insecurity
As mentioned in the introduction, there is already a large volume of literature that examines
segmentation and the prevalence of outsiders across European labour market (see also,
Davidsson and Naczyk, 2009). However, most focus on the objective measures of insecurity
without much attention to the subjective side of insecurity. Examining subjective insecurity
is crucial for policy makers. High levels of subjective insecurity are associated with low levels
of well-being for the individual (De Witte and Naswall, 2003; Hellgren et al., 1999) and their
family (Chung, 2011), and have implications for company performance and for society as a
whole (for an overview see Chung and Mau, 2014/forthcoming). Workers’ perception of
future unemployment has also been shown to be a strong predictor for unemployment
occurring in the subsequent year (Green, 2009; Green et al., 2001). What is more,
individuals are sometimes better able to make judgments about future unemployment
chances than predictions based on objective measures due to the better understanding of
the context the individual is placed in (Campbell et al., 2007; Stephens Jr, 2004).
Again, the core question of this paper is to examine to what extent outsiders are really
outsiders, measured through the subjectively perceived insecurity gap between insiders and
outsiders. It is expected that objectively insecure - temporary workers are also more likely
to feel insecure about their position than the objectively secure - those with permanent
contracts. This is because of the nature of their contract, and may also be more at risk of
losing their jobs during reorganisations (Chung and van Oorschot, 2010; Clark and PostelVinay, 2009; Näswall and De Witte, 2003). However, the question is whether this increased
feeling of insecurity for temporary or precarious workers are equal across different
institutional settings.
Institutions and labour market segmentation
The main institutions that are seen to cause divisions in the labour market include industrial
relations/bargaining structures, employment protection legislation, training skills
accumulation processes – such as active labour market policies. All of these institutions
increase the cost of hiring and firing insiders, which help secure the position of insiders
(Lindbeck and Snower, 1989).
Industrial Relations
Stronger unions and collective bargaining have been seen as a key cause of increasing
insider’s strength through increasing bargaining power of the insiders (Lindbeck and Snower,
1986; Saint-Paul, 2002) i. This can be through the use of strike and other tools, but also
through amplifying the costs of hiring and firing workers through changing the employment
protection rules. Through increasing union strength, the barrier that stands between the
primary and secondary market would be enforced. This makes it more difficult for outsiders
to enter the insider’s market, widening the gap between the two markets.
When taking corporatism into account, the picture becomes more complex. Corporatist
bargaining – that is when unions cooperate with the employer bodies to influence policies –
is facilitated when unions are responsible for larger part of the labour market through wider
collective bargaining coverage and centralised bargaining structures. It has been argued that
unions in coordinated markets have contributed to the diffusion, generalisation and
institutionalisation of good company practices to the whole of the population (Palier and
Thelen, 2010: 120). Thus, corporatist countries have been linked to less inequality or
diversity in wage setting (Kahn, 1998), and other working conditions in the labour market.
Similarly, a smaller gap in perceived insecurity could be expected between insiders and
outsiders in these corporatist countries.
However, in recent years in the mist of liberalisation and external economic pressures, new
forms of dualism have been seen to form in these corporatist countries. Palier and Thelen
argue that
“…actors in the “core” economy have been relatively well positioned to defend
traditional institutions and practices for themselves, but they are no longer able to
serve the leadership functions they once did of providing crucial collective goods for all”.
(Palier and Thelen, 2010: 120)
In corporatist countries, unions were successful in securing the insiders from the outside
pressures of labour shedding strategies through negotiations with employers, where it was
agreed that the core skilled workforce would be protected. However, this was only possible
through increasing flexibility on the secondary market, exposing outsiders to increased
insecurity (Palier and Thelen, 2010). Emmenegger et al. (2012:310) goes on to argue that
labour unions were the facilitator and consenters to dualisation, by agreeing to social and
labour market policies that would negatively affect outsiders while protecting the insidersii.
In this case, countries with a more corporatist tradition – thus centralised bargaining system
with stronger unions should be the ones with the largest subjective insecurity gaps between
insiders and outsiders.
Employment protection legislation
Employment protection legislation (EPL) for regular workers protects workers from unfair
dismissal, thus decreasing the likelihood of job loss for permanent workers. However,
because it only covers the rights of those on permanent contracts, it may have limited
impact on the insecurity perception of workers on temporary contracts (Boeri et al., 2001:21;
Rueda, 2005). More so, EPL for regular workers can increase insecurity for outsiders.
Stringent EPL on firing permanent workers have been linked to longer unemployment
durations – due to employer’s reluctance to hire people on permanent contracts (Blanchard,
2006; Nickell, 1997). Stringent EPL has also been linked to greater use of temporary
contracts (Dolado and Jimeno, 2002; OECD, 2004). This can result in greater insecurity for
the workforce, making it more difficult to obtain permanent contracts, thus widening the
gap between the insiders and outsiders further. Keeping EPL for regular workers at a high
level while deregulating EPL for temporary workforce has been referred to as the “twotiered reform”(Dolado and Jimeno, 2002) or “flexibility at the margin”(Toharia and Malo,
2000) due to the partial and targeted deregulation of the labour market as seen in countries
such as Spain and Italy (Esping-Andersen and Regini, 2000). Thus, I expect countries with a
stringent EPL for permanent workers to be the ones where larger gaps between insiders and
outsiders can be found.
Passive and active labour market policies
The main role of passive labour market policies (PLMP) is to protect individuals from the
consequent income loss due to job loss. Generous benefits allows individuals to stay
unemployed without consequence to their income security, which increases bargaining
power of workers to increase wage levels (Blanchard, 2006; Nickell, 1997). However, this
protection also decreases one’s fear of the repercussion of unemployment and increase
affective and somewhat cognitive job security (Anderson and Pontusson, 2007; Clark and
Postel-Vinay, 2009; OECD, 2004; Pacelli et al., 2008). A longer duration of PLMP has been
criticized to make the unemployed pickier about finding new positions, thus delaying the
period of unemployment and increasing unemployment rates (Nickell, 1997; OECD, 1994).
However, this longer job search period also increases job fit (Marimon and Zilibotti, 1999)
which would increase the security of keeping one’s job – job security. In addition, a longer
job search period can provide individuals more confidence of the chance of finding a new
position – increasing their perceived labour market security. Active labour market policies
off-sets the negative impact of UB, by increasing the skill set of the unemployed – through
training programmes - as well as assisting in job search activities (Blanchard, 2006; Nickell,
1997). This can increase re-employment opportunities for the unemployed – increased
labour market security - as well as decreasing lay off risks for the employed – increased job
security(Anderson and Pontusson, 2007; Chung and van Oorschot, 2011), thus increasing
employment security overall.
Unlike EPL, both ALMP and PLMP are expected to benefit outsiders more due to the
frequent unemployment and insecure labour market positions of outsiders (Boeri, et al.,
2004; Rueda, 2007). However, in some cases the condition of receiving PLMP benefits is
based on employment and contribution record. In these cases those in the secondary
market may not have had the opportunity to contribute to the scheme and are likely to be
excluded from its provision (Palier and Thelen, 2010). Thus, the benefits of generous labour
market policy systems can be expected to decrease employment insecurity of both insiders
and outsiders similarly, only if there are no stringent contribution conditions that exclude
outsiders from these policies.
Socio-economic context
Another key interest of this paper is to examine whether institutions have been successful in
buffering the subjective insecurity spike during times of crisis or market shocks. Given that
the secondary market acts as a buffer for the insiders, bad labour market conditions may
not necessarily impact insiders, while exposing the outsider to insecurity – thus increasing
the gap between insiders and outsiders further. Similarly, if labour shedding is done
primarily in the secondary market when external pressures are high, economic shocks would
be felt first or primarily by the outsiders. Thus, during the financial crisis the rise in
insecurity due to economic downturns could be felt stronger by the outsiders. The economic
downturn could be measured through the economic cycle as well as its impact on the labour
market through unemployment rate changes. The proportion of outsiders may also be an
indicator of the division in the labour market. A very small portion of outsiders may entail
that most workers end up transitioning into the primary market- where secondary market
positions act as stepping-stones. On the other hand, if there is a (significantly) large segment
of the secondary market, this could entail that there is a structural division of the labour
market and transition into permanent contracts may be more difficult.
Data and Method
The data used for analysis is the 4th wave of the European Social Survey (ESS). This data set
covers 31 European countries, EU 27 excluding Austria, Lithuania, Luxembourg, Italy, and
Malta but including Turkey, Ukraine, Russia, Norway, Israel, and Switzerland. The data was
gathered during the early stages of the financial crisis, that is late 2008 and early 2009. It is
one of the few that covers a large number of countries and perceived employment security
of individuals. Unlike the other previous surveys, where the perceived possibility of losing
one’s job is asked, the question also considers the possibility of obtaining another job in a
quick manner. Secondly, this survey also includes important background variables, such as
human capital characteristics as well as individual’s job and company level characteristics,
which are not available in other similar data sets. Of all the countries in included in the ESS, I
exclude Croatia, Israel, Russia, Switzerland, Turkey and Ukraine from the analysis due to
context data availability and problems of comparability. Thus, in this paper I include 23
countries, including Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland,
France, Germany, Greece, Hungary, Ireland, Latvia, the Netherlands, Norway, Poland,
Portugal, Romania, Spain, Sweden, Slovenia, Slovakia and the United Kingdom.
Since I am examining employment insecurity, individuals that are currently in
paid/dependent employment are relevant. For this reason, I exclude respondents who are
self-employed, unemployed, sick, retired and/or in education. I also exclude those who are
above 65 years of age. Of the 34625 cases of respondents under 65 in our 23 countries, 65%
have answered that they have participated in paid employment (including family businesses)
in the past 7 days, 13% of which are self-employed, and a further 851 missing cases in the
employment insecurity variable leaves a total of 18708 cases and a further reduction to
17023 cases when missing cases for the other individual level variables are taken into
The dependent variables
The dependent variable of this paper is the perceived job and employment security of
individuals. This is measured with the following question in the ESS. “How likely is it that
during the next 12 months you will be unemployed and looking for work for at least four
consecutive weeks?” (D47). The respondent can answer in a 4 point scale response – from
“not at all likely”, “not very likely”, “likely” to “very likely”. I’ve recoded the scale into a
dummy variable, where those who have answered “likely” and “very likely” to this question
are considered as being cognitive employment insecure.
Independent variables
The key independent variable used in this paper is whether or not the respondent has a
permanent contract measured through “Do/did you have a work contract of…unlimited
duration, or, limited duration, or, do/did you have no contract?”. Those who have answered
as “unlimited duration” are categorized as permanent contract holders – thus our insiders –
and those with limited duration or no contract are considered outsiders. In addition to this
variable, I include the commonly used controls in modelling employment and job insecurity
(e.g.Anderson and Pontusson, 2007; Clark and Postel-Vinay, 2009; Erlinghagen, 2008) such
as age, gender, education level, past-training experienced, unemployment experienced,
existence of a disability, citizenship, family circumstances, occupation level, union
membership, size and sector of the company as control variables. For the theories behind
each of these variables see Chung & van Oorschot (2010) and Chung & Mau
At the national level, I include industrial relations variables, employment protection
legislation, labour market policy, and economic and labour market condition variables. To
measure union bargaining power and structure, I use collective bargaining coverage rate
and union density both represented as a percentage of wage earners – which indicates
bargaining power, and bargaining level (1 indicating individual level, 5 indicating national
level). To measure corporatism in a more direct manner, I include coordination of wage
setting index, which examines the extent to which coordination exist between employers,
unions and the state (1 indicating fragmented wage bargaining, and 5 indicating centralized
bargaining by peak association(s)), and a variable to measure routine involvement of unions
and employers in government decisions on social and economic policy (0 indicating no
concertation and 2 indicating full concertation, regular and frequent involvement). All
industrial relations variables are from the ICTWSS data set and are for the year 2008 or
closest year available. Employment protection legislation is divided into that for regular
workers – the strictness of regulation on firing workers on permanent contracts, for
temporary workers – the rigidity of regulations on hiring workers on temporary contracts,
and overall- which includes the both as well as issues to do with collective dismissals. The
data is from the OECD. Labour market policy (LMP) expenditure data is used to measure the
generosity of the LMP indicators, divided into active labour market policy expenditure
(ALMP) – job search and training facilities provided to the unemployed, and passive labour
market policy expenditure (PLMP) – benefits given to the unemployed for income
maintenance, and overall- which is a combination of the two. All data is from Eurostat and is
expressed as a percentage of the GDP. To take into account the number of people needing
these policies, I divide the indices with the unemployment rate. I include unemployment
rate of 2008 as an indication of the labour market condition at the time of survey, the GDP
growth rate for 2008-2009 and change in unemployment rate from 2008 2nd quarter to 2009
2nd quarter to indicate the impact of the financial crisis on the economy as a whole and on
the labour market respectively. Temporary employment as a percentage of the total
employment for 2008 is used to indicate the proportion of outsiders in the labour market.
See Annex for more details.
The Model
In this paper, two-level random slope multilevel logistic regression models are used. In
multilevel models individuals are considered to be nested in countries (Hox, 2002).
Multilevel modelling is used when it is presumed that individuals are subject to the
influences of groupings (Rasbash et al., 2009), in this case, countries. Through the use of a
multilevel model I can examine whether there is a statistically significant cross-national
variance in the gaps between insiders and outsiders. In addition, I can include context level
variables – rather than country dummies - to explain for this cross-national variance. Several
models are examined. First, I examine the employment insecurity gap found between
insiders and outsiders, with and without other individual level control variables. Second, I
test whether the insecurity gap found between insiders and outsiders vary across countries
– through a random slope model. Third, I include the context variables separately to see if
they can account for the varying gaps between insiders and outsiders across countries.
Given the complexity of the model, and the lack of level 2 country cases, it is not
recommended to include many context variable per model to be used as an interaction term
(see Stegmueller, 2013). Thus I restrict to at most two context variables per model. I use
xtmixed function of STATA 12.0 for all models.
Employment insecurity gap between insiders and outsiders
Figure 1 shows the gap in employment insecurity between the insiders and outsiders across
23 countries. In all countries, permanent workers are on average more secure about their
employment compared to those on temporary contracts or no contracts. However, there
are large variations across countries. In Cyprus there are no difference between permanent
and temporary workers (or a very slight difference favouring the latter), and in the
Netherlands, Romania and Estonia the difference between the two groups are less than 10%.
On the other hand, in Sweden, Spain, and France the difference between these two groups
of workers are much larger, where the difference in likelihood are more than 30%. Other
than the fact that that the Nordic social democratic regime countries are the ones with the
lowest levels of employment insecurity, and the new accession countries have higher levels
of insecurity, there are no clear patterns found for the welfare regime country grouping –
especially concerning the gap between insiders and outsiders in their employment
insecurity levels. However, these gaps do not take into account the different individual level
controls into account.
Figure1 here…
Next I examine the multilevel model results. First, examining the amount of variance at level
2 – country level, and level 1- individual level, we can see that a substantial amount of
variance can be explained at the country level. The intra-class correlation (ICC) score is 18.0%
which means that amongst all the variance across European individuals in their employment
insecurity perception across the 23 countries in the sample, approximately 18% can be
attributed to the context in which the individuals are placed- i.e., the country. Including the
contract type variable into the model increases the amount of variance found at the country
level (Model1). In other words, when comparing workers on temporary or no contracts, the
difference across countries amplifies. As expected, as a European average those on
permanent contracts feel more secure about their employment, although this decreases
somewhat when the model includes other individual variables (model2).
Table 1 here…
I expect that the insecurity gap found between the insiders and outsiders will vary in
different contexts – i.e., countries. To test for this variance, random slopes models are used
(Model 3). The result shows that although permanent workers are usually less likely to be
insecure about their employment compared to those without a permanent contract, this
gap varies across countries significantly. Figure 2 is a graphical representation of the crossnational variance of the employment insecurity gap found between insiders and outsiders
when other individual level variables are taken into account. Somewhat similar to Figure 1,
in countries such as Cyprus, Estonia, and Latvia, the gap between insiders and outsiders are
much smaller than the European average even when controlling for other individual level
variables. On the other hand, Sweden, Finland, and Denmark are countries where much
larger gaps can be observed(need to test for CIs).
Figure 2 here…
Explaining the cross-national variance
What can explain for the cross-national variance in the gap of employment insecurity
between insiders and outsiders? As shown in Table 2 of all the institutional variables, labour
market policy generosity, as well as bargaining structures, or more specifically the collective
bargaining coverage rate, union density, and coordination help explain why there are larger
employment insecurity gaps between insiders and outsiders in some countries while not in
others. Countries with a generous labour market policies, and those where unions are
strong and there are tendency toward corporatism(centralised more coordinated bargaining
structures) are those where the gap between insiders and outsiders are the largest.
Examining the coefficient for the main effect (first rows) it is clear that these countries are
also those where in general workers are in general less likely to feel insecure. This reduction
in insecurity, however, is much larger for insiders (those with permanent contracts).
Employment protection legislation, do not explain the levels of employment insecurity nor
the gap between the insiders and outsiders. However, this might be due to the fact that
when EPL indicators are included in the model, we lose four country cases – Bulgaria, Cyprus,
Latvia and Romania - which decreases the variance across countries in the levels of
employment insecurity as well as the variance found for the gap between insiders and
outsiders somewhat.
Economic conditions and the severity of the financial crisis – measured here through the
unemployment rate 2008, real GDP growth rate for 2009 and the unemployment rate
change for 2008-2009 2nd quarters- do seem to have an impact on the overall level of
employment insecurity of workers. That is, the larger the economic shock and its impact on
the labour market the more insecure workers feel about their employment. GDP growth
rate has been shown as one of the most important context characteristic explaining the
cross-national variance in the level of employment insecurity (see Chung and van Oorschot,
2011). However this impact is not significantly larger for outsiders. The financial crisis has
impacted employment insecurity, but equally across the two markets. Share of temporary
workers do not seem to have a large impact on level of insecurity or the gap in insecurity
Table 2 here…
Robustness testing
To further test the impact of the context variables in more detail, I examine the interaction
between institutions and impact of regimes on the employment insecurity gap between
insiders and outsiders. Firstly, I find that the bargaining structure variables are highly
correlated to one another – collective bargaining coverage rate and bargaining level,
coordination index are correlated at 0.6, and the latter two variables are correlated at the
0.7 level. Thus countries where large portion of the population is covered by the collective
bargaining are those where bargaining is done at a more centralised level and are more
likely to have coordination between the associations. In addition, the bargaining variables
are correlated to the labour market policy expenditure variables – that is collective
bargaining coverage rate has a 0.6 correlation to the LMP, and PLMP expenditure variable,
and a 0.5 correlation to the ALMP expenditure variable. In other words, countries with large
collective bargaining coverage are usually the ones with generous labour market policies.
Thus the impact of these variables on the level and gap of employment insecurity could be
due to other confounding factors that are not included in the model. To test for this, I’ve
included two context variables at a time to see which one is truly making the impactiii. It
seems that LMP indicators are the ones that are truly significant in decreasing the levels of
employment insecurity, while the collective bargaining coverage rate is the factor that
explains the cross-national variance in the gap between insiders and outsiders. Other
variables such as coordination index and the labour market policy generosity indicators
become insignificant when collective bargaining coverage rate is also included in the model.
On the other hand, when both union density and collective bargaining coverage is both
included, they are both significant in explaining the gap in perceived insecurity between
insiders and outsiders although the impact of the latter is stronger. Secondly, to test the
impact of institutions controlling for the labour market and economic conditions, I’ve tested
the impact of collective bargaining coverage when other labour market variables were
included in the model. I found that collective bargaining coverage remains significant even
when other labour market and economic condition factors are included in the model.
Thus, countries with stronger unions with a more centralised bargaining system – and
perhaps where corporatism is prevalent (based on the high correlation in collective
bargaining coverage rate and coordination indices) - when faced with bad labour market
conditions insiders were protected to a large extent while outsiders were exposed. This
confirms the thesis put forward by Palier and Thelen (2010), where it was argued that
coordinated markets – with traditionally centralised bargaining and stronger unions - were
successful in protecting the insiders from the pressures of labour shedding, but the
outsiders were left exposed to the pressures. In these countries, although the overall level
of employment insecurity may be lower compared to other countries due to unions having
successfully protected their workers from external pressures, this is mostly the case for the
insiders of the labour market.
Labour market policies on the other hand, seem to protect both insiders and outsiders to a
similar level without providing outsiders a more secure feeling in their employment.
Somewhat rejecting the previous notion that labour market policies provide more security
for the outsiders (Boeri, et al., 2004; Rueda, 2006). In addition, economic shocks do not
seem to have influenced the outsiders to a greater extent – unlike what has been argued in
previous studies.
Conclusion and Discussion
There has been a rise of insecurity across Europe due to new employment risks, increased
flexibility in labour markets, globalisation and post-industrialisation. One interesting
question for policy makers is whether the existing institutions were successful in
overcoming some of the insecurities that have developed due to these economic
transformations as well as the financial crisis. Many scholars examine the impact of
institutions on individual’s job and income insecurities. However, most studies presume that
institutions impact different groups in the labour market in a similar manner. Based on the
dualisation and labour market segmentation literature, I expect that the protective
mechanism of institutions will have different effects on the insiders and outsiders of the
labour market – measured here through contract type. This is tested using the European
Social Survey from 2008/9 – a period that can be defined as the initial stages of the financial
crisis. Analysis results show that the employment insecurity gap between the insiders and
outsiders vary across different countries. In addition, the varying gaps can be explained
somewhat through institutions such as industrial relations structures. Stronger unions with a
bargaining system that covers a larger group of the population seem to have succeeded in
protecting workers from the feelings of employment insecurity. This was however more so
the case for the insiders rather than the outsiders. This impact is stable even when labour
market condition and economic fluctuation variables are taken into account. Labour market
policies, such as active labour market policy and passive labour market policies on the other
hand seem to protect all workers at a similar level, without increasing the gap between the
two segments. Employment protection legislation does not seem to explain much in
explaining both the levels and the gap between the insiders and outsiders.
The results of this paper confirm the theory set forth by Palier and Thelen (Palier and
Thelen, 2010), as well as others (Emmenegger, et al., 2012), where it was argued that
corporatist countries with stronger unions with a centralised bargaining structures were the
ones that introduced dualism of the labour market to address the pressures of liberalisation
while trying to protect the core segment of their workforce. Similar to their argument, it
seems to be that countries where corporatist may be prevalent are the ones where the gaps
between insiders and outsiders in their subjective insecurity are the largest. Thus, labour
shedding strategies were mostly imposed on the outer segments of the labour market
increasing the perceived employment insecurity of the outsiders, while protecting the
insiders. However, it must be noted that in other countries without such bargaining
structures/traditions both insiders and outsiders were exposed to flexiblisation and
increased insecurity. Thus in these countries although the gap between the insiders and
outsiders may be minimal, the levels of perceived insecurity are still high for both types of
workers, and higher than that of the corporatist countries.
This paper provides important issues for future studies in the field of job and employment
insecurity. Firstly, employment insecurity levels vary not only across countries, but between
different groups of workers within the same country. In addition, this gap between different
segments of the labour market is not always the same across countries. In some countries
despite the overall level of insecurity the differences between groups may be minimal. In
others, although at first glance the level of insecurity may look very low, this hide the fact
that there are large differences between segments of the labour market, and the outsiders
are exposed to insecurity comparable to that of other countries with much higher levels of
insecurity. Thus, it is important to look at not only the levels of insecurity, but also the
different gaps between different groups of workers. Here I’ve only examined permanent
workers versus temporary workers, but using the different definition of outsiderness,
workers in different age group, sex, occupation level and migrant status should also be
examinediv. Secondly, as we can see from this paper, institutions do not necessarily impact
all workers in the labour market the same way – as presumed in previous studies. Because
the roles of institutions are different, the way in which workers are impacted or protected
by them varies accordingly. Institutions that may help reduce insecurity of some workers,
may not do much for others. Thus, future studies that examine the impact of institutions
should also take into account for these discrepancies. This study only focuses on institutions
rather than impact of partisanship, which is another aspect of dualisation thesis that
explains the varying degrees of division of labour markets. This was not within the scope of
this paper, but is another aspect that should be examined in future studies. Lastly, it is
worthwhile to question our understanding of what constitute as insiders and outsiders. As
we have found in this paper although “objectively” individuals may be in different labour
market positions, their subjective perception of insecurity may be similar in certain contexts
(e.g., Cyprus, Estonia). Given that it is the subjective perception of individuals that have
large implications for well-being and other wider consequences, perhaps our focus needs to
move beyond our presumptions of objective indicators to consider more direct subjective
aspects of insecurity.
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Appendix 1: Independent variables
Individual level characteristics
Demographic & Human capital variables
Age – 4 categories (15-24, 25-34, 35-44, 45-54, 55-64) – reference: 34-44
Sex – female dummy
Education – lower secondary or below, upper secondary, tertiary or above: reference:
upper secondary
Training received in the past year
Previous unemployment experience – had an unemployment experience of 3month
or more in the past five years
Disability – daily life hampered by illness or disability
Citizenship-citizen of the country of residence
Family structure
Having a partner in paid work
Having dependent child(ren)
Employment & workplace characteristics
Occupation level – Legislators, senior officers and managers, Professionals,
Technicians and associate professionals, Clerks, Service worker and shop and market
sales worker, Skilled agricultural and fishery workers, Crafts and Related Trade
workers, Plant and machine operators and assemblers, Elementary occupations and
Armed forces (reference: Service worker and shop and market sales worker)
Permanent contract – reference: temporary or no contract
Currently a union member
Size of company - under 10, 10 to 24, 25 to 99, 100 to 499, 500or more: reference
under 10
Sector – NACE13 category – Agriculture forestry and fishing, Mining and quarrying,
Manufacturing(reference), Electricity gas and water, Construction, Retail and repair,
Hotel and restaurants, Transport storage and communication, Financial
intermediation, Real estate renting and business activities, Public administration and
defence, Education, health and social work, and Other services.: reference
National level variables
EPL overall: Employment protection overall, including Individual dismissal of workers
with regular contracts, Additional costs for collective dismissals, and Regulation of
temporary contracts
EPL regular workers: Individual dismissal of workers with regular contracts,
incorporating (i) procedural inconveniences that employers face when starting the
dismissal process; (ii) notice periods and severance pay; and (iii) difficulty of
dismissal, as determined by the circumstances in which it is possible to dismiss
workers, as well as the repercussions for the employer if a dismissal is found to be
EPL index for temporary workers: including regulation of fixed-term and temporary
work agency contracts with respect to the types of work for which these contracts
are allowed and their duration, as well as regulation governing the establishment
and operation of temporary work agencies and requirements for agency workers to
receive the same pay and/or conditions as equivalent workers in the user firm, which
can increase the cost of using temporary agency workers relative to hiring workers
on permanent contracts.
Labour market policies (All data from EUROSTAT: and for
National expenditure on labour market policy as a percentage of GDP divided by the
unemployment rate
National expenditure on passive labour market policy as a percentage of GDP divided
by the unemployment rate
National expenditure on active labour market policy as a percentage of GDP divided
by the unemployment rate
Bargaining power/structure (All data from ICTWSS: for
2008 or latest)
Collective bargaining coverage: employees covered by collective (wage) bargaining
agreements as a proportion of all wage and salary earners in employment with the
right to bargaining, expressed as percentage
Union density : net union membership as a proportion of wage and salary earners in
Bargaining level : The predominant level(s) at which wage bargaining takes place (5 =
central or cross-industry level; 4 = intermediate or alternating between central and
industry bargaining; 3 = sector or industry level; 2 = intermediate or alternating
between sector and company bargaining; 1 = local or company level)
Coordination of wage-setting : (5 = a) centralized bargaining by peak association(s),
with or without government involvement, and/or government imposition of wage
schedule/freeze, with peace obligation (example: Sweden prior to 1980); b) informal
centralisation of industry-level bargaining by a powerful and monopolistic union
confederation (example Austria prior to 1983;c) extensive, regularized pattern
setting and highly synchronized bargaining coupled with coordination of bargaining
by influential large firms (Japan prior to 1998). 4 = a) centralized bargaining by peak
associations with or without government involvement, and/or government
imposition of wage schedule/freeze, without peace obligation (example: Ireland
1987-2009); b) informal (intra-associational and/or inter-associational) centralisation
of industry and firm level bargaining by peak associations (both sides) (example
Spain 2002-8; c) extensive, regularized pattern setting coupled with high degree of
union concentration (example: Germany most years). 3 = a) informal (intraassociational and/or inter-associational) centralisation of industry and firm level
bargaining by peak associations (one side, or only some unions) with or without
government participation (Italy since 2000); b) industry-level bargaining with
irregular and uncertain pattern setting and only moderate union concentration
(example: Denmark 1981-86); c) government arbitration or intervention (example:
U.K 1966-8, 1972-4) 2 = mixed industry and firm-level bargaining, with no or little
pattern bargaining and relatively weak elements of government coordination
through the setting of basic pay rates (statutory minimum wage) or wage indexation
(example France most years).1 = fragmented wage bargaining, confined largely to
individual firms or plants (example U.K. since 1980).
RI: routine involvement of unions and employers in government decisions on social
and economic policy.(2 = full concertation, regular and frequent involvement; 1 =
partial concertation, irregular and infrequent involvement; 0 = no concertation,
involvement is rare or absent)
Economic conditions (all data from EUROSTAT)
Share of temporary workers as a proportion of the total employed for 2008
Unemployment rate for 2008
GDP growth rate 2008-2009
Unemployment change 2nd quarter 2008 – 2nd quarter 2009
Figures and Tables
Czech Rep.
Figure1. Employment insecurity gap between non-permanent and permanent workers
across 23 European countries for 2008/9
data: ESS 4th wave. Design and population weighted.
Czech Rep.
Figure 2. Cross-national variance in the employment insecurity gap between insiders and
outsiders (having controlled for individual and workplace characteristics) – sorted by gap
Table 1. Explaining employment insecurity of individuals across 23 European countries with
contract type
Permanent contract
Variance country level
Variance individual level
Model 2
+ind. level
Model 3
+random slope
𝜋 /3
Variance permanent
Explained variance country
N level 1 (individuals) = 17032 , N level 2 (countries) = 23
a: Model 2 controls for variables such as age, sex, education, training experience in the last 12 months,
unemployment experience in the past five years, existence of a disability, citizenship, whether or not the
individual has a partner in paid work, a child or children in the household, occupation, currently belonging to a
trade union, and size and sector(NACE 13 + public/private) of the company the individual is employed in. Full
models can be provided upon request.
*** = p <0.001, ** = p < 0.01, * = p < 0.05
Table 2. The impact of institutions in explaining the cross-national variance in the level of
employment insecurity and the gap between insiders and outsiders
Main effect
(Macro factor)
Macro factor*permanent
Employment protection
EPL overall
Labour market policies
LMP/unemp ALMP
- 1.004***
Variance country level
Variance permanent
Explained variance level 2
(from model0)
Explained variance level 2
(from model3)
Explained variance random
slope: permanent (from
model 3)
Level 2 N
Level 1 N
Each column represents a separate model, where one context variable is included as a main effect on
employment insecurity, as well as an interaction term with permanent contract. All models include the
individual level variables as in model 3. All level 2 variables are centred and standardized.
For models including EPL, different model 0 and 3 were calculated based on 19 country cases.
*** = p <0.001, ** = p < 0.01, * = p < 0.05
Main effect
(Macro factor)
Macro factor*permanent
Bargaining structure
Bargaining Coordination
Variance country level
Variance permanent
Explained variance level 2
(from model0)
Explained variance level 2
(from model2)
Explained variance random slope:
Level 2 N
Level 1 N
Each column represents a separate model, where one context variable is included as a main effect on
employment insecurity, as well as an interaction term with permanent contract. All models include the
individual level variables as in model 3. All level 2 variables are centred and standardized.
*** = p <0.001, ** = p < 0.01, * = p < 0.05, ¥ = p < 0.010
rate 2008
Main effect
(Macro factor)
Macro factor*permanent
Economic & labour market conditions
GDP growth
Unemp. Change
‘08- ‘09
08q2 - 09q2
% temp
workers ‘08
- 0.083
- 0.882***
Variance country level
Variance permanent
Explained variance level 2
(from model0)
Explained variance level 2
(from model2)
Explained variance random slope:
Level 2 N
Level 1 N
Each column represents a separate model, where one context variable is included as a main effect on
employment insecurity, as well as an interaction term with permanent contract. All models include the
individual level variables as in model 3. All level 2 variables are centred and standardized.
*** = p <0.001, ** = p < 0.01, * = p < 0.05, ¥ = p < 0.010
Given that membership coverage are never complete, as in 100% of workers being within the unions or under
collective bargaining coverage in which case there cannot be a division of the workforce
This can also be linked to partisanship, where the as Rueda argues that the goals of social democratic parties
were “best served by pursuing policies that benefit insiders while ignoring the interests of outsiders”(Rueda,
2005:61). However, examining the impact of partisanship –as well as different party coalition on employment
insecurity perception gaps between insiders and outsiders is beyond the scope of this paper.
Results can be provided upon request.
I’ve also found that the insecurity gap between younger workers and prime age workers also vary across
countries, as well as the gap in insecurity across different occupation groups (Chung, forthcoming).