Labour Market Governance and the Creation of Outsiders

Published date01 March 2015
AuthorColin Crouch
Date01 March 2015
DOIhttp://doi.org/10.1111/bjir.12058
Labour Market Governance and
the Creation of Outsiders
Colin Crouch
Abstract
Using case-study data, the article examines the contention that protective
labour market policies and trade union action are responsible for growing
divisions between labour market ‘insiders and outsiders’. Case studies are
reported on developments in collective bargaining in the hospitals and engineer-
ing sectors from seven western and central European countries. The article
finds that managerial strategies, and interactions between management and
unions, have to be considered to give a full account of the growth of precarious
employment.
1. Introduction
Debates over labour market ‘reform’ in Europe are mainly about the role of
employment protection laws in either reducing overall employment or creat-
ing divisions between protected labour market insiders and unprotected out-
siders (e.g. Addison and Teixeira 2003; Avdagic 2015; Boeri 2004; Cahuc and
Postel-Vinay 2002; Clark and Postel-Vinay 2009; Eichhorst 2015; European
Commission 2007; Heyes 2011; Micco and Pages 2006; OECD 2004; Schmid
2015; Venn 2009). There is another debate about hypothesized distinctions
between protected workers in the ‘non-market’ public sector and exposed
workers in the private sector (Pfeifer 2011). There is then a further theme
concerning collective bargaining. For orthodox economists, trade unions are
labour monopolists, trying to raise artificially the price of labour, and pro-
tecting their members as privileged insiders at the expense of ‘outsiders’, who
are either unemployed or otherwise required to bear the costs of the insiders’
privileges (Lindbeck and Snower 1988; Rueda 2005, 2006; Sigeman 2009).
Missing from all these formulations of the problem of outsiders is the role of
employers. There is rarely any consideration that managerial strategy itself
might favour the creation of grades of employee with different levels of job
Colin Crouch is at the University of Warwick.
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British Journal of Industrial Relations doi: 10.1111/bjir.12058
53:1 March 2015 0007–1080 pp. 27–48
© John Wiley & Sons Ltd/London School of Economics 2015. Published by John Wiley & Sons Ltd,
9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
security, or that outsiders might be created by the interaction between
employer strategy and other elements of the labour market context. The aim
of the present article is to explore how these further elements might operate.
It does this, first by exploring some general comparative data on European
economies, and then by examining reports of case studies on developments in
collective bargaining in the hospitals and engineering sectors from seven
western and central European countries.
2. Outsiders and market externalities
The creation of labour-market outsiders can be seen as an example of the
more general problem of market externalities, including the possibility that
various means of tackling market failure will have characteristic failures of
their own. The concept of labour market ‘outsiders’ implies something stron-
ger than being at the lower end of a continuum of income or working
conditions. It implies the existence of discrete cut-off points that prevent
certain persons from sharing favourable conditions enjoyed by others. The
simple term ‘outsider’ in this context covers a considerable variety of forms of
exclusion, depending on what constitutes the ‘inside’ from which the outsid-
ers are excluded. The unemployed are the clearest cases of outsiders, as they
are excluded from active participation in the labour market. Workers in the
shadow economy are excluded from the protection of the law. Workers with
temporary contracts are excluded from the benefits of open-ended contracts,
though the extent of their exclusion will depend on the precise terms of both
forms of contract. More generally, there can be various forms of contract for
workers doing similar work, the outsiders being those unable to gain access
to the more privileged forms.
In theory, these issues will be played out in particular ways under different
forms of labour market governance, as summarized in Table 1. Column three
TABLE 1
Characteristic Means of Dealing with Externality Problems through Definition of Labour
Market Outsiders
Forms of governance Externality coping capacity Definition of outsiders
Law and government High Depends on political leverage
of different groups
Associational
bargaining
Depends on degree of
encompassingness
Groups outside associational
scope
Firm-level bargaining Low, unless unions can
introduce wider perspectives
Groups of low importance to
firms, unless amended by
union influence
Corporate hierarchy Low: limited to organizational
needs
Groups of low importance to
firms
Market Low Groups defined by implicit and
incidental results of market
competition
28 British Journal of Industrial Relations
© John Wiley & Sons Ltd/London School of Economics 2015.

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