Barriers To Entry: Insider/Outsider Politics and the
Political Determinants of Job Security Regulation
Paper prepared for group sessions of work package 4
Convenors: Prof. Klaus Armingeon & Prof. Bruno Palier
Annual RECWOWE Conference 2007, Warsaw
Patrick Emmenegger
Institute of Political Science
University of Berne
Lerchenweg 36
3012 Berne, Switzerland
[email protected]
Abstract
The insider/outsider theory of employment and unemployment (Lindbeck/Snower 1988, 2001; SaintPaul 1996, 2002; Rueda 2005, 2006) claims that political parties ignore the interests of labour market
outsiders. Social democratic parties, considering labour market insiders as their main electoral
constituency, support stricter job security regulations, which erect additional barriers to entry for
labour market outsiders and thereby aggravate the outsider's economic situation. This paper puts the
insider/outsider theory of employment and unemployment to test. On the micro level, we analyze
labour market participants' perceptions of the importance of job security using survey. Turning to
political parties, we analyze the social bases of party support. Finally, on the macro level, we examine
the political determinants of job security regulation. The results of the empirical analysis lend only
limited support to the insider/outsider theory of employment and unemployment. While labour market
insiders value job security regulation higher than labour market outsiders, the outsiders support tight
regulations as well. In contrast to expectations, labour market outsiders do not show less support for
social democratic parties than labour market insiders. Finally, social democratic parties do not support
tighter job security regulations.
1
Introduction
In surveys, job security always comes out as one of the most important characteristics of
the respondents’ jobs.∗ Most people value job security higher than a high income or a friendly
work environment. Job security, however, is not so popular in contemporary scholarly
research. Here, job security regulation is often treated as one of the most important
impediments to job creation (Siebert 1997; Blanchard and Wolfers 2000; Blanchard 2006). In
contrast to unemployment benefits, collective bargaining institutions or other usual suspects
of inhibiting job creation, job security is seen by most social scientists as of minor importance
for an individual’s position in the labour market (Kenworthy 2003, 2004; Pontusson 2005).
Even worse, job security regulation seems to hurt the chances of the weakest in the labour
market, be it the long-term unemployed (Blanchard and Portugal 2001), the women (EstevezAbe 2005) or the outsiders in general (Rueda 2005). Consequently, ‘flexicurity’, the
combination of security through the welfare state and a flexible, unregulated labour market,
has become the ‘magic formula’ (Sarfati 2003: 278) in social policy.
In contrast to the prominence of job security regulation in scholarly work on (too) rigid
labour markets and (necessary) social policy reforms, we know little about the determinants
of job security regulation. This gap in the literature we wish to address. While we identify
three different groups of arguments, we will focus in this paper on insider/outsider politics,
which have recently gained prominence in political science thanks to the work of David
Rueda (2005, 2006).1 In a nutshell, this theory argues that social democracy and attached
trade unions only represent the interests of labour market insiders. Insiders are best served by
minimizing labour turnover. Consequently, on the macro-level, social democratic parties and
trade unions are pushing for more job security regulation. In an empirical examination, Rueda
has found support for these theoretical claims (Rueda 2005).
In this paper we challenge Rueda’s findings on three grounds. First, he fails to
distinguish between self-employed and so-called ‘upscales’, employees with supervisory
functions. Second, Rueda does not examine the crucial link between individual social policy
preferences and the vote choice. Third, due to the usage of inappropriate statistical techniques
his macro-level results are spurious.
To proceed, we will discuss the insider/outsider theory and its application on job
security regulation in more detail as well as the few empirical studies that put this causal link
to test. Subsequently, we turn to our own empirical examination. Finally, we will discuss the
results of the empirical part before we turn to the conclusions and a short consideration of the
implications for the study of the political determinants of job security regulation.
Insider/outsider politics and job security regulation
The insider/outsider theory of employment and unemployment has been developed by
Assar Lindbeck and Dennis J. Snower (1988) to answer an economic mystery of the 1980s.
While the sharp rise in unemployment in the aftermath of the first oil shock had been credited
to ‘stagflation’, the combination of economic stagnation and high inflation, the persistence of
high unemployment confronted economists with a puzzle. A decline in productivity growth
due the rapid deindustrialization had been observed, but, surprisingly, wage setters did not
seem to adjust to the new reality of lower productivity growth (Blanchard 2006: 19).
We would like to thank Klaus Armingeon and Romana Careja for comments on earlier drafts. The
usual disclaimer applies.
1
The two other important arguments are the ‘familialism’ argument by Esping-Andersen (1996, 1999)
and the ‘investment in skills’ argument by Iversen, Soskice and others (Estevez-Abe et al. 2001;
Iversen and Soskice 2001; Crouch et al. 1999).
∗
2
Lindbeck and Snower suggested to look at the behaviour of labour market insiders, since
collective bargaining typically takes place between a union, representing the employed
workers (insiders), and firms. The unemployed, however, lack a representation in these
negotiations, hence their labelling as outsiders. Assuming rational behaviour, Lindbeck and
Snower expect the insiders to focus only on their own employment and to demand wage
increases that are beyond the interests of outsiders, thereby keeping the unemployment above
the natural rate.
Firms still have the option to replace their employees with unemployed or use the threat
of hiring unemployed to negotiate lower wages with trade unions. But the credibility of this
threat is a function of labour turnover costs, the cost of replacing employed workers. These
costs can rise due to the harassment of underbidding new recruits, but the most important
source of labour turnover costs is job security regulation. “Due to labor turnover costs,
outsiders face labor market discrimination in the sense that they do not receive equal reward
for equal productivity. As a result, outsiders may be involuntarily unemployed or confined to
dead-end jobs – that is, they may be unable to work their way into insiders’ jobs even though
they are willing to work for less than insider wages […]” (Lindbeck and Snower 2001: 167).
In sum, we need to distinguish between insiders and outsiders since these two groups have
oppositional preferences regarding job security regulation. While job security regulation
increases the insiders’ market power vis-à-vis their firm, it also installs barriers to entry for
outsiders.
It is important to note that apart from outsiders and insiders, there are also selfemployed and so-called upscales in the labour force. Self-employed are not subject to
collective bargaining while the upscales occasionally are. However, due to their human and
social capital they do not need to be afraid of unemployment. Consequently, we cannot expect
them to support social policy interventions. In contrast, due to their privileged position in the
labour market they have to expect to be forced to carry a disproportionate part of the financial
costs of social policy interventions.
Building on this, Rueda argues that left parties have an interest in supporting policies
that are tailor-made for labour market insiders (Rueda 2005: 62). This is due to electoral
politics and the commitments parties have to important groups of voters. “The presence of
strong, continuing expectations about parties and the interests of social groups not only
creates easily identifiable choices for citizens, it also makes it easier for parties to seek out
their probable supporters and mobilize them at election time” (Powell 1982: 116, see also
Dalton 2006: 148ff.). Due to ideological reasons, left parties can be expected to support the
interests of the working class (Hibbs 1977), which in this model is represented by the insiders
and the outsiders (compared to the self-employed and the upscales). Being confronted with
the policy issue job security regulation, social democratic parties will side with the insiders,
since they tend to be politically more active and outnumber the outsiders (Rueda 2005: 62).
Turning to the self-employed and the upscales, clear predictions are equally possible.
Rueda (2005) treats these two groups as one. This is, however, a gross simplification. While
job security in its regulatory sense can still be meaningful to upscales, there is no benefit of
job security regulation for self-employed. Hence, we should expect upscales to be more
favourable towards job security than the self-employed. Finally, no predictions can be made
for the preference ordering between upscales and outsiders. While the upscales tend to lose
financially on job security regulation, the outsiders are disproporationally affected by its
negative consequences on labour market flows.
The testable hypotheses can be summarized also follows:
1.
Insiders consider job security regulation as more important than any other
group in the labour market.
3
2.
The self-employed consider job security regulation as less important than any
other group in the labour market
3.
Insiders vote disproportionally for leftwing parties.
4.
The self-employed vote disproportionally for non-leftwing parties.
5.
Leftwing parties have a significant positive effect on the level and the
development of job security regulation on the national level.
These hypotheses will be subjected to an empirical examination in the successive parts
of this paper. However, before we turn to empirics we would like to highlight one more time
our contribution to the understanding of insider/outsider politics and its application on job
security regulation as well as discuss the state of the literature.
Looking at the social bases of party support, we normally assume the leftist parties to
represent the working class. Indeed, a disproportionate share of the working class votes go to
leftwing parties (Dalton 2006: 151f.). Rueda challenges this understanding by pointing to the
division of the working class into two segments: those with secure employment and those
with no or insecure employment (Rueda 2005: 61). Leftist parties do not represent the latter.
Consequently, we should expect labour market outsiders to vote disproportionally for nonleftist parties.2 However, Rueda does not examine this crucial causal link.3 In contrast, we will
put this causal link to test as well.
Furthermore, Rueda fails to distinguish between upscales, i.e. employees with
supervisory functions, and the self-employed. This distinction may appear unessential on first
sight. However, in the framework of insider/outsider politics job security regulation has no
positive meaning to self-employed.4 In the end, themselves can only fire them. The situation
is different for the upscales. Their risk of becoming unemployed may be smaller compared to
an insider, but there is certainly a risk. Moreover, job security regulation has no clear
(negative) financial consequences for upscales. Job security regulation does not increase
unemployment; it only affects its composition (Blanchard and Portugal 2001; Bertola 1990;
Esping-Andersen 2000). It is exactly here where Rueda resorts to the preferences of
employers. They especially benefit from lower levels of job security regulation (Rueda 2005:
64).5 However, in our framework, employers are classified as self-employed.6
Left political power, job security regulation and the state of the literature
Job security regulation has been identified as a form of social policy by leading social
policy scholars like Gøsta Esping-Andersen (1999) and Giuliano Bonoli (2003). Nevertheless,
research on the political determinants of job security regulation has been very rare. While the
2
Keep in mind that the insider/outsider theory of employment and unemployment and Rueda’s
application have very high expectations concerning the rationality of the actors.
3
Of course, job security regulation is not the only issue affecting an individual’s voting decision. In
the realm of labour market politics active and passive labour market policies may also be important
issue. However, Rueda claims that the same logic applies to these policy fields. Since they benefit
mainly the outsiders, they receive less support from labour market insiders than from outsiders.
Turning to macro-level relationships, we should not expect a positive relationship between the
electoral strength of leftist parties and indicators for the generosity of these policies. Rueda finds
empirical support for these claims (Rueda 2005, 2006).
4
Job security as opposed to job security regulation can still be meaningful to self-employed.
5
Rueda argues in a similar way for managers. Since managers are not paying themselves for the wage
increases that result from insider/outsider politics, we cannot see why this should be the case.
6
This classification is in accordance with class theory in sociology (see Erikson and Goldthorpe
1992).
4
literature on development of public social expenditure or welfare entitlements has been
dominated by the power resources approach (Korpi 1983; Esping-Andersen 1990; Huber et al.
1993; Huber and Stephens 2001; Allan and Scruggs 2004), the power resources approach
never gained prominence in research on job security regulation.7 To our knowledge, there is
only the work of Botero et al. (2004) and Saint-Paul (1996, 2002) in economics and Siegel
(2007) and Rueda (2005) in political science. We will now turn to a discussion of these
analyses.
Botero et al. simply resort to redistributional politics and ideology. Since leftist parties
want to redistribute to the benefit of workers, leftist governments will introduce labour
regulations that are more protective of workers (Botero et al. 2004: 1343).
Saint-Paul’s (1996: 281f.) discussion is more elaborated. Like Rueda (2005), Saint-Paul
argues in the framework of the insider/outsider theory; but he further introduces the
distinction between ideological and opportunistic governments. Ideological leftist
governments will push for more labour market regulation independent of electoral
consequences. An opportunistic leftist government, however, will consider the economic and
electoral consequences of its policies, thereby even mull over deregulation. Saint-Paul already
indicates that an opportunistic leftist government will not take into account the preferences of
the poorest and the unemployed; these societal groups may end up voting for rightwing
parties (Saint-Paul 1996: 281). However, here Saint-Paul’s story becomes inconsistent. As we
have seen in the discussion above, in the insider/outsider framework leftist governments will
support job security regulations independent of the importance of opportunism relative to
ideology. This inconsistency is resolved in his 2002 paper. Here, he argues, extensive job
security regulation is more likely in economies with greater worker bargaining power (SaintPaul 2002). Unfortunately, in this paper, Saint-Paul refrains from linking insider/outsider
politics to electoral politics.
Finally, Siegel (2007) resorts to the “parties do matter” theory (Schmidt 1996); but
unlike Botero et al. (2004) he introduces the context of partisan policy-making. The effect of
leftist governments on job security regulation will be stronger, the more unlikely the option of
coordinated social democratic supply side economic policies becomes. This is especially the
case in countries with a high degree of interest group pluralism. This argument partly overlaps
with the reasoning of Ferrera on the southern model of welfare (Ferrera 1996). Ferrera
describes the southern European welfare states as being generally dualistic: “On the one hand
we find in these countries a group of hyper-protected beneficiaries who are (or have been)
included in the citadels of ‘garantismo’: typically public employees, white collar workers and
private wage-earners of medium and large enterprises working on a full contract, with job
security […]. On the other hand we find large numbers of under-protected workers and
7
This may be due to the position of the very influential social policy scholar Gøsta Esping-Andersen
who credits a familialist culture for the development of job security regulation. He argues that “an
implicit familialism” (Esping-Andersen 1999: 23) in labour market management especially in
Southern Europe leads to a family’s virtually complete dependence on the male earner’s income and
entitlements which meant that “unions came to battle for job security […] and the ‘family wage’”
(Esping-Andersen 1996: 75). As a source of this familialist political culture, Esping-Andersen points
to Catholic social doctrines and especially the Christian democratic ‘subsidiarity principle’ with its
institutionalized familialism which supports the male-breadwinner/female-carer model with transfers
as the basic determinant of the development of restrictive employment protection legislation (EspingAndersen 1996: 66). In a similar manner, Pontusson argues that the importance of job security in
continental Europe owes much to the prominence of Christian democratic ideology (Pontusson 2005:
217). In contrast, he argues, the traditional social democratic welfare model is best exemplified by
Denmark and its high levels of active labour market policies and low levels of job security regulation
(Pontusson 2005: 127).
5
citizens, who only (occasionally) draw meagre benefits and may thus find themselves in
conditions of severe hardship: typically irregular workers in weak sectors without job security
(small enterprises, traditional services and agriculture, etc.), workers of the informal
economy, young and long-term unemployed people, etc.” (Ferrera 1996: 20). He argues that
this dualistic structure of the labour market is due to the ideological polarization and the
presence of a radical-maximalist and divided left (Ferrera 1996: 31). When the socialist
parties were pushing for more universal and less separatist social protection schemes, they
faced fierce resistance from the conservative establishment and have not been supported by
the more radical left parties; the latter wanted to protect the interests of their core
constituency, the industrial workers (Ferrera 1996: 31).8
Turning from theoretical arguments to empirical evidence, we observe some support for
the theoretical claims. However, on a second look, all these results are not very robust. Siegel
(2007) is using OECD indicators, distinguishing between the strictness of employment
protection for regular workers and the regulation of temporary employment. His own
empirical analysis is restricted to an estimation of the political determinants of change in
regulation of temporary employment. Siegel finds a positive leftwing party effect, which is
particularly strong when the party effects are multiplied with an indicator for interest group
pluralism. However, looking at his model specification, there is reason to doubt this result
since he did only include the interaction term but not the independent variables (see Franzese
et al. 2001). Additionally, Siegel examines the regulation of temporary employment
independent of the strictness of employment protection for regular workers. We question the
usefulness of such an exercise. As Chung (2005: 35) shows empirically, the regulation of
regular and temporary contracts cannot be analyzed independently. “It is important to note
that it is the employment protection of regular workers that explains the relative share of
temporary jobs across countries, and not the EPL for temporary workers, or any of its
disaggregate indicators, nor the relative strictness of EPL for regular workers.” How can this
surprising result be explained? Chung argues that two paths to flexibility should be
distinguished. On the one hand, flexibility can be achieved by little protection of regular
workers. On the other hand, if regular workers are heavily protected, flexibility is achieved by
employing more temporary workers. This argument is based on a cost-benefit ratio. Being
able to shed permanent workers easily, employers do not have any use for temporary workers.
In contrast, when firing employees is very costly, employers turn to temporary employment.
As long as the cost of firing permanent workers is higher than the cost of employing
temporary workers, employers will tend to go on hiring temporary workers. Hence, the
regulation of temporary employment loses its significance. Even if one does not accept such a
reasoning, the empirical evidence presented by Chung (2005) clearly shows that the
regulation of regular contracts, temporary contracts and the share of temporary employment
are interdependent.
The paper of Botero et al. (2004) focuses exclusively on levels in the year 1998. The
authors developed an all-new dataset containing information on 85 countries. Among these
countries are all liberal democracies as well as not so liberal countries such as China, Egypt,
Nigeria and Pakistan. This does not stop the authors from working with explanatory variables
like left power. But these variables are introduced without controlling for civil rights or
democracy! This raises questions of comparability and concept stretching. Furthermore, they
refrain from distinguishing between numerical (hiring and firing) and temporal flexibility
(overtime regulations). Finally, there is often a lack of variation in the data. For example, out
of the 21 countries used in this study, 13 have a maximum indicator value of 1 for the subindicator ‘cost of increasing hours worked’ in the dataset. Thus, we must conclude that the
8
It is important to note that the reasonings of Ferrera and the insider/outsider theory are partly
contradictory. According to Ferrera, socialist parties try to remedy dualist labour markets.
6
dataset of Botero et al. is much more useful in examining differences in a sample of very
heterogeneous countries. Maybe unsurprisingly, the effect of left political power indicators
ceases to be significant as soon as the sample is restricted to the 21 countries examined in this
study (results in appendix).
In his 1996 paper, Saint-Paul (1996: 283ff.) classifies changes in job protection
legislation in seven major European nations in the period 1962 to 1994 into ‘across-the-board’
and ‘two-tier’ reforms. In contrast to the former type, ‘two-tier’ reforms only affect one
segment of the labour market, typically temporary workers. This distinction is important, as
his empirical analysis reveals. While he does not observe any party effects in the case of ‘twotier’ reforms, clear party effects emerge in the case of ‘across-the-board’ reforms.
Methodologically, Saint-Paul is only relying on frequencies. For example, only in nine out of
224 possible cases he observes an ‘across-the-board’ increase in firing costs (10 in the case of
‘across-the-board’ reductions of firing costs). In four out of nine cases left parties have been
in power, in five cases rightwing or centrist parties have been in power. Furthermore, SaintPaul fails to control for catch-up effects, temporal effects, the average strength of parties etc..
In his 2002 paper, Saint-Paul does not present a macro-level test of his argument.
However, he offers some micro-level evidence. He shows that people feeling affiliated to the
British conservative party show less support for the claim ‘the government should support
declining industries to protect jobs’ (Saint-Paul 2002: 698). Since his model specification
leads to a reduction of the sample from initially 3000 to 279, his results should be taken with
a grain of salt.
Finally, Rueda presents two models on the determinants of employment protection
(Rueda 2005: 70). His first model uses data on severance pay by Lazear (1990) and extended
and corrected by Addison and Teixeira (Addison and Teixeira 2005; Addison et al. 2000).
These data exist only for 19 countries and in the form of five-year averages.9 Rueda finds a
significant positive effect of leftist incumbency on the development of severance pay.
However, his statistical model is not convincing. To deal with serial autocorrelation, Rueda
included the lagged dependent variable, whose estimated coefficient is 0.964. This is very
problematic since only a very little part is left to be explained by the substantive variables.
We would argue that in this case it is a safe bet to argue that the temporal development of the
dependent is not stationary; the latter being a necessary precondition for the application of
models examining the temporal development of the dependent variables. Furthermore, by
including the lagged dependent variable Rueda inevitably changes the perspective of the
model to an examination of annual change. But in ten out of 19 country cases the dependent
variable is a constant!10 Nevertheless, Rueda ends up explaining 92 percent of the variance of
the dependent variable, although next to the lagged dependent variable only three substantive
variables are significantly different from zero.11 Rueda’s second model uses summary values
for the 1980s and 1990s of OECD’s overall employment protection indicator. Although the
indicator values for the 1980s and 1990s are highly correlated12, Rueda does not correct for
serial autocorrelation, nor does he control for any other variables.
To sum up this part, there exists only little evidence on the positive effect of left
9
However, in some datasets and papers these data are included in yearly form, thereby using linear
interpolation. Unfortunately, this part in Rueda’s paper is not very well documented. However, in the
model description he argues that he using yearly data (Rueda 2005: 66).
10
Of course, the temporal invariance is the source of the unit root problem in Rueda’s model.
11
These variables are cabinet partisanship (p-value of 0.037), international openness (0.036) and lag of
standardized unemployment rate (0.036).
12
The bivariate correlation for the indicator values of 1985 and 2003 is r = 0.96 using the slightly
adjusted OECD indicator employed in this analysis for overall employment protection.
7
incumbency on the level of job security regulation. The results are often contradictory and the
statistical models of questionable quality. This is, however, also due to the poor quality of
available data and the stickiness of job security regulation.
Data and Method
In this section, we will describe the data and models used in the succeeding statistical
analysis. Tracking the causal link implied in the insider/outsider theory of employment and
unemployment requires a test of three causal steps: First, we have to examine the social policy
preferences of these labour market groups in the realm of job security. we expect the insiders
to value job security more than any other group. In contrast, the self-employed value job
security less than any other group. Second, those who place a high value on job security will
support leftist parties. If the first claim is valid, we should expect outsiders to
disproportionally support leftist parties. Third, the strength of leftist parties has a positive
effect on job security regulations.
To examine the first two claims the ISSP 1997 module “work orientations II” will be
used. This dataset allows us to study preferences regarding job security as well as party
affiliations with the same set of respondents. Out of the 21 countries employed in this
analysis, 15 are included in this module.13 To assess the first claim, we will use the following
survey question: How important each item you personally think it is in a job: job security?
The respondents had five substantial answer options: (1) Very important, (2) important, (3)
neither important nor unimportant, (4) not important and (5) not important at all. For this
analysis, the scaling has been reversed. 20’971 have answered this question.
The main independent variable is the classification of respondents into the categories
“insiders”, “outsiders”, “upscales” and “self-employed”. Insiders are full-time, not-selfemployed workers without supervisory functions. Upscales are not-self-employed workers
with supervisory functions.14 Outsiders are respondents currently looking for a job or
respondents working on a fixed-term contract.15 Finally, the last group are the self-employed.
The other independent variables will be discussed only very briefly due to space
restrictions. 16
Women: They tend to belong to the outsiders, but due to their additional life-course
risks they are expected to prefer more social policy. However, this need decreases with age.
Age: Older workers are less sought-after. Consequently, we expect them to be more
positive towards job security regulation.
Income: High-income groups are expected to be hostile towards redistribution (Meltzer
and Richard 1981) but their preferences in the case of job security are less clear. However,
income can also be understood as an approximation of the privileged labour market position
13
Included are Canada, Denmark, France, Germany, Italy, Japan, Netherlands, New Zealand, Norway,
Portugal, Spain, Sweden, Switzerland, United Kingdom and the United States of America. Not
included are Australia, Austria, Belgium, Finland, Greece and Ireland. The major alternative data
sources are Eurobarometer surveys (44.3 and 56.1). The two surveys cover 15 and 14 countries
respectively. The coverage is skewed to non-liberal countries though.
14
Supervision is a problematic discrimination since we do not know whether the particular respondent
supervises numerous other employees or only an apprentice. Grouping the upscales together with the
insiders, however, does not weaken but enforces the results presented here.
15
Respondents that could not be classified have been removed from the sample. This decreases the
sample to 12’698 observations.
16
For a full documentation of the employed variables please consult the appendix.
8
of the respondent. Consequently, we expect income to be associated with preferences for less
job security.
Education: Understood as an indicator for general skills, we expect highly educated
respondents to perceive job security as of minor importance. Their skills are insurance enough
to be sought-after in case of dismissal.
Marriage: This can mean two things. A married respondent may be the only
breadwinner; hence a whole family is attached to his/her job. In contrast, marriage can also
mean insurance, since a second breadwinner may be available (keep in mind that the sample
is restricted to people working or currently looking for a job!). To capture these contrasting
logics, we will interact ‘married’ with ‘gender’. Due to the predominance of traditional
models of family organisation, we expect married males to be particularly concerned with job
security, while married females will be less concerned compared to their consexuals.
Trade union membership: We expect members of trade unions to be more sensitized to
labour market issues and generally more supportive of job security regulation.
Church attendance: Building on Esping-Andersen (1996, 1999), regular service
attendants can be expected to favour more conservative family models and consequently to be
more supportive of job security regulation.
We will turn now to the second claim: the labour market status/voting decision nexus.
The dependent variable, party affiliation, has been constructed using the national specific
party affiliation data in ISSP 1997. The classification into ‘far left’, ‘left’, ‘centrist’, ‘right’
and ‘far right’ has been made on the basis of Cusack et al. (2006, see web appendix).17 We
will also control our results with the respondents’ self-classification into the left-right
continuum. However, the latter variable has not been included into the questionnaire in some
countries.
The major independent variables are the respondents’ perceived importance of job
security and the classification of respondents into the labour market groups. Additionally,
several control variables will be employed.
Age: We expect older respondents to support more traditional values, which are better
represented by centrist or rightwing parties.
Women: Inglehart and Norris (2000) observe a shift in voting preferences of women in
recent decades. They used to be more conservative than men due to a stronger attachment to
religion. However, in recent years this relationship has been reversed. Women tend to vote for
leftist parties due to their stronger commitment to gender equality. We try to capture this
development by including an age-gender-interaction term.
Income: Since left parties tend to be more supportive of redistribution, rich people tend
to vote for centrist or rightwing parties (Meltzer and Richard 1981).
Education: The effect of education on the vote choice is less clear. However, if
education is understood as an approximation of the resources of the respondent, we should
expect education to be negatively associated with leftist party affiliation.
Trade union membership: In most countries there are strong ties between trade unions
and leftist parties. Furthermore, the political goals of trade unions and leftist parties are partly
overlapping. Consequently, we expect trade union members to vote disproportionally for
17
With one minor difference: The Christian social party (CSP) in Switzerland has been classified as
‘left’. Cusack et al. (2006, see web appendix) describe this party as ‘conservative’ and classified it as
‘right’. However, this classification ignores that this party is a splinter group to the left of the Christian
democratic party, which Cusack et al. classify as centrist.
9
leftist parties.
Church attendance: This variable is used as an indicator of religiosity. we expect more
religious respondents to support more conservative values. Hence, we expect church
attendance to be negatively associated to leftist party affiliation.
To estimate the models we will use ordered logistic regressions with country dummies
and clusters to adjust the standard errors for intragroup correlation. As a control, we will reestimate all models by using simple bivariate logistic regression models with country
dummies and clusters.18
Job security regulation
Job security regulation can be understood as restrictions placed on the ability of the
employer to use labour (Addison and Teixeira 2003: 85). This definition comprehends the
regulation of working time, part-time work and many other things. In this paper, we restrict
our focus on the regulation of numerical flexibility, which in our definition comprises mainly
two aspects: (1) restrictions on firing regular workers and (2) restrictions on hiring temporary
workers. This understanding may be criticised as being too narrow. However, even when this
narrow definition is used we are already confronted with severe problems of data
comparability and conceptual discrimination.
The OECD (OECD 2004) developed an indicator that tries to capture cross-sectional
and temporal variations in job security regulation. The indicator is available for all 21
countries and covers the period from 1985 to 2003.19 Despite being the most detailed
indicators available, they have been subjected to criticism. Crouch et al. (1999: 36) argue that
the measurement of legal restrictions leads to a bias. They raise two important points: (1) nonstatutory regulations and (2) implementation of legislation. The first issue is particularly
important for countries like Japan and Denmark. Japan “has, within its great firms, possibly
the most institutionalized labour markets in the world; but because the factors which reduce
the disposability of labour result from corporate strategy rather than government regulation,
they are disregarded as not really being job regulation” (Crouch et al. 1999: 36). In Denmark,
collective agreements seem to play a much bigger role than legal provisions (Sigeman 2002:
259). However, according to Bertola et al. (1999: 17) collective agreements mainly play a role
in the regulation of collective dismissals, “while constitutional and legislative provisions on
the protection of human rights and protection against unfair labour practices provide
protection in case of individual dismissals” (Bertola et al. 1999: 17).
The second issue focuses on rule of law. “It is widely known that in at least some
economic sectors and geographical areas within southern Europe legislated labour regulation
is widely ignored” (Crouch et al. 1999: 36). In fact, there are huge differences concerning rule
of law among OECD countries. Using the indicators for rule of law in 2005 in World Bank’s
Governance Indicators Dataset we find Italy on place 75 among 208 countries, enclosed by
Lithuania and Bhutan. Greece ends up on place 67, enclosed by Dominica and Kuwait. Samek
Lodovici (2000: 32) argues similarly, but augments the critique: “Comparisons of regulatory
regimes, in order to derive information on the level of flexibility in the functioning of the
labour market, should consider their coverage, the role of legislation versus collective
agreements, judicial interpretations, industrial relations systems, and current practice.”
18
The binary dependent variables are coded as follows: (1) Importance of job security: one if very
important (N= 11152) and zero otherwise (N= 8941). This coding is due to the skewed distribution of
preferences. (2) Party affiliation: one if left or far left (N= 6090) and zero otherwise (N= 6746).
19
Except in the case of New Zealand. In this case, data is available from 1990 onwards.
10
Boeri and Jimeno (2005) add on the point of coverage. They argue that measurement
problems often stem from substantial within-country variation in enforcement of regulations.
In the case of Italy, a 15-employee threshold exists with less restrictions on firing for firms
below it (see also Garibaldi et al. 2004).20
The OECD has taken the critique seriously. In their 2004 update they tried to
incorporate aspects of contractual provisions and judicial practice. But as they admit: “Given
that collective agreements and courts’ decisions often refer to a wide range of rules set on a
case-by-case basis, their role is likely to be somewhat understated in the information
presented here” (OECD 2004: 64). To make things worse, the OECD does not clearly outline
when and to what extent they incorporated these elements. This leads to another problem:
subjectivity. As Addison and Teixeira (2003: 91) write in their detailed discussion of the
indicators of employment protection legislation: “There is a obvious problem of subjectivity
in the construction of the indices. This is reflected in the implicit weighting scheme, the
inherent bluntness of ordinal rather than cardinal measures21, the difficulty of attributing
scores on the basis of legal provisions that may be applied differently in practice (possibly
varying in the severity with the stage of the [economic] cycle) that involve different levels of
penalties and that may be subordinate to collective bargaining agreements. (Statistics on the
latter are, of course, even more difficult to assemble).”22 We just do not know how much of
additional regulative aspects like collective agreements, courts’ decisions, coverage etc. have
been taken into account by the OECD.
The difference between legislation and current practice has already been subject to
empirical studies. Ichinio et al. (2003) show that judges are biased by labour market
conditions. During economic downturns they rule more in favour of employees; thereby
raising the firing costs for employers. Also, the general role of courts has been investigated.
Bertola et al. (1999) highlight the role of judicial enforcement. They gathered data for 13
countries. However, the comparability of their data has to be questioned. Different competent
bodies on different levels, different types of dismissals, different provisions invoked etc.;
reading their report one ends up wondering if there is anything that can be won out of these
data. Additionally, court decisions may play mainly a threatening role (OECD 2004: 66). In
fact, in the sample of a big Italian bank used by Ichino et al. (2003) out of 1862 outspoken
dismissals only 86 (4.6 percent) end up in court where 80 percent of the these firings have
been confirmed. But how can a threatening role be quantitatively measured? Finally, courts’
decisions alse seem to play a role in countries where no legal protection exists (Büchtemann
and Walwei 1996; Krueger 1991).
Similarly problematic is the choice of the weighting scheme. Two examples should
illustrate this. The regulation of individual dismissals of regular workers consists of three
equally weighted components. The OECD does not offer a theoretical explanation for this.
Turning to empirics, Bertola et al. (1999) disaggregated the indicator and tested the three
components separately. They found that only the component ‘difficulty of dismissal’ is
significantly relted to the percentage of “currently non-employed who left their job due to a
layoff” (Bertola et al. 1999: 16) and the unemployed with tenure shorter than one month as a
20
In 1990 a reform tightened the regulations of individual dismissals. Firms below the threshold still
face fewer restrictions though.
21
Despite their cardinal ‘character’ the OECD EPL indicators are based on ordinal assessments, which
are in the following averaged.
22
According to Bertola et al. (1999: 17), in Germany, there are approximately 4500 framework
collective agreements, 1300 arrangements for most branches and regions and 3200 work agreements
dealing with this issue next to the legislated act.
11
percentage of total employment (for a similar observation see Emerson 1988).23
The equal weighting of the indicators for the regulation of individual dismissals and
temporary employment is also questionable. First, temporary workers have always been a
minority. In some countries, they never got beyond ten percent of dependent employment.
Even in countries like Greece, Portugal or Spain regular workers were always the clear
majority. Second, the indicator for the regulation of temporary employment exhibits much
more variation. In certain countries, this could lead to a serious misinterpretation of the
regulation of the labour market and of regulatory change.
To address some of these issues we adjusted some of the weightings employed by the
OECD. Despite these changes, the bivariate correlation between the original indicator and the
adjusted indicator amounts to r=0.95. The adjustments are documented in the appendix.
The main independent variable used in the statistical model using macro data is the
partisan composition of government. We distinguish between right-wing, centrist and leftwing parties (for the classification see Armingeon et al. 2006). As the following discussion
will show, we are confronted with substantial statistical problems. Consequently, we will
reduce the number of controls to a minimum.
Institutional constraints: We expect less change and less regulation in countries where
governments are confronted with many institutional constraints of central government policymaking.
Unemployment: Unemployment increases the pressure on governments to intervene in
the labour market. On the basis of the current economic orthodoxy we expect high
unemployment to lead to deregulatory reforms.
GDP growth: Like unemployment, sluggish GDP growth may put pressure on
governments to deregulate the labour market.
Openness: This variable is often employed in research on social expenditure. While
there are two conflicting versions in the literature, the efficiency and the compensation thesis,
only the first makes sense in the case of job security regulation. In the end, the compensation
thesis states that social expenditure rose due to increased competition and higher flexibility
requirements in small open economies.
GDP: This variable is introduced to control for potential differences in the general
development of the countries in the sample.
We would like to end this part with a short discussion about the employed statistical
methods in this second part of the empirical analysis. The statistical examination is
complicated by the fact that the dependent variable, job security regulation, is very ‘sticky’.
The bivariate correlation between the 1985 and the 2003 value, the beginning and the end of
the period covered, is r=0.96. It is therefore no surprise that both the levinlin test (Levin et al.
2002) as well as the ipshin test (Im et al. 2003) indicate a unit root for annual data. There are
three ways out. First, to analyse the effect of the partisan composition of government on job
security regulation, we can turn to simple cross-sectional regression models. But then we are
dealing with only 21 observations. Alternatively, we can employ a technique used by Stephen
Nickell (Nickell 1997; Nickell and Layard 1999): Two cross-sections (1985 and 2003) are
treated as independent observations. We will estimate a random-effects model, controlling for
the first cross-section by including a dummy variable.
Second, we can switch from annual change to periods in the hope to end up with a
23
The two other components are procedural inconveniences and notice and severance pay for no-fault
individual dimissals.
12
stationary dependent variable. This is indeed the case when we switch from annual change to
three year-differences. This way, however, we are still confronted with serial autocorrelation,
for which we need to control. This implies that we have to include the lagged dependent
variable on the right hand side of the equation or perform a prais-winsten transformation.
Either way, we change our model from examining the level of the dependent variable to one
examining the change of the dependent variable. Simple Wald tests reveal that the inclusion
of country and year dummies is necessary. This causes problems since one independent
variable, institutional constraints of central government policy-making, is a constant and two
variables, GDP and trade integration, are ‘sticky’. We will therefore employ the newly
developed method by Pluemper and Troeger (2007), which allows us to estimate fixed effects
models with time invariant or rarely changing variables.24 As a control, we will also estimate
conventional pooled time-series cross-section regression models with panel corrected
standard errors (Beck and Katz 1995), a prais-winsten transformation as well as country and
year dummies; however, without the time invariant independent variable.
Third, we can stick to annual data but calculate the first differences of the dependent
variable. This reduces the number of observations to 373. Due to the differentiation the
dependent variable is zero unless there is a change in the undifferentiated variable. This is
only 30 times the case (8%). Not surprisingly, these models do not provide any significant
results and will not be presented here.
Results
In this section we will discuss the regression models on the determinants of social
policy preferences in the realm of job security, on the determinants of party choice and,
finally, on the partisan determinants of job security regulation. Table 1 provides estimates on
the determinants of job security preferences. Model 1 represents the baseline model. The
variables for trade union membership and church attendance have been included separately,
since their inclusion leads to a downsizing of the number of observations. The variables for
the different labour market groups have been incorporated in models 3 and 4.
For the purpose of this paper, the most important variables are the labour market
groups. As expected, labour market insiders prefer more job security relative to labour market
upscales, while the self-employed prefer less. In contrast to the results of Rueda (Rueda
2005), there is no difference between labour market outsiders and upscales regarding job
security preferences.25 However, this does not conflict with Rueda’s claim that social
democratic parties are confronted with a dilemma. If it could be shown that labour market
insiders disproportionally vote for social democratic parties and that social democratic
incumbency leads to more job security regulations, Rueda’s story may be still true. But before
we turn to the party models, let us quickly look at the control variables in these four models.
The hypotheses outlined in the previous part are, with one exception, all confirmed.26 The
exception is the variable church attendance. On the basis of Esping-Andersen (1996, 1999)
24
This is a three-stage procedure where the unit effects from stage one are explained by time-invariant
and rarely changing variables in stage two before, in stage 3, the model is re-estimated using pooled
OLS.
25
Please remember that Rueda classifies labour market upscales and the self-employed in the same
group, while we argue that these two groups have different job security preferences and, consequently,
should be classified differently.
26
Admittedly, the age variable and the woman-age interaction effect cease to significant in three out of
four models. However, the coefficient signs are all in the expected direction. Statistical models not
reported here show that these two variables lose most of their explanatory power as soon as the
variables married and the married-woman interaction are included.
13
we expected church attendance to have a positive effect on job security preferences. This is
due to the mediation of conservative ideas of family organisation.27 However, this does not
seem to affect job security preferences.28 Church attendance, however, affects party
preferences and to these models we now turn to.
--- Table 1 about here --The results of the estimations of party choice are documented in table 2. Model 5 serves
as a baseline model. The respondents’ perception of the importance of job security is included
in model 6, the labour market groups in model 7 and both are included in model 8. In these
variables we are also mainly interested.
The insider/outsider theory of employment and unemployment as well as Rueda’s
application describe labour market participants as very rational actors. Aware of the beneficial
consequences of leftist incumbency respondents valuing job security very highly are expected
to lend support to leftist parties. But model 6 tells us otherwise. The perceived importance of
job security does not affect the voting decision. Things look similar in the case of labour
market groups. Being aware of the negative consequences of social democratic incumbency
labour market outsiders are expected to vote for non-leftist parties. Quite the contrary is the
case if we believe model 7. The labour market outsiders appear to be the most loyal social
base of leftist parties, although the effect is not significantly different from the labour market
insiders’. As expected, the labour market upscales and the self-employed tend to support nonleftist parties. The inclusion of the perceived importance of job security does not have an
impact on these relationships.
Turning to the controls, we observe that women and trade union members vote
disproportionally for the left, while regular church attendants and rich respondents vote for
the right. Contrary to our expectations, we could not observe an effect of age, the gender-age
interaction and education on party choice.
Admittedly, these models do not control for many important factors such as policy
issues. This is due to restrictions on data availability. None of the usually included policy
issues have been documented in the ISSP 1997 module. However, we would argue that it is
very unlikely that the inclusion of further controls would reverse these very robust effects.29
27
In work not reported here we were able to show that church attendance, and not catholic social
values, lead to more conservative ideas of family organisation.
28
Logit models with a binary dependent variable (not reported) confirm the results presented in table
1. As a further control, we included a variable for affective job security (worry about losing job).
People worrying about losing their job generally prefer more job security. Interacting labour market
groups with affective job security does not yield significant results. Due to the inclusion of affective
job security, however, the labour market outsiders dummy becomes significant. With have two
explanations for this: (1) The inclusion of the variable “worry about losing job” halves the group of
labour market outsiders since this question could only be posed to people with jobs, i.e. temporary
jobs (from 2466 to 1286 respondents). (2) Labour market outsiders more often worry about losing the
job (33 % compared to 22 %) and the worrying about losing one’s job increases the demand for job
security (results not reported).
29
Logit models with a binary dependent variable (not reported) confirm the results presented in table
2. Replacing the dependent variable with the self-placement on the right/left-scale (not reported) does
not significantly alter the results. With one exception: While the income variable becomes highly
significant, the dummy variable for labour market upscales ceases to be significant. Re-estimating the
same models with a binary dependent variable (not reported) does not affect the results. The bivariate
correlation between self-placement on the right/left-scale and the party choice amounts to r=0.94. As a
14
Nonetheless, there is still a loophole for the defendants of the insider/outsider theory of
employment and unemployment. Therefore, it is important to examine the third part of the
causal chain and analyze the partisan determinants of job security regulation.
--- Table 2 about here --Model 9 in table 3 shows the estimation results using a random effects model on two
cross-sections, thereby following an approach employed by Nickell (Nickell 1997; Nickell
and Layard 1999). Model 10 provides the results of the fixed effects model. It is always
reasonable to use fixed effects with panel data, since they always give consistent results, but,
unfortunately, they may not be very efficient. The estimations using random effects are more
efficient, but they need not be consistent. A Hausman test can be employed to check if the
latter is the case. The result of this test is presented at the bottom of table 3. The chi2-score
with six degrees of freedom does not allow us to turn down the null hypothesis of notsystematic differences. Consequently, the random effects model provides efficient and
consistent results. Hence, we will only discuss model 9.
Turning to results, we do not observe a positive effect of leftist government incumbency
on the level of job security regulation. This stands in stark contrast to the results presented in
the literature (Botero et al. 2004; Rueda 2005; Siegel 2007; Saint-Paul 1996). However, it
must be added that Saint-Paul and Rueda are not really looking at levels but annual
differences. We also estimated models analyzing change, but before we turn to these we will
quickly discuss the control variables. As expected, the institutional constraints of central
government policy-making have a negative effect on the level of job security regulation.
Furthermore, we observe a negative effect of the level of unemployment on job security
regulation. This could be interpreted as a sign that economic pressure leads to a deregulation
of the labour market. No such effect can, however, be observed in the case of economic
growth. Moreover, we find a negative effect of GDP per capita on the level of job security
regulation. Thus, richer countries tend to have fewer job security regulations. Finally, we do
not detect an effect of trade integration on job security regulation.
--- Table 3 about here --Table 4 provides the results of the analysis of change in job security regulation. Model
11 is using the newly developed estimator by Pluemper and Troeger (Pluemper and Troeger
2007), which allows to use fixed effects and time-invariant or rarely changing independent
variables at the same time. Model 12 and 13 have employed the standard approach in
comparative politics by using panel corrected standards errors as devised by Beck and Katz
(1995) and a prais-winsten transformation. Model 12 includes year dummies and thereby
focuses on cross-sectional variation, which allows incorporating time-invariant variables.
Model 13 includes year and country dummies. In this case, no time-invariant independent
variables can be included and the effect of rarely changing independent variables will be
underrated.
The results of these models of change of job security regulation provide very similar
further control, we checked whether affective job insecurity does influence party preferences. While
respondents worried about losing their job tend to vote for leftist parties, the different labour market
groups’ party preferences have not been affected (results not reported).
15
results as the models on levels. Again and most important, we cannot observe an effect of
leftist government incumbency on the change of job security regulation. There is only one
notable difference to the results in table 3. We observe a negative effect of trade integration
on the development of job security regulation. This is very much in line with our expectations
based on the efficiency theory. However, this result should be taken with a grain of salt since
it is only significant in two out of three models.
--- Table 4 about here --To sum up the empirical part, our analysis only lends support to the first part of the
three-step causal chain outlined in the theoretical part. Labour market outsiders tend to value
job security less high than labour market insiders, but against the theoretical expectations they
still vote for leftist parties. Furthermore, we cannot observe a positive effect of leftist
incumbency on job security regulation. How can this result be explained? To this question we
turn in the next section.
Discussion
In social sciences we are normally confronted with the question why we have found a
relationship between two variables. In this case, things are different and we have to explain
why the expected relationship is absent. In the following, we would like to argue that the
insider/outsider theory has too demanding rationality expectations. People often do things that
are not in their best interest from a rational choice point of view, and, certainly, people often
do not realise what is best for them from an economist’s point of view.
The assumption of rationality can be a tough one and there are many calls for a more
conservative usage of the concept (Goldthorpe 2000; Hernes 1992; Larsen 2006; Simon
1985). In the case of the insider/outsider theory of employment and unemployment the
rationality expectations are too high. The labour market outsiders are expected to realise (i)
that job security regulation hinders their (re-)employment chances and (ii) that leftist parties
focus on the interests of labour market insiders due to strategic reasons, thereby consequently
ignoring the interests of labour market outsiders. But as we have seen in table 2, the labour
market outsiders do not seem to ‘realise’ that they should not vote for leftist parties.30
Furthermore, outsiders seem to value job security very highly. They do not seem to
‘realise’ that job security regulations hurt their employment chances, either. Table 5 provides
the averaged perceived importance of job security for the four labour market groups
compared with all items included in the ISSP 1997-survey. Maybe surprisingly, the labour
market outsiders consider job security to be the most important attribute of a job, slightly
more important than an interesting job and much more important than a high income.
--- Table 5 about here --Do the labour market outsiders at least know what should be done to make them labour
30
In a similar vein, in Eurobarometer 44.3 (1996), respondents have been asked whether they agree
with the following statement: “Workers need strong trade unions to protect their interests.” Among the
four labour market groups discussed here, the labour market outsiders showed most agreement with
this statement.
16
market insiders? Eurobarormeter 44.3 (1996) offers us an opportunity to address this question.
The wording of the questions is: “What do you think should be the first priority for combating
unemployment? Should we…?” The respondent could only choose one suggested answer.
The groupings of the respondents in the four labour market groups have been made as similar
as possible.
As table 6 shows, there are no strong differences between the four labour market
groups. 43% of the respondents believe that unemployment would be best combated by
stimulating the economy. Another about 10% each thinks that unemployment can be lowered
by improving education, reducing weekly hours and reducing taxes. While a potential answer
‘reducing job security regulation’ has not been included – the authors of the questionnaire did
not seem to consider it to be of particular importance – the facts that ‘stimulate the economy’
tops the list and the similarity of answers between the labour market groups do not lend
support to the insider/outsider theory.
Indirectly, however, we can analyze the rationality of respondents. Outsiders would be
particularly hurt if the unemployment benefits were reduced. As expected, outsiders are
generally less enthusiastic about the reduction of unemployment benefits (2.72% compared to
4.91% across all groups), but the difference is only small.31 Similarly, we observe that the
self-employed, which also include the employers, disproportionally support the reduction of
employers’ social contributions (9.82% compared to 6.44% across all groups). Nevertheless,
the support for ‘stimulate the economy’ is more than four times higher. Especially the latter is
at odds with rationality, since self-employed and the labour market upscales have to expect to
finance this stimulation with their taxes. Thus, we find the expected kind of rationality, but it
is not a ‘majority phenomenon’.
--- Table 6 about here --To sum up, it is highly questionable that most labour market outsiders are aware of the
detrimental effect job security regulation has on their employment chances, as the
insider/outsider theory of employment and unemployment claims. In contrast, they value job
security very highly, probably due to the fact that being in unstable employment or even
unemployed makes you realise how desirable a secure job is.
Conclusion
In this paper we applied the insider/outsider theory of employment and unemployment
to job security regulation. We argued that if the theory is valid we should expect labour
market outsiders to prefer less job security than insiders and support non-leftist parties, and
the strength of leftist parties should be associated with more job security regulation at the
national level. None of these claims finds much support in this analysis. While the labour
market outsiders perceive job security less important than labour market insiders, their level
of support is still very high. In fact, they consider job security to be more important than a
high income or an interesting job. In contrast to the theoretical expectations, outsiders vote
disproportionally for leftist parties. Finally, we cannot observe a positive effect of leftist
government incumbency on job security regulation.
In the discussion we argued that these results are due to the exaggerated rationality
31
Interestingly, the labour market insiders are the strongest supporters of a reduction of
unemployment benefits (7.34% compared to 4.91% across all groups).
17
expectations of the insider/outsider theory. According to theory, insiders are pushing their
wages to a level where their wage is just marginally higher than the wage a outsider would be
willing to work for plus the labour turnover costs (Lindbeck and Snower 1988: 63). This
reasoning presumes a lot of rationality and knowledge. As table 6 shows, a certain degree of
rationality can be observed in the survey data employed in this paper, but rationality is not a
majority phenomenon. If the latter would be the case, we would not observe 42% of the selfemployed and 46% of the labour market upscales supporting the stimulation of the economy
to combat unemployment, since they have to expect to foot the big part of the bill.
Job security is often treated as of minor importance compared to other social policies.
Pontusson argues that wage compression, job security regulation and payroll taxes are
impediments to job creation in social market economies. Reform, however, should only target
on the latter two since wage equality is more important (Pontusson 2005: 214). But job
security seems to be of utmost importance to all labour market participants (see table 5).
While we should be careful not to read too much into these data, we should equally careful in
demands for more labour market flexibility. In the end, policies should serve the people.
18
Table 1: Determinants of preferences for job security (ISSP 1997)
(1)
-0.465***
0.326**
0.002
-0.001
-0.227***
-0.003**
0.297***
-0.329***
-
DV: Importance of Job Security
(2)
(3)
(4)
0.203***
0.195***
-0.036
-0.062
-0.476***
-0.458***
-0.466***
Reference Category
0.348*
0.491***
0.420**
0.003
0.004(*)
0.003
-0.002
-0.005(*)
-0.003
-0.237***
-0.249***
-0.252***
-0.002*
-0.004**
-0.003**
0.245***
0.214***
0.206***
-0.334***
-0.282***
-0.288***
0.198**
0.151**
0.006
-0.007
Insider
Outsider
Self-employed
Upscale
Woman
Age
Woman x age
Education
Income
Married
Married x woman
Trade union member
Church attendance
LME
Canada
-0.457***
-0.289***
-0.429***
-0.302***
New Zealand
-0.237***
-0.219***
-0.274***
-0.235***
UK
0.121***
0.178***
0.265***
0.299***
USA
Reference Category
CME
Denmark
-1.238***
-1.318***
-1.435***
-1.512***
Germany (W)
0.134***
0.156***
0.001
0.046
Germany (E)
0.711***
0.702***
0.768***
0.757***
Japan
-1.164***
-1.155***
-1.120***
-1.225***
Netherlands
-1.110***
-1.209***
-1.204***
-1.258***
Norway
-0.190***
-0.235***
-0.221***
-0.263***
Sweden
-0.305***
-0.431***
-0.408***
-0.515***
Switzerland
-0.238***
-0.226***
-0.231***
-0.223***
MME
France
0.136***
0.110**
0.046(*)
0.007
Italy
0.210***
0.210***
0.262***
0.267***
Portugal
0.557***
0.593***
0.646***
0.721***
Spain
2.188***
2.237***
0.208***
0.303***
2
Pseudo R
0.05
0.05
0.06
0.06
N
15614
13740
10890
9861
Notes: *** p < 0.001, ** p < 0.01, * p < 0.05, (*) p < 0.1. Source: ISSP 1997. Ordered logistic
regressions with country dummies and clusters to account for intra-group variation.
19
Table 2: Determinants of Right/Left Voting Preferences (ISSP 1997)
DV: Party Vote (1 far right to 5 far left)
(5)
(6)
(7)
(8)
0.028
0.029
-0.123
-0.126
Reference category
-0.389***
-0.384***
-0.588***
-0.584***
-0.349**
-0.351**
0.326*
0.320*
0.313(*)
0.306(*)
-0.003
-0.003
-0.001
-0.001
0.001
0.001
0.000
0.000
-0.014
-0.012
0.000
0.002
-0.010(*)
-0.010(*)
-0.009*
-0.009*
0.517***
0.515***
0.521***
0.519***
-0.153***
-0.153***
-0.153***
-0.153***
Importance of job security
Insider
Outsider
Self-employed
Upscale
Woman
Age
Woman x age
Education
Income
Trade union member
Church attendance
LME
Canada
-0.071*
-0.068(*)
0.020
0.023
New Zealand
-0.592***
-0.591***
-0.520***
-0.519***
UK
-0.044
-0.045
0.057
0.055
USA
Reference category
CME
Denmark
-0.613***
-0.595***
-0.543***
-0.525***
Germany (W)
0.586***
0.585***
0.697***
0.697***
Germany (E)
1.402***
1.396***
1.487***
1.481***
Netherlands
0.115
0.128
0.181
0.194(*)
Norway
-0.457***
-0.453***
-0.391***
-0.388***
Sweden
0.003
0.012
0.075
0.084
Switzerland
0.110**
0.113*
0.245***
0.247***
MME
France
0.530***
0.532***
0.620***
0.622***
Italy
0.341***
0.342***
0.389***
0.390***
Portugal
0.851***
0.848***
0.919***
0.916***
Spain
0.145(*)
0.143(*)
0.152(*)
0.145(*)
Pseudo R2
0.04
0.04
0.04
0.04
N
6485
6485
6485
6485
Notes: *** p < 0.001, ** p < 0.01, * p < 0.05, (*) p < 0.1. Source: ISSP 1997. Ordered logistic
regressions with country dummies and clusters to account for intra-group variation.
20
Table 3: Partisan Determinants of Job Security Regulation (two cross-sections
model)
DV: Job Security Regulation
(9)
(10)
Estimation Method
Random Effects
Fixed Effects
(efficient)
(consistent)
Left government(t-1 – t-8)
-0.001
-0.003
Institutional Constraints
-0.220(*)
Unemployment(t-1 – t-8)
-0.064*
-0.059(*)
GDP(t-1 – t-8)
-0.019(*)
-0.015
Openness(t-1 – t-8)
-0.002
-0.006
GDP growth(t-1 – t-8)
0.014
0.058
Dummy for 1985
0.189(*)
0.149
Constant
4.408***
3.854**
Hausman-Test
chi2(6) = 8.26, Prob>chi2 = 0.2200
Adj. R2
0.40
0.10
N
41
41
Notes: *** p < 0.001, ** p < 0.01, * p < 0.05, (*) p < 0.1.
Table 4: Partisan Determinants of Job Security Regulation (3-year-period models)
DV: Job Security Regulation
(11)
(12)
(13)
Estimation Method
XTFEVD
PCSE
PCSE
Left government(t-1 – t-3)
-0.000
0.000
-0.001
Institutional Constraints
-0.199***
-0.236***
Unemployment(t-1 – t-5)
-0.025***
-0.024*
-0.022*
GDP
-0.023**
-0.012**
0.001
Openness(t-1 – t-5)
-0.003***
-0.002
-0.004**
GDP growth(t-1 – t-5)
0.004
0.009
0.005
Constant
4.555***
3.789***
1.333***
F-test (country dummies)
9101***
F-test (year dummies)
33.74***
260.0***
rho
0.524
0.871
0.438
Adj. R2
0.96
0.65
0.95
N
124
145
145
Notes: *** p < 0.001, ** p < 0.01, * p < 0.05, (*) p < 0.1. PCSE: OLS Regression models with
panel-corrected standard errors and a prais-winsten transformation. XTFEVD: Panel Fixed Effects
Regression with Vector Decomposition, panel-corrected standard errors and a prais-winsten
transformation.
21
Table 5: Perceived importance of job attributes (ISSP 1997)
How important is…
selfempl outsider
insider
upscale
(1) …job security.
4.31
4.45
4.52
4.42
(2) …high income.
3.77
3.84
3.91
3.80
(3) …good opportunities for advancement.
3.69
3.81
3.72
3.82
(4) …an interesting job.
4.41
4.44
4.42
4.56
(5) …a job that allows someone to work independently.
4.17
3.92
4.01
4.16
(6) …a job that allows someone to help other people.
3.88
3.97
3.89
3.81
(7) …a job that is useful to society.
3.84
3.91
3.84
3.79
(8) …a job that allows someone to decide their times or
3.69
3.55
3.49
3.46
days of work.
N
~1600
~2500
~4600
~3900
Notes: From 5 (very important) to 1 (not important at all). Source: Questions v13 to v20 in
ISSP 1997. Wording: “how important each item you personally think it is in a job?”
Table 6: Measures against unemployment (Eurobarometer 44.3)
All
Selfempl
Insider Outsider Upscale
43.28
42.41
42.79
43.42
45.85
4.91
6.87
7.34
2.72
5.00
6.44
9.82
5.43
6.56
5.74
10.84
7.91
11.03
11.03
12.66
2.80
3.27
2.85
2.74
2.34
2.74
2.16
2.38
3.20
2.34
11.54
5.43
12.26
12.48
10.64
12.35
16.93
11.08
12.72
9.68
0.19
0.32
0.12
0.19
0.32
0.85
0.48
0.89
0.91
0.74
4.06
4.39
3.83
4.05
4.68
12293/
1252/
4251/
5850/
940/
100%
100%
100%
100%
100%
Notes: Source: Question 90 in Eurobarometer 44.3 (1996). Wording: “What do you think
should be the first priority for combating unemployment? Should we…?” Respondents were asked to
choose one among eleven given answers.
Stimulate the economy
Reduce unemployment benefits
Reduce employer’s social contributions
Improve education and vocational training
Reduce free movement
Increase free movement
Reduce weekly hours
Reduce taxes
Increase taxes
Reduce cooperation in EU
Increase cooperation in EU
Total
22
Appendix
A1. Reanalyse von Botero et al. (2004)
DV: Job Security Regulation
(2)
(3)
(4)
Left_big
0.1276
(0.2010)
Left_small
0.1934***
0.2691
(0.0576)
(0.1776)
GDP
0.0189
-0.0980
0.0216
-0.0686
(0.0138)
(0.1534)
(0.0134)
(0.1349)
Constant
0.2335(*)
1.4546
0.2088(*)
1.1028
(0.1331)
(1.5181)
(0.1254)
(1.3604)
Adj. R2
0.06
-0.08
0.10
0.02
N
85
21
85
21
Notes: *** p < 0.001, ** p < 0.01, * p < 0.05, (*) p < 0.1. Standard errors in parantheses.
(1)
0.1812**
(0.0673)
-
A2. New weighting scheme of OECD EPL indicator
Level 3
Scale 0-6
Level 2
Scale 0-6
Procedural inconveniences
Notice and serverance pay for
Regular contracts (old 1/2) not-fault individual dismissals
(new 3/4)
Difficulty of dismissal
Fixed term contracts
Temporary contracts (old
1/2) (new 1/4)
Termpory work agency
employment
Level 1
Scale 0-6
(old 1/3) Notification procedures
(new 1/4) Delay to start notice
Notice periode after
(old 1/3)
(new 1/4) Severance pay after
9 months
4 years
20 years
9 months
4 years
20 years
Definition of unfair dismissal
(old 1/3) Trial period
(new 1/2) Compensation
Reinstatement
Valid cases for use of fixed-term contracts
(old 1/2)
Maximum number of successive contracts
(new min)
Maximum cumulated duration
Types of work for which is legal
(old 1/2)
Restrictions on the number of renewals
(new min)
Maximum cumulated duration
(1/2)
(1/2)
(1/7)
(1/7)
(1/7)
(4/21)
(4/21)
(4/21)
(1/4)
(1/4)
(1/4)
(1/4)
(1/2)
(1/4)
(1/4)
(1/2)
(1/4)
(1/4)
Documentation:
(1)
Instead of using equal weights for the two level 2-indicators for temporary contracts
we use the minimum out of these two. We argue that it does not matter for employer
if s/he hires workers on the basis of fixed term contracts or temporary work agencies.
These two are substitutable. For some preliminary evidence for this claim see OECD
(2002: 134).
(2)
Instead of using equal weights for the three level 2-indicators for the regulation of
regular contracts we increase the weight of the indicator “difficulty of dismissal”,
since this indicator is more important than the other two (Bertola et al. 1999; Emerson
1988).
(3)
Instead of using equal weights for the two level 3-indicators for the overall regulation
of employment we weight regulation of regular contracts 0.75 and the regulation of
temporary work 0.25. These weights are based on data on the contributions of
temporary and permanent jobs to total employment growth (OECD 2002: 135).
23
A3. Variable description
Name
Importance of job
security
Party Vote
Left
Insider
Outsider
Self-employed
Upscales
Woman
Age
Education
Income
Married
Trade Union
member
Church attendance
Description
Source
Micro-level data
Wording: “How important each item you personally
think it is in a job?” (a) Job security. From 1 (not
important at all) to 5 (very important)
Respondent’s national specific party affiliation. Coding
from 1 (far right) to 5 (far left) on the basis of (Cusack et
al. 2006)
Respondent’s party affiliation. Left to right from 1 (far
right) to 5 (far left)
Dummy-variable for full-time employed workers with
no supervisory function
Dummy-variable for temporary workers with no
supervisory function and people currently looking for a
job
Dummy-variable for self-employed respondents
Dummy-variable for employed workers with supervisory
functions
Dummy-variable for female respondents
Age of respondent
Education of respondent from 1 (none) to 7 (university
degree completed). Sweden: variable reconstructed on
the basis of country-specific education variable
Based on country-specific income variables. Made
comparable by a z-standardization
Dummy-variable for married respondents
Dummy-variable for trade union members
Unemployment
GDP
Regularity of church attendance from 1 (never) to 6
(once a week or more)
Macro-level data
Cabinet composition: left-wing parties in percentage of
total cabinet posts
Average of three time-invariant indicators (index of
institutional constraints of central state government
according to Schmidt (Schmidt 1996), augmented index
of institutional pluralism according to Colomer
(Colomer 1995) and the augmented index of
constitutional structures by Huber et al. (Huber et al.
1993))
Standardized unemployment rate
GDP per capita in current prices relative to USA (=100)
Openness
Imports and Exports as a percentage of GDP
GDP Growth
Growth rate of real GDP per capita (constant prices)
Left government
Institutional
constraints
24
ISSP 1997
ISSP 1997
ISSP 1997
ISSP 1997
ISSP 1997
ISSP 1997
ISSP 1997
ISSP 1997
ISSP 1997
ISSP 1997
ISSP 1997
ISSP 1997
ISSP 1997
ISSP 1997
(Armingeon et al.
2006)
(Armingeon et al.
2006)
(OECD 2006)
Penn World Table
(Access 2.5.2007)
Penn World Tables
(Access 2.5.2007)
Penn World Tables
(Access 2.5.2007)
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