insiders and outsiders

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Those currently employed (insiders) and those who are not (outsiders). This distinction is used to help explain the persistence of unemployment in many economies. Wages and working conditions are determined by bargaining, either informally, or via collective bargaining between trade unions and employers. The workers' representatives are very keen on protecting the jobs of present employees, the insiders, but less keen on providing job opportunities for potential employees, the outsiders. The workers' side have a strong interest in not making wages so high or working conditions so expensive as to handicap employers in competing to retain their existing markets, as losing these would lead to job losses. They have less interest in agreeing to wage levels and working practices which would make profits high enough to induce employers to expand and provide jobs for new workers. The domination of collective bargaining by insiders is believed to help explain why unemployment is so persistent in many countries.

Subjects: Economics.

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