Altered risks or static divides? : labor market inequality during the Great Recession

Abstract

European countries during the Great Recession had to deal with massive economic shocks, leading to a surge in employment insecurity. How was this increase in employment risk distributed across societal groups? The prominent dualization hypothesis typically posits that outsiders, characterized by low labor market attachment, grow particularly vulnerable to a deterioration of employment prospects during recessions, while insiders remain comparatively sheltered from economic fluctuations. Using panel and cross-sectional data from France, Italy, Portugal and Spain for the pre-crisis, crisis and immediate postcrisis period, we show that this did not hold in Southern Europe during the Great Recession. Instead, employment prospects deteriorated more rapidly for insiders than for outsiders leading to convergence in the labor market conditions of the two groups. We suggest potential explanations for this finding and highlight a future research agenda for dualization scholars.