Dualization, crisis and the welfare state

Labour market dualization (an increasing separation between insiders and outsiders) has become an influential feature of many OECD economies since 1980s. This paper argues that dualization mitigates the generosity of the welfare state in a significant way. It also investigates the relationship between dualization and policies that protect and insure against unemployment. The compensating role of social policy is shown to be limited in cases where dualization is more significant. The paper then focuses on the relationship between dualization and the welfare state during the present crisis. It emphasizes the influence of insider–outsiderdifferences on both the nature of unemployment and the responsiveness of social policy during the Great Recession.