Labour market policies and social inequality in labour market outcomes

Labour market policies shape how labour market outcomes are distributed across social groups. This chapter discusses theoretical perspectives on how labour market policies might cause greater or lesser inequality in employment, job quality, and earnings between social groups as characterized by their gender, education, age, or ethnicity. The chapter focuses first on the ‘unified theory’, which largely holds that most policy interference with the functioning of the labour market has detrimental outcomes, the brunt of which is born by those groups with lower human capital. It contrasts this perspective with the dualization literature, which does not deny positive impacts of labour market policies overall but highlights how they can create greater inequality between ‘insiders’ and ‘outsiders’. After contrasting these approaches with the existing evidence, the chapter argues that further research should build on theories of institutional complementarities and contextual moderation as developed for instance in the Varieties of Capitalism literature.