I'd like to make one point which links to Migeru's mention of hysteresis and transition effects. The first reaction to unemployment was to increase protection for the "insiders", and create that class of "outsiders".

That also led companies to focus on insider-poor investments, i.e. they started hiring less not to be stuck with "insiders" should there be a downturn: more capital-intensive investment (explaining the higher productivity of insiders), and an ebb and flow of outsiders depending on outside demand.

When the persistence of high unemployment made this situation unpalatable, the answer was finally to stop protecting insiders so much. The problem is that there had been pretty irreversible changes in the meantime:

• companies have gotten used to investing incapital rather than in labor;

• the outsiders have lost the social and professional competences required to join asily the mainstream and are not easily recruited into the "inside"

• insiders are unhappy to see their protections eroded while unemployment is not obviously improving, and thus overall morale sags, with detrimental effects on the economy.

Maybe we should focus more on that "morale" and economic well being perceptions effects. If you are told all the time that we are in a crisis much worse than the others, then you believe it, and it becomes politically self-fulfilling.

In the long run, we're all dead. John Maynard Keynes