Two important puzzles guide my research: the astonishing persistence of high levels of unemployment in many OECD countries since the early 1980s and the equally intriguing lack of political reactions in the affected countries. With evidence from an econometric analysis of OECD-wide data and detailed case studies of Spain, the UK, and the Netherlands, I will argue that the key to the understanding of the unemployment problem is to divide labor into insiders and outsiders. An accurate examination of the politics of persistently high unemployment and precarious employment must rest on the consideration of insiders and outsiders as distinct groups with contradictory interests. The conflict between insiders and outsiders results in unemployment but, I maintain, institutional and political variables fundamentally transform the effects of this political phenomenon. The creation of a model integrating institutional and political factors produces two unexpected and theoretically interesting conclusions. First, except in the presence of high levels of centralization and coordination of wage bargaining (when outcomes are uncertain), social democratic governments promote particularistic union strategies while conservative governments promote solidaristic union strategies. Second, and more importantly, in these circumstances social democratic governments are less successful at reducing unemployment and precarious employment than conservative ones.