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The US is a classic liberal market economy where almost 37 per cent of the labour force can be categorised as "cheap labour". But the social market economies of western Europe are not that different. Indeed in Germany the number (43 per cent) is higher than in the US, and even Sweden records almost 34 per cent for aggregate cheap labour. Clearly, Europe's social market economies have as much need of cheap labour as the liberal market economies.

Unfortunately, data on legal and illegal immigrants are non-existent or unreliable. Our expectation is that including reliable measures in our analysis for immigrant workers would only increase the percentage of cheap labour in EU countries, thereby reinforcing their similarity with the US.

So why does it matter if a high level of cheap labour comes from non-standard employment in Europe? It matters because the rise of new outsiders challenges political parties across the ideological spectrum, in three related ways. First, parties of the left might traditionally have sought cheap labour's votes but worry about alienating their core supporters who feel economically vulnerable. Second, parties of the right have been tempted by the rise of cheap labour to cater to populist anxieties about legal and illegal immigration.

Last, and more important, cheap labour workers, condemned to milling around in this ideological vacuum, may feel increasingly marginalised from the normal routes of political assimilation and integration. The structure of the labour market may turn those in the non-standard categories away from democracy by eroding its legitimacy as a system associated with economic protection and political inclusion.

These divisions will soon be tested politically, for instance, in the forthcoming Swedish general election and next year's French presidential election. The political dilemma facing parties of all persuasions involves the choice of model to promote. In many ways, the existing options have proven unsuccessful. The liberal model fails because cheap labour is integrated into standard employment but remains unprotected, and the social model fails because, so far, it has promoted the difference between insiders and outsiders and equated cheap labour with second-class citizenship. Resolving the dilemma posed by cheap labour is the challenge facing governments of all industrialised democracies.

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