Those currently employed (insiders) and those who are not (outsiders). This distinction is used to help explain the persistence of unemployment in many economies. The insider–outsider theory of unemployment is based on the following assumptions: the incumbent workers, or the insiders, have market power, for example, by belonging to a trade union; the firms make hiring decisions and face labour turnover costs; the entrants, or the newly hired workers, are able to renegotiate their wages if they stay in the firm long enough. All of this prevents the unemployed, or outsiders, from underbidding the insiders even though the former are willing to work for lower wages and in cheaper working conditions.