Active labour-market policy is an important tool for governments interested in the promotion of employment. This article explores a topic in the comparative political economy literature in need of more attention: the politics behind the promotion of active labour policies. It is argued here that social democratic governments are often not interested in employment promotion measures; labour is divided into those with secure employment (insiders) and those without (outsiders); it is contended that social democratic governments have strong incentives to pursue labour-market policies that benefit insiders but not outsiders. There are factors, however, that either exacerbate or limit the effects of insider–outsider differences on social democracy. These claims are tested in three ways. First, the interplay of government partisanship and employment protection is explored in the British case. Secondly, the individual preferences assumed in the model are tested with Eurobarometer data. And thirdly, the effects of social democracy on active labour-market policy are analysed using data from sixteen industrialized democracies.