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**Labour Market Flexibility :check: :red_cross: (EPL (CONSEQUENCES OF EPL,…
**Labour Market Flexibility :check: :red_cross:
FOUR TYPES OF LABOUR MARKET FLEXIBILITY
WAGE FLEXIBILITY
Wage levels & wage differentials become more responsive to market conditions, and more specific to the firm
Wages more responsive to macroeconomic factors such as unemployment, productivity and international competitiveness
Policies
:
Abolishing NMW; weakening collective bargaining (less unionism); reducing welfare benefit floor for wages (RR's)
NUMERICAL FLEXIBILITY
Enhancing employers' ability to vary hours of work and the no. of workers employed in response to changing product demand
Policies:
Less EPL; reducing fixed-term employment contracts; less unionism; encouraging temp & part-time work
e.g. Fixed-term, agency work, part-time work
Rise of the Gig economy:provides more flexibility, makes wages more flexible and labour costs more responsive to unemployment
employment reduced more quickly in a recession - employers' gains risks amplifying economic distress, reducing employment and wages
Shedding long-term employment relationships may also make it easier for companies to raise productivity by shifting production to most efficient sites
EPL makes it difficult & more costly to dismiss labour
- firm is more wary of hiring new workers - prefer to meet increase in demand by overtime OR increasing employment of capital relative to labour
Firms would reduce employment size more rapidly during recession but take on new employees during booms :silhouettes:
FUNCTIONAL FLEXIBILITY
Increasing firms' power to effectively utilize their workforce
Policies:
Encouraging worker mobility within firm; multi-skilling training; reducing work demarcation
e.g. shift work, overtime
Permits more efficient use of a firms' workforce - improving labour productivity - and a means of coping with uncertainty & volatility in product demand
WORKING TIME FLEXIBILITY
Giving firms more authority to set and change work schedules and the organisation of working time
Includes:
hours of work; paid holidays; sick leave; overtime; flexi-time
Increase labour productivity per hour employed - productivity growth & employment growth positively correlated
Productivity growth creates scope to reduce unit costs and prices - higher sales - increasing output and employment
Policies to increase market flexibility conflict with those seeking to enhance worker security
Theory of Mandated Benefits
Flexibility suspicion - for firms benefit only?
Impose a mandate of minimum standards
Costs to the firm and worker
Some laws mandate good working conditions - maternity leave, anti-discrimination laws, Health & Safety, EPL, training programmes
Some laws increase union power directly/indirectly - stopping privatization, extending collective agreements, raising tariffs
Some laws raise wages directly - NMW - or indirectly - higher taxes, higher RRs raise wages
Conclusion:
Regulation might increase employment BUT only if the market fails - and if Wages are rigid (NMW) then unemployment will persist
EPL
CONSEQUENCES OF EPL
Creation of Insider vs Outsider groups
Insiders may not need the extra protection - highly employable - protection not reaching the desired workers
Countries with HIGH EPL have HIGH long-term unemployment - and high temp.work
Spain
Creation of a precarious job situation aiming to avoid
Damaging to welfare
Outsiders consist of the young, old and female workers - young have less experience & lower productivity; women take time out for children and; old have short horizon
Strict EPL linked to uncertainty avoidance
Labour Productivity
Higher productivity per worker in France than UK - employment rate is lower in France - unskilled & inexperienced marginalized in unemployment
Benefiting France's labour productivity
Longer duration of unemployment
LMR causes concentrated unemployment - consequent high wages and generous working conditions + EPL = choosy hiring firms
Limited opportunities for LR unemp. & unskilled
Higher long term unemployment of Youth & older workers
Rise of the Gig economy
Consists of set of norms and procedures to be followed in case of dismissals of redundant workers
Impose legal restrictions on dismissals and compensation to workers
EPL bear close relationship to welfare system - providing insurance against unemployed risk - protecting insiders
Exists because:
Institution protecting a limited segment of the workforce against unemployment risk
A strong redistribute measure - protecting insiders - hurting the unemployed and temp. workers - experiencing longer unemployment duration
temp workers stuck in secondary market
firm also loses out of lost profits from strict EPL
Median voters benefit from strict EPL - better wages and nicer working conditions
FLEXIBILITY LIMITATIONS & BARRIERS
Employer driven
Refusal on grounds of business need
Employers may use flexible schedules to manage wage costs and variations in demand
Career implications - reductions in pay or levels of HC, and reduced opportunities for progression
Questionable commitment to job
More women take on flexible roles - limiting career progression/opportunities
WORK LIFE BALANCE AGENDA
(2000)
Aim: raise employers' awareness of benefits to business with introduction of policies and practices giving better employee work-life balance
Not formal policy :!?:
Flexible Working Law
right to request flexible working established by Employment Act 2002
Right to request a contract variation relating to hours, timing of work or location of work for those with childcare responsibilities
Places duty on employers to consider requests and only reject on grounds of business need
Options include:
Shift work
Part-time
Flexi-time
Job share
Maternity Leave
Paternity leave
Child support
BENEFITS
EMPLOYER
Improved productivity
Reduction in absenteeism
Lower overhead costs
Increased employee moral and commitment
EMPLOYEE
Enable more control over timing and location of work
Better quality of life
Better health and piece of mind
Increased amount and/use of leisure
More enjoyable work-life
LABOUR MARKET POLICY ASSESSMENT
Numerical flexibility policies
appear
not to have increased mobility of UK labour
- falls in probability transitioning from unemplopyment to work
Labour law changes since 1979 - conducive to increasing functional and work time flexibility by allowing management to introduce changes in working conditions
Centered around introduction of labour saving technology, and TUs involvement in setting and regulating workplace practices (restricting)
1982 Employment Act - decreasing union power and union density was falling
Increased functional flexibility and working time flexibility should in theory improve productivity
1980s growth not clearly linked to policy
Combination of employment stability and lack of internal flexibility could discourage employers from hiring new labour
make employment adjustments difficult because harder to use redeployment
if ILMs are fairly rigid then it makes it harder to use such practices as job rotation to enhance skills