Symposium Introduction: Labour Market Reforms, Employment Performance, Employment Quality, and Changing Social Risks

Abstract

Labour market reforms have been high on the political agendas of European governments in recent times. Ever since the early 1990s, when European economies experienced considerably higher unemployment rates than the United States, orthodox economists have insisted on a need for labour market deregulation. In this view, institutions such as strict employment protection legislation, generous unemployment benefits and strong unions, are seen as impediments to employers’ ability to adjust quickly to changing market conditions, and thus the underlying reason for Europe’s high unemployment. Employment protection in particular has been portrayed as a key obstacle to job creation. Because employers anticipate the potential future costs of dismissals, it is argued, they will refrain from hiring new workers even during economic upturns if the restrictions on dismissals and severance payments are high (e.g. Lazear 1990; Siebert 1997; St Paul 2004). Strict employment protection is also thought to be responsible for longer spells of unemployment, because it reduces flows in and out of employment (Blanchard and Portugal 2001). In this perspective, job security regulations generate high turnover costs, which insulate insiders (employees) from competition of outsiders (unemployed) and encourage them to pursue wage hikes (Lindbeck and Snower 1990). Endorsed forcefully by the OECD Jobs Study (1994), the deregulatory view has dominated policy debates over the last two decades. Although the OECD has subsequently moderated its advocacy of across-the-board deregulation (Bassanini and Duval 2009; OECD 2004), this idea has underpinned reforms that brought about a weakening of employment protection in a number of European countries. While the type and scope of reforms differs across countries, the common denominator has been a move from standard forms of employee protection to the maximization of labour force participation. During 1990–2007 the EU countries undertook over 100 deregulatory reforms. About a quarter of those were structural and involved a significant weakening of employment protection for standard workers, while the rest