The Great Reversal: How an Influential International Organization Changed Its View on Employment Security, Labor Market Flexibility, and Collective Bargaining

Abstract

The claim that labor market flexibility—the lack of regulations and collective bargaining constraints on employers—is essential to maximizing employment, minimizing unemployment, and obtaining growth does not have empirical support. That the claim lacks evidence can be seen by tracing how the market fundamentalist assertions made in the initial OECD Jobs Strategy in 1994 have been reversed by the OECD and by other international financial institutions. The OECD now notes that new evidence “shows that countries with policies and institutions that promote job quality, job quantity, and greater inclusiveness perform better than countries where the focus of policy is predominantly on enhancing market flexibility.” It has also rejected the argument that collective bargaining defends the interest of “insiders” against “outsiders” in the labor market. While OECD reports previously made almost indiscriminate calls for lowering labor standards to increase labor market flexibility, they now caution that irregular work can be a danger.