The Impact of Wage and Labour Flexibility on Employers and Employees

Abstract

labour market flexibility, working time arrangements and work-life balance are important issues on the political agenda of many societies. The present paper captures the trade-off between the interests of employers and employees by adjusting working hours to the employee availability constraints. A theoretical model is developed in order to determine the ideal gap between full-time and part-time employees. The paper proposes a method of computing a fair rate for part-time employees that is driven by purely financial considerations which ensure that neither employers nor employees are penalized by the employment arrangement. The ideal that is identified can serve as a benchmark for a justifiable gap (also referred to as wage differences) between part-time and full-time employees. Policymakers can rely upon the method presented for computing a fair rate for part-time employees. Another dimension of labour flexibility in the field of Human Resource Management is discussed in order to define an appropriate gap between part-time and full-time employees.