Increasing Labour Market Flexibility Research Articles

Productivity – your countries need you!

Increased global productivity could boost real wages, consumption, fiscal positions and alleviate fears of secular stagnation. But will it? Puzzles relate to the longer term global slowdown and to some countries' recent productivity‐less recoveries in jobs. We assess various explanations including mismeasurement, secular stagnation, financial sector malfunction and increased labour market flexibility. Our baseline forecast is for a moderate pro‐cyclical recovery in productivity but we show how downside risks imply it could be anaemic. Sustained weak productivity is a secular issue. Eight years after 2007, median productivity growth in OECD economies is less than Japan's was eight years into its lost decade. Aspects of secular stagnation and balance sheet adjustment have contributed. Measurement error may have played a role over the longer term. Recent experience divides recoveries into “haves” and “have nots” in terms of productivity and employment. The UK may finally be emerging from a “productivity‐less” recovery in employment after 2011; Spain and the Netherlands have experienced jobless recoveries in productivity; others, such as Canada and Sweden, have experienced pro‐cyclical (typically weak) recoveries in productivity; Italy hardly got going in either direction. Most theories provide, at best, a limited explanation for recent weak productivity performance. These include data mis‐measurement, increased labour market flexibility, financial sector malfunction and supply side secular stagnation. On balance, we think that a modest productivity bounce‐back could be imminent, caused by some demand recovery, tighter labour markets in major economies, higher real wages and firms deciding to invest more in capital, which enhances productivity and points the global economy towards normality. We also illustrate how global risk scenarios could dampen recovery. Negative skews imply mean G7 productivity growth across the scenarios would be an anaemic 1.1% in 2016, 0.5 percentage points (pp) lower than the baseline.

Labour market reforms in Greece and the wage curve

We offer strong evidence of a wage curve mechanism in Greece, which seems to be substantially enhanced by reforms aimed at increasing labour market flexibility. Male, older, more qualified and rural employees appear to be more sensitive to regional unemployment.

Labour market deregulation and apprenticeship training: A comparison of German and Swiss employers

Many extensions of classical human capital theory regard labour market rigidities as a prerequisite for firms to invest in general training. From this perspective, the German labour market reforms since 2003 should have reduced their willingness to support the apprenticeship training system. This article demonstrates that, on the contrary, German firms did not abandon the training system but instead changed their training strategies after the implementation of the labour market reforms. We analyse the new training strategies that German firms deployed to cope with the increased labour market flexibility engendered by the labour market reforms. Switzerland, where no such reforms occurred, serves as the counterfactual. The results demonstrate that German firms successfully reduced the net costs of training by involving apprentices in more work and reducing non-productive tasks.

The Effect of Employment Protection on Labor Productivity

The theoretical predictions of how employment protection affects firm productivity are ambiguous. In this paper I study the effect of employment protection rules on labor productivity using micro data on Swedish firms. A reform of the employment protection rules in 2001 made it possible for small firms with less than eleven employees to exempt two workers from the seniority rules. I exploit the reform as a natural experiment. My results indicate that increased labor market flexibility increases labor productivity. The increase is not explained by capital intensity or the educational level of workers.

Five Characteristics of Youth Unemployment in Europe

Current levels of youth unemployment need to be understood in the context of increased labor market flexibility, an expansion of higher education, youth migration, and family legacies of long-term unemployment. Compared with previous recessions, European-wide policies and investments have significantly increased with attempts to support national policies. By mapping these developments and debates, we illustrate the different factors shaping the future of European labor markets. We argue that understanding youth unemployment requires a holistic approach that combines an analysis of changes in the economic sphere around labor market flexibility, skills attainment, and employer demand, as well as understanding the impact of family legacies affecting increasingly polarized trajectories for young people today. The success of EU policy initiatives and investments will be shaped by the ability of national actors to implement these effectively.

Women Workers in India: Why So Few Among So Many?

This paper examines the determinants of female labor force participation in India, against the backdrop of India having one of the lowest participation rates for women among peer countries. Using extensive Indian household survey data, we model the labor force participation choices of women, conditional on demographic characteristics and education, as well as looking at the influence of state-level labor market flexibility and other state policies. Our main finding is that a number of policy initiatives can help boost female economic participation in the states of India, including increased labor market flexibility, investment in infrastructure, and enhanced social spending.

Systemic competitiveness of post-socialist and capitalist economies: a broader look at the competitiveness debate

International competitiveness studies have hitherto mainly been focused on constructing ranking schemes. This article adds to the literature by analysing World Competitiveness Yearbook data in order to econometrically pinpoint the crucial competitiveness determinants for 35 countries. Applying the system GMM panel data estimator to post-socialist (PS) and capitalist countries separately, several conclusions emerge: i) small and medium enterprises are the main competitiveness generator in the PS block (in contrast to large corporations in the capitalist economies), ii) credit rating is highly relevant in both groups, iii) increasing labour market flexibility in PS countries plays a vital role in boosting competitiveness.

Assessing the Effects of Internal Devaluation Strategy in the Wake of the Eurozone Crisis: An Analysis of Labour Market Flexibilisation and the Working Poor in Europe

In the current European crisis, neoliberal ideas dictate the policy agenda. The propagated solution in the European economic misery is “internal devaluation”: Austerity and labour market flexibilisation are the main goals of economic policy making. Focusing on labour market flexibilisation, this paper calls into question the negative social implications of these policies by demonstrating that increased labour market flexibility creates poverty among the working population. Drawing on the work of Karl Polanyi, the theoretical concept of the commodification of workers and is outlined and, reconstructing the historical processes of commodification, decommodification and recommodification, a theoretical approach is created that outlines the rise of neoliberal labour market policies: how these have led to an increase of labour market flexibility in Europe in the last two decades and how subsequently a new class of precarious workers was created. Empirically testing this theoretical argument, the effect of labour market flexibilisation in Europe over the period 2003-2009 is quantitatively analysed through a time-series-cross-section analysis of 24 European countries. The results of the quantitative analysis support the theoretical argument that was previously made. The paper concludes that labour market flexibilisation has severe negative consequences and is most likely no adequate solution to the current European crisis.

Challenges of implementing a primary health care strategy in a context of a market‐oriented health care system: the experience of Bogota, Colombia

Although Colombia has a health system based on market and neoliberal principles, in 2004, the government of the capital-Bogota-took the decision to formulate a health policy that included the implementation of a comprehensive primary health care (PHC) strategy. This study aims to identify the enablers and barriers to the PHC implementation in Bogota. The study used a qualitative multiple case study methodology. Seven Bogota's localities were included. Eighteen semi-structured interviews with key informants (decision-makers at each locality and members of the District Health Secretariat) and fourteen FGDs (one focus group with staff members and one with community members) were carried out. Data were analysed using a thematic analysis approach. The main enablers found across the district and local levels showed a similar pattern, all were related to the good will and commitment of actors at different levels. Barriers included the approach of the national policies and a health system based on neoliberal principles, the lack of a stable funding source, the confusing and rigid guidelines, the high turnover of human resources, the lack of competencies among health workers regarding family focus and community orientation, and the limited involvement of institutions outside the health sector in generating intersectoral responses and promoting community participation. Significant efforts are required to overcome the market approach of the national health system. Interventions must be designed to include well-trained and motivated human resources, as well as to establish available and stable financial resources for the PHC strategy.

Developing the flexible library and information workforce.

Flexibility is a vaguely defined media buzzword connoting the progressive, forward-looking workplace. Employers report that increased labour market flexibility has made them more cost-effective, efficient, better able to deal with customer and employee demands and the implementation of new technology. But what is happening to those workers who make up the flexible workforce? For a while in the 1980s it seemed that flexibility could do no wrong; now, however, the shortcomings of flexible labour markets are becoming
 more apparent.

A Micro-Analysis of Labour Market Flexibility

This article employs an elementary bargaining model to characterise the consequences of increasing labour market flexibility. In the model a policy change relaxes a non-wage minimum condition of employment. The policy change has ambiguous effects on the share of the surplus that accrues to workers and may leave workers worse off. Moreover, where a worker is on the minimum wage, total welfare may be reduced as workers seek to circumvent the minimum wage by sacrificing non-wage conditions of employment. The results add to our understanding of the motivation and composition of groups, such as labour unions, opposed to labour market reforms. Moreover, they imply that it may be welfare enhancing to retain rigid labour market conditions for workers on, or close to, the minimum wage.

Childbearing, women's employment and work-life balance policies in contemporary Europe

This volume addresses the tensions between work and welfare with respect to fertility. Focusing on childbearing choices (intentions, desires) as influential predictors of future fertility, the contributors examine the importance of labour force attachment on young women's fertility plans in the context of increased labour market flexibility and differences in work-life balance policies across Europe in the early 21st century. Both high- and low-fertility societies of different welfare regimes are studied, illuminating processes of uncertainty and risk related to insecure labour force attachment and the incoherence effect in terms of women's and men's equal access to education and employment but unequal share of domestic responsibilities, constraining fertility. The synthesis of the findings shows how childbearing choices in relation to uncertainty, risk and incoherence offer a lens for understanding the capabilities of families to have and care for children in contemporary Europe. This volume contributes to the conceptual development of further research on the complex relationship between fertility, paid work and work-life balance policies.

The State of Precarious Work in China

Precarious work, which is characterized by the uncertainty and unpredictability of employment, can found in the labor market of most industrialized countries. Although precarious work was relatively rare in China until the 1980s, it has experienced rapid growth over the past two decades. The factors underlying the diffusion of precarious work are varied and interrelated, notably reflecting the impact of changes in the structure of industry, occupations, urbanization, state policies, and labor market institutions, as well as employers’ manpower strategies. Although the spread of precarious work is sometimes advocated as an effective means of generating employment and increasing labor market flexibility, substantial evidence shows that such work is plagued by a series of problems, including low pay, low skill, high work intensity, poor working conditions, and lack of employment protection. This article reviews research on the trends and quality of precarious work in China in the past two decades and offers insights for policy makers with respect to the ways to integrate precarious workers into the primary labor market.

Feature: Flexible Forms of Employment: Boon and Bane

In recent decades, economic policy makers across Europe have sought to increase labour market flexibility by promoting the use of temporary employment. The articles in this Feature provide new results on how fixed-term and agency work contracts affect firm productivity and how the segments of two-tier labour markets interact. This article points to a possible trade-off between efficiency and equity when deregulating labour markets. Taken together, the evidence presented in this Feature suggests that flexible forms of employment can be both a boon and a bane for labour markets and for society as a whole.

Variation in the length of an undergraduate degree: participation and outcomes

Recent policy in England has advocated the introduction of fast-track degrees to provide an alternative, shorter route to a bachelor’s degree. It has been argued that this will widen participation in higher education and increase labour market flexibility by providing an option in which undergraduates spend one fewer years out of the labour market. Critics have suggested that the outcomes from this new undergraduate option will be worse than those for students following the standard length of undergraduate degree (which is three years for most subjects studied at universities in England). This criticism is based on a belief that students on the shorter degrees will be encouraged to ‘cram’, having less opportunity for reflection that will foster a deep understanding. These arguments are evaluated using data which compare students following two and three year degrees in the same subjects at the same university.

Effects of Federal Policy to Insure Young Adults: Evidence from the 2010 Affordable Care Act's Dependent-Coverage Mandate

Using data from the Survey of Income and Program Participation (SIPP), we study the health insurance and labor market implications of the recent Affordable Care Act (ACA) provision that allows dependents to remain on parental policies until age 26. Our comparison of outcomes for young adults aged 19–25 with those who are older and younger, before and after the law, shows a high take-up of parental coverage, resulting in substantial reductions in uninsurance and other forms of coverage. We also find preliminary evidence of increased labor market flexibility in the form of reduced work hours. (JEL H51, I11, I18, J13, J22)

Does immigration increase labour market flexibility?

The question we investigate empirically in this article is whether immigration makes the labour supply in the receiving country more responsive to regional differences in economic opportunities. The main merit of the paper is that we examine three stages in the regional mobility of refugees and labour immigrants: First, the settlement pattern of newly arrived immigrants, second, their subsequent mobility between regions and, third, their eventual exit from the regional labour market to abroad. The analyses apply to immigrants who arrived in Norway from 1995 to 2004. In all three stages, mobility is investigated with regard to its responsiveness to regional differences in wages and unemployment. The main finding is that, in all three stages, the geographical mobility of immigrants is sensitive to regional economic opportunities. In that sense, immigrants do “grease the wheels” of the labour markets, through all the three stages of mobility. The most robust results are found for regional unemployment differences. With regard to natives, we generally do not find any strong evidence for “greasing the wheels” effects.

Trends in labour market flexibilization among Dutch school-leavers: The impact of economic globalization on educational differences

This study examines to what extent there is a trend towards increasing labour market flexibility among Dutch school-leavers between 1992 and 2007, particularly among less educated ones. In addition, the article aims to explain this trend and increasing educational differences by economic globalization, controlled for business cycle effects. Multinomial logistic regression models are estimated using 16 cross-sections of the Dutch Labour Force Survey (1992–2007), including 16,447 labour market entrants. The results show that there is an increase in the likelihood of flexible employment between 1992 and 2007, which implies less standard employment, particularly among less educated individuals, and less unemployment, particularly among higher educated individuals. The less educated are hence doubly disadvantaged by the process of labour market flexibilization. It appears that economic globalization provides an explanation for these findings, except for the increasing educational differences in flexible employment compared to unemployment.

Employment Function for Indonesia: An Econometric Analysis at the Sectoral Level

The Indonesian government has pinned its hope for reducing unemployment on higher economic growth and increased labor market flexibility, such as lowering minimum wages. The estimated sectoral employment functions reveal that output growth rather than real wages is the major determinant of employment. Additionally, the real wage elasticity of employment in the manufacturing sector is very low. That is, a large cut in real wage will have marginal gains in employment, causing a decline in labor income. Therefore, the strategy of lowering real wage is likely to increase the incidence of the working poor as well as the incidence of vulnerability.

Flexicurity, employment protection and the jobs crisis

The concept of ‘flexicurity’ has become ubiquitous in the labour market policy recommendations of the European Commission. EU member states have been encouraged to increase labour market flexibility while maintaining security through the promotion of ‘employability’ and an ‘adequate’ floor of unemployment benefits. The economic crisis that erupted in 2008 has, however, provided flexicurity measures with a strenuous test. As this article demonstrates, those countries that have maintained relatively strong employment protections have tended to experience fewer labour market disruptions than countries with weaker employment protections. The article also suggests that while there has been some convergence in employment and social protection policy across Europe, the trend has been towards less security rather than ‘flexicurity’.