Labour Market Flexibility Research Articles

Labour Market Flexibility in Indian Industry: A Critical Survey of the Literature

This paper critically reviews the growing literature on the relationship between India’s supposedly ‘restrictive’ labour laws and poor performance on a range of industrial and social indicators. I first summarize the main claims of this literature, and the construction of the indices that it uses to measure inter-state differences in labour regulation. I show, on the basis of a detailed textual analysis of the relevant laws, that the original authors made multiple errors in coding the legal provisions, and that later contributors to the literature misinterpreted the resulting indices as measures of labour market flexibility. I then highlight some econometric issues that undermine their findings, and the difficulties involved in replicating their analyses with a ‘corrected’ and updated indicator. In the course of this discussion, I briefly describe some very recent changes in the labour laws. I go on to point out some flaws in recent papers: they inaccurately capture the employment thresholds at which different sections of the law become applicable; they ignore reasons other than labour regulations for why firms choose to stay small; and they ignore other forms of flexible employment while creating a misleading dichotomy between contract workers and ‘permanent’ workers. I conclude by summarizing evidence of growing de facto flexibility in Indian industry and deteriorating labour market outcomes for workers, without any de jure changes in the regulatory framework.

Political Economy of Labour Market Institutions in a Globalised Era

The paper extends the literature on the political economy of labour market institutions by developing a framework in which owners of capital can benefit from both greater labour market flexibility and better rule of law. Their choice of location of manufacturing centres can, therefore, by influenced both by reduction in expropriation that is associated with better rule of law and greater bargaining power vis-a-vis workers by way of greater labour market flexibility. It follows that where owners of capital are better placed to influence government choices of these institutions, labour market flexibility is influenced by both labour market institutions intensity of exports and as well as rule of law intensity of exports. These predictions are borne out by a cross-country empirical analysis.

Labor Market Institutions and the Incidence of Payroll Taxation

Despite unambiguous predictions of the canonical model of a competitive labor market, empirical studies on the labor market effects of payroll taxation provide conflicting evidence. Our meta-analysis shows that varying degrees of labor market competitiveness across places and time could be one explanation for the mixed results. We then estimate the labor market impacts of payroll taxation in Singapore, the country with most competitive and flexible labor market among the countries investigated in the literature. By exploiting the sharp reduction in payroll tax rate when workers turn 60, we find that the payroll tax cut in Singapore has a large effect on wages without changes in employment. We provide novel evidence corroborating the canonical model prediction that the welfare costs of social insurance programs financed by payroll taxes can be minimized in a competitive labor market.

Labour Market Flexibility in the Context of the Shadow Economy for the Construction Industry

The article analyses labour market flexibility in the context of the shadow economy. The main research problem is devoted to the flexibility of the construction labour market in relation to the level of labourers who work in a country's shadow economy. The following hypothesis was adopted: Flexibility of the labour market for the construction industry decreases with an increase in the level of the shadow economy. The MIMIC approach was used to calculate the level of the shadow economy in a group of selected countries, divided into three categories. The first category includes countries with a relatively low level of shadow economy (less than 15% of their GDP). The second group contains a level starting from 15 to 25% of their GDP, while the third group has a shadow economy that exceeds 25% of GDP. The Pearson correlation index was applied in order to measure the coefficient level between market flexibility and the size of the shadow economy. The flexibility of the labour market was calculated as the change of unemployment caused by the change of construction industry output. The research proved that the correlation between market flexibility and the shadow economy is significant. This is due to the fact that the Pearson index reached the level of 0.866, which means that whenever the shadow economy increases, the labour market flexibility of the construction industry decreases. (original abstract)

Would It Be Useful to Import “Lifetime Employment” Into Russia?

ABSTRACT This article is formatted as a written response disputing the material of Iu.P. Voronov’s “Without Relying on a Pension,” which can be found in this issue. It calls into question the author’s proposal that Russia partially introduce a system of lifetime employment similar to that in Japan. This article shows that the Japanese system functions on the basis of complementary social institutions, each of which produces serious socioeconomic systemic defects. In particular, it leads to increased exploitation of workers, especially younger and older workers, and incites employers to seek the early retirement of older workers. Thus, the economic position of these workers deteriorates. Lifetime employment cannot be adopted partially. This is confirmed by the experience of the United States and Europe, where this term mistakenly refers to a system of open-ended (permanent) work contracts. An analysis of changes in the institutional environments of the Japanese, European, and U.S. labor markets shows that lifetime employment is gradually being modified in Japan and is in fact dying out. Permanent contracts are also gradually dying out in Western countries, since the change in technological paradigm (digital transformation) requires a more flexible labor market.

The Career Model of 21st Century Adopted By Higher Education Graduates

Abstract The present paper has identified two career models, the Protean Career and the Boundaryless Career, that can be considered to accommodate higher education graduates’ personal and professional needs, as well as the flexibility and adaptability requirements of the current labor market. The research used the data from a tracer study applied online to the graduates of the West University of Timisoara, with a response rate of 25% (which falls within the response rate for similar studies at the European level). There has been an increased dynamic of the number of jobs compared to the short period since they have been active on the labor market, especially among male graduates. At the level of individual factors that can influence career success, the importance given to both objective and subjective values is observed. The results have shown that for graduates, income, job security, the possibility of promotion, the use of knowledge, but especially leisure time, are equal priorities, with consistent values in time for both stages of the study. Moreover, there has been a significant negative association between the variables of leisure time and job satisfaction (r (522) = -.17, p <.001). Given the mode of action, the high dynamics of jobs, which reflect the much-needed flexibility in the dynamic context of the labor market, and the values that have guided job search, often working and studying at the same time, the pattern of employment career that most accurately describes the career profile of graduates seems to be that of the Protean career (the path with a heart), also called the career of the 21st century.

Emerging from crisis: Sweden’s active labour market policy and vulnerable groups

Sweden has adopted an Active Labour Market Policy as a means of transitioning out of the economic crisis created by the 2020 COVID-19 pandemic. The approach is to a significant extent reminiscent of that adopted following the 2008 Global Financial Crisis (GFC). The article examines the effectiveness of active labour market policy in Sweden over the period 2007–2012. By analysing these earlier policy outcomes, the aim is to assess the success of active labour market policy more broadly. The hypothesis that greater labour market flexibility allows the labour market policy to be more efficient is evaluated. With a focus on the labour supply, possible reasons for the reduced efficiency of state interventions are outlined using regression models. Conclusions derived from the models point to the failure of earlier Swedish active labour market policy towards the vulnerable groups of the unemployed, unemployed women and men aged 15–19 years and the long-term unemployed.

Labour market reform and firm-level employment adjustment: Evidence from the hukou reform in China

This paper empirically investigates whether the nature of firm-level employment adjustment is affected by the flexibility of the labour market. Specifically, we take advantage of differences in local labour market conditions created by the non-uniform implementation of the hukou reform in China. Variations in the implementation across cities and time allow us to identify the employment effects of the reform by comparing firms in regions with hukou reform to those in regions without. Combining firm-level data and city-level hukou reform data from 1998 to 2007, we adopt a difference-in-differences approach to address this question. The empirical results show that firms exposed to the hukou reform have higher employment adjustment rates on average than similar firms without reform, indicating that an increase in labour market flexibility allowed more employment adjustment. We also find evidence that tariff reductions are associated with greater employment adjustment in reform than non-reform cities.

Globalization and Workforce Composition in Indian Formal Manufacturing: New Evidence on Product Market Competition Channel

A variety of mechanisms linking globalization and margins of adjustments in the labor markets have been empirically tested in recent years. How globalization could affect the workforce composition of industries and thereby the quality of jobs, a key labor market indicator is much less studied and the econometric evidence is sparse. This study contributes to filling the gap by studying India’s formal manufacturing sector that experienced deep trade and industrial reforms since the 1990s. Industry-level panel data are analyzed to establish the indirect link between product market structure (concentration) and workforce composition of firms (usage of contract workers). We explicitly measure changes in market concentration using a newly constructed trade-adjusted concentration ratio, profitability (price-cost mark-up), and workforce composition (usage of contract workers) to show how the effect of globalization is mediated indirectly through the product market structure. Our sample includes 46 three-digit formal manufacturing industries spanning from 1998 to 2014. The findings provide significant evidence that Indian manufacturing firms responded to globalization by hiring relatively more contract workers a key margin of labor market flexibility. This finding underlines the importance of understanding the indirect ways in which globalization could affect labor market conditions and workers' welfare in developing countries.

The impact of new technologies and robotics on employment in the united states

An analysis of the impact of new technologies on employment in the United States has been carried out. Various points of view on the prospects of job losses under the influence of automation and robotics have been shown. The paper uses methods of analysis, comparison, and expert evaluations. The study is based on data from the U.S. Bureau of Labor Statistics, the results of sample surveys of the American population. The article gives characteristics of the US labor force, considers its features. Examples of the use of new technologies by the largest American employers have been shown. New technologies are transforming all spheres from healthcare to transportation and manufacturing. New types of jobs are being created and the employment structure is changing. Untypical forms of employment are expanding. The paper provides public opinion survey on the attitude of Americans to artificial intelligence and its impact on their lives and work. The occurence of distance relations between the employee and the employer leads to the formation of a flexible and virtual labour market. The world of work is becoming increasingly digital. This process is causing fundamental changes in the world of work, which entails new challenges for various aspects of social policy. People of all ages will have to adapt to the new situation in the labour market, which is associated with technological changes and structural shifts in the demand for labour force. The importance and possibility of retraining, professional development, and career guidance throughout life have been updated. The study shows the importance of monitoring the impact of new technologies on employment in order to identify areas of risk.

Estimating State-Level Matching Efficiencies in the Indian Labor Market

Estimating State-Level Matching Efficiencies in the Indian Labor Market-Matching Function, Matching Efficiency, Indian Labor Market, Stochastic Frontier Model, Population Density, Labor Market Flexibility

Beyond Occupational Hazards: Abuse of Day Laborers and Health.

With the increase in labor market flexibility and worksite immigration enforcement, day labor is a common type of informal employment arrangement among immigrants. Our study contextualized day laborers' physical and mental health within work- and community-level factors. We use a nationally representative sample of 2015 day laborers from the National Day Labor Survey. Multivariable logistic regression models estimated the association of occupational and socioenvironmental abuses with self-rated health (SRH), a positive PHQ-2 screening, morbidities, and workplace injuries. Employer abuse was associated with fair/poor SRH, workplace injuries, morbidity, and PHQ-2; business owner abuse was associated with PHQ-2 and workplace injuries; and crime and having a dangerous job are both associated with workplace injuries. Health disadvantages stem from unsafe occupational conditions and an overlapping array of adverse social experiences. These findings highlight the need to develop and evaluate policies that protect all workers regardless of socioeconomic position and immigration status.

Can Formal Labor Contracts Improve Employee Job Satisfaction

Before the reform and opening up, most of the employees in the employing units were “permanent workers”, and the vast majority were lifelong employees. With the development of market economy, the lifelong employment system can no longer stimulate the enthusiasm of employees, and China’s labor market began to change. The basic direction of China’s labor market reform is to introduce the market mechanism and standardize the labor contract system to enhance the flexibility and security of labor market. In order to improve the signing rate of labor contracts and protect the legitimate rights and interests of workers, the Chinese government promulgated and implemented the Labor Contract Law in 2008, which can promote the establishment of harmonious and stable labor relations.Based on the CFPS2016 micro data, this paper explores the impact of signing formal labor contracts on improving employee job satisfaction. Empirical research shows that, on average, signing formal labor contracts has a significant role in promoting employee job satisfaction. For employees aged 16-40, at the “relatively satisfactory” level, the probability of job satisfaction of employees who signed formal labor contracts is 3.55% higher than that of employees without formal labor contracts. In order to ensure the preciseness of the research conclusions and reduce the estimation errors, this paper designs three aspects: （1）Robustness test. In order to exclude the bias caused by personality factors, this paper uses life satisfaction and marriage satisfaction to do further robustness test.（2）Quasi-natural experiment design. Based on the differences of job satisfaction and labor contract status between husband and wife, this paper constructs a quasi-natural experiment scene. If there are differences between the two sides in whether to sign a formal contract, it can be expected that there should be differences in their job satisfaction.（3）Estimation of instrumental variables. This paper uses the household registration system as a tool variable of formal contracts to verify the causal effect of formal contracts on job satisfaction.Therefore, the government needs to strengthen the implementation of the Labor Contract Law and improve the probability of workers having labor contracts. For employers, it is not enough to improve employee job satisfaction only by signing labor contracts, but also need to match salary and welfare, career development channels, etc. to make employees’ work long-term and stable.This paper tries to make the following contributions: （1）The existing research mainly focuses on the external factors such as the social security of workers, but rarely involves the internal psychological changes of employees, such as subjective well-being and employee job satisfaction. This paper studies the above issues.（2）Considering the institutional differences of labor market at home and abroad, foreign studies rarely explore the signing of formal contracts, but mainly study the impact of different contract types on workers. Combined with China’s labor market, this paper explores the above cross fields.

Trends and cycles under changing economic conditions

The identification of trends and cycles is often a challenging task under sizeable changes in economic conditions. Business cycles have unique features, varying in duration, intensity and across countries. We propose an unobserved components model with flexible product and labour market equations to cope with evolving economic conditions, namely time-varying inflation processes and labour share trends. Moreover, we augment the information set with data-driven low-frequency movements in real variables before initiating a joint estimation of all unobserved components. We use the same model to establish an international comparison between the euro area and Portugal covering 40 years of data. We conclude that Portugal witnessed (i) a steeper potential output deceleration since the 1990s, driven initially by productivity and afterwards also by the labour and capital inputs; (ii) a pervasively higher volatility in labour and product markets; and (iii) a long-lived interruption in convergence trends after the 2000s.

How the Eurozone disempowers trade unions: the political economy of competitive internal devaluation

Abstract The marginalization of trade unions was a notable feature of the sovereign debt crisis in the Eurozone periphery. However, governments have recently imposed liberalizing reforms against union protests in the Eurozone core too. We argue that organized labour loses influence across the core-periphery divide because the ‘new economic governance’ puts national governments under enhanced pressure to compete against each other on wage and labour market flexibility—a process known as competitive internal devaluation. The article illustrates this argument through comparative quantitative indicators of liberalization and qualitative process-tracing in three core countries. Whereas Germany’s outstanding competitiveness position allowed its unions to extract significant concessions, their counterparts in France and Finland faced unprecedented defeats from governments aiming to restore economic growth by closing down the competitiveness gap to Germany. Our findings highlight the class power implications of the Eurozone’s reliance on the labour market as the main economic adjustment variable.

호텔 기업 노동시장 유연성, 조직냉소주의, 이직의도 간 구조적 관계 : 서울 시내 5성급 호텔을 중심으로

본 연구는 호텔 기업 노동시장의 유연성, 구성원들의 조직냉소주의 및 이직의도 간 구조적관계를 확인하고자 하였다. 본 연구의 목적을 달성하기 위하여 문헌연구를 바탕으로 국내 호텔기업과 관련하여 노동시장 유연성, 구성원들의 조직냉소주의 및 이직의도와 관련된 속성을 도출하였다. 이러한 속성을 토대로 본 연구의 실증분석을 위해 7개 5성급 호텔의 구성원을 대상으로 하여 총 288부의 유효 설문지가 빈도 분석, 확인적 요인분석 및 신뢰도 검증, 상관관계분석, 구조방정식모형 분석을 위해 사용되었다. 본 연구의 실증분석에 대한 결과를 다음과 같이 제시하고자 한다. 첫째, 노동시장 유연성의 하위변수인 수량적 유연성, 기능적 유연성은 구성원들의 조직에 대한 냉소주의에 유의한 정(+)의 영향을 미치는 것으로 나타났다. 그러나, 임금 유연성은 기각되었다. 둘째, 노동시장 유연성의 하위변수인 수량적 유연성 및 기능적 유연성은 구성원들의 이직의도에 유의한 정(+)의 영향을 미치는 것으로 분석되었다. 그러나, 임금 유연성은 이직의도에 영향을 미치지 않는 것으로 분석되었다. 마지막으로, 구성원들의 조직에 대한 냉소주의는 이직의도에 유의한 정(+)의 영향을 미치는 것으로 나타났다. 따라서 호텔 기업은 노동시장의 유연성을 지속적으로 실행함으로써 기업 경쟁력의 핵심지표라 할 수 있는 기업 가치를 증대시킬 수 있다. 그러나, 과도한 유연성의 실행은 조직에 대한 구성원들의 저항, 불신을 가져올 수 있으며, 나아가 조직에 대한 냉소주의 및 타 호텔로의 이직을 고착시킬 수 있다. 즉, 호텔 기업은 구성원들이 노동시장 유연성 제도의 혁신 및 중요성을 공감할 수 있는 노력을 기울여야 한다.

How Large and Persistent is the Response of Inflation to Changes in Retail Energy Prices?

We estimate the dynamic effects of changes in retail energy prices on inflation using a novel monthly database, covering 110 countries over 2000:M1 to 2016:M6. We find that (i) inflation responds positively to retail energy price shocks, with effects being, on average, modest and transitory. However, our results suggest significant heterogeneity in the response of inflation to these shocks owing to differences in factors related to labor market flexibility, energy intensity, and monetary policy credibility. We also find compelling evidence of asymmetric effects—under sufficiently large shocks—in the case of high-income and low-income countries, with increases in retail fuel prices inducing larger effects on inflation than decreases in fuel prices.

How Large and Persistent is the Response of Inflation to Changes in Retail Energy Prices

We estimate the dynamic effects of changes in retail energy prices on inflation using a novel monthly database, covering 110 countries over 2000:M1 to 2016:M6. We find that (i) inflation responds positively to retail energy price shocks, with effects being, on average, modest and transitory. However, our results suggest significant heterogeneity in the response of inflation to these shocks owing to differences in factors related to labor market flexibility, energy intensity, and monetary policy credibility. We also find compelling evidence of asymmetric effects—under sufficiently large shocks—in the case of high-income and low-income countries, with increases in retail fuel prices inducing larger effects on inflation than decreases in fuel prices.

FDI in hot labour markets: The implications of the war for talent

This paper highlights an inherent contradiction that exists within investment promotion activities in rich countries. Since the financial crisis, many inward investment agencies have shifted their activities from job creation per se to seeking to attract investment in high-tech activities. Such knowledge-intensive sectors are engaged in what has become referred to as “the war for talent”, so locations need to understand their value proposition to firms, especially where labour is tight. This paper explores the implications of this, in terms of the impact on employment and earnings of high skilled labour. We show that, because skill shortages already exist in many of these sectors, seeking to attract inward investment in these sectors simply causes the earnings of such workers to be bid up, and employment in the incumbent sector to fall. We highlight the over-riding importance that firms place on the availability of skilled labour when determining locations, and how policies which promote labour market flexibility, particularly through investment in skills to address skill shortages, can significantly mitigate the adverse effects, which tend to be more keenly felt in poorer regions of Europe where skilled labour is in even shorter supply.

Impact of trade liberalisation on formal\u2013informal interlinkages in India: does sectoral labour mobility matter?

Existing study argues that labour market flexibility accompanied by trade liberalisation helped in building complementary relationship between formal and informal sectors in India. However, no direct relation is established between the labour market flexibility and trade liberalisation with respect to inter- and intra-sectoral movement of labour. The present study enquires whether the extent of labour mobility between and within formal–informal sectors affects the formal–informal growth linkages due to the tariff cut on traded goods, as a part of trade liberalisation in India. The findings based on static CGE analysis indicate that in absence of labour market segmentation (i.e. in absence of both wage rigidity and skill specificity) with full mobility of labour, formal sector growth is higher vis-à-vis the growth of those activities under segmented labour market with full mobility of labour. Amongst growing informal sector activities, output growth is lower in absence of segmented labour market with full mobility of labour. Finally, restricted labour mobility leads to largest expansion of formal activities, but further exacerbates the growth of informal activities. The study reveals that improvement in functional income distribution is mixed across households, depending on the degree of labour mobility, which implies labour market adjustment is costly due to structural reforms, that pitches for government intervention.