Labour market flexibility
Encyclopedia
Labour market flexibility refers to the speed with which labour markets adapt to fluctuations and changes in society, the economy or production.
determined by the intersection of the demand and supply curve . In the words of Siebert labour market institutions were seen to inhibit
or fixed-term contracts or through relaxed hiring and firing regulations or in other words relaxation of Employment Protection Legislation
, where employers can hire and fire permanent employees
according to the firms’ needs.
flexibility or temporal flexibility. This flexibility achieved by adjusting working hours or schedules of workers already employed within the firm. This includes part-time, flexi time or flexible working hours/ shifts
(including night shift
s and weekend shifts
), working time accounts, leaves such as parental leave
, overtime
.
al flexibility is the extent employees can be transferred to different activities and tasks within the firm. It has to do with organization of operation or manage
ment and training
workers. This can also be achieved by outsourcing
activities.
Job rotation is a label given to many functional flexibiltiy schemes - see Coyne 2011 and wikipedia pages.
or wage
flexibility is in which wage levels are not decided collectively
and there are more differences between the wages of workers. This is done so that pay and other employment cost
reflect the supply and demand of labour. This can be achieved by rate-for-the-job systems, or assessment based pay system, or individual performance wages.
Other than the 4 types of flexibility there are other types of flexibility that can be used to enhance adaptability
. One way worth mentioning is locational flexibility or flexibility of place . This entails employees working outside of the normal work place such as home based work, outworkers or teleworkers. This can also cover workers who are relocated to other offices within the establishment.
s as it is in the definitions above. Increasingly the common view is that labour market flexibility can potentially be used for both workers and companies/ employers and employees. It can also be used as a method to enable workers to ‘adjust working life and working hours to their own preferences and to other activities’ . As companies adapt to business cycles and facilitate their needs through the use of labour market flexibility strategies, workers adapt to their life cycles and their needs through it (Chung, 2006). The European Commission
also addresses this issue in its Joint Employment Report and its new Flexicurity
approach, calling for an adequate methods to enhance flexibility for both workers and employers that is “capable of quickly and effectively mastering new productive needs and skills and about facilitating the combination of work and private responsibilities.” (Chung, 2008) ETUC also emphasize the importance of the development of working time flexibility as an alternative to implementing external flexibility as the sole method of increasing flexibility in the labour market (ETUC, 2007). In their report on working time, TUC has also argued that flexible working should be extended to all workers through stronger regulations (Fagen et al. for TUC, 2006).
Definition
In the past, the most common definition of labour market flexibility was the neo-liberal definition. This entailed the ease of labour market institutions in enabling labour markets to reach a continuous equilibriumEconomic equilibrium
In economics, economic equilibrium is a state of the world where economic forces are balanced and in the absence of external influences the values of economic variables will not change. It is the point at which quantity demanded and quantity supplied are equal...
determined by the intersection of the demand and supply curve . In the words of Siebert labour market institutions were seen to inhibit
"the clearing functions of the marketMarketA market is one of many varieties of systems, institutions, procedures, social relations and infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offering their goods or services in exchange for money from buyers...
by weakening the demand for labor, making it less attractive to hire a worker by explicitly pushing up the wageWageA wage is a compensation, usually financial, received by workers in exchange for their labor.Compensation in terms of wages is given to workers and compensation in terms of salary is given to employees...
costs or by introducing a negative shadow price for labor; by distorting the labor supply; and by impairing the equilibrating function of the market mechanism (for instance, by influencing bargainingBargainingBargaining or haggling is a type of negotiation in which the buyer and seller of a good or service dispute the price which will be paid and the exact nature of the transaction that will take place, and eventually come to an agreement. Bargaining is an alternative pricing strategy to fixed prices...
behavior).”
Theory
The most famous distinction of labour market flexibility is given by Atkinson . Based on the strategies companies use, he notes that there can be four types of flexibility.External numerical flexibility
External numerical flexibility refers to the adjustment of the labour intake, or the number of workers from the external market. This can be achieved by employing workers on temporary workTemporary work
Temporary work or temporary employment refers to a situation where the employee is expected to leave the employer within a certain period of time. Temporary employees are sometimes called "contractual", "seasonal", "interim", "casual staff", "freelance", or "part-time"; or the word may be shortened...
or fixed-term contracts or through relaxed hiring and firing regulations or in other words relaxation of Employment Protection Legislation
Employment Protection Legislation
Employment protection legislation refers to all types of employment protection measures, whether grounded primarily in legislation, court rulings, collectively bargained conditions of employment or customary practice. The term is common among circles of economists. Employment protection refers...
, where employers can hire and fire permanent employees
Permanent Employment
Permanent employees or regular employees work for a single employer and are paid directly by that employer. In addition to their wages, they often receive benefits like subsidized health care, paid vacations, holidays, sick time, or contributions to a retirement plan. Permanent employees are often...
according to the firms’ needs.
Internal numerical flexibility
Internal numerical flexibility, sometimes known as working timeWorking time
Working time is the period of time that an individual spends at paid occupational labor. Unpaid labors such as personal housework are not considered part of the working week...
flexibility or temporal flexibility. This flexibility achieved by adjusting working hours or schedules of workers already employed within the firm. This includes part-time, flexi time or flexible working hours/ shifts
Shift work
Shift work is an employment practice designed to make use of the 24 hours of the clock. The term "shift work" includes both long-term night shifts and work schedules in which employees change or rotate shifts....
(including night shift
Night Shift
A night shift is either a group of workers who work during the night, or the period in which they work. See shift work.Night Shift may also refer to:* Night Shift , a fictional team of supervillains in the Marvel Universe...
s and weekend shifts
Working Saturday
In some countries which have a 5-day workweek with Saturday and Sunday being days off, on some occasions some Saturdays may be declared working Saturdays.-Community Service Day:Community service days are very popular in the US corporate culture...
), working time accounts, leaves such as parental leave
Parental leave
Parental leave is an employee benefit that provides paid or unpaid time off work to care for a child or make arrangements for the child's welfare. Often, the term parental leave includes maternity, paternity, and adoption leave...
, overtime
Overtime
Overtime is the amount of time someone works beyond normal working hours. Normal hours may be determined in several ways:*by custom ,*by practices of a given trade or profession,*by legislation,...
.
Functional flexibility
Functional flexibility or organizationOrganization
An organization is a social group which distributes tasks for a collective goal. The word itself is derived from the Greek word organon, itself derived from the better-known word ergon - as we know `organ` - and it means a compartment for a particular job.There are a variety of legal types of...
al flexibility is the extent employees can be transferred to different activities and tasks within the firm. It has to do with organization of operation or manage
Manage
Manage is a Walloon municipality located in the Belgian province of Hainaut. On January 1, 2006 Manage had a total population of 22,341. The total area is 19.60 km² which gives a population density of 1,140 inhabitants per km²....
ment and training
Training
The term training refers to the acquisition of knowledge, skills, and competencies as a result of the teaching of vocational or practical skills and knowledge that relate to specific useful competencies. It forms the core of apprenticeships and provides the backbone of content at institutes of...
workers. This can also be achieved by outsourcing
Outsourcing
Outsourcing is the process of contracting a business function to someone else.-Overview:The term outsourcing is used inconsistently but usually involves the contracting out of a business function - commonly one previously performed in-house - to an external provider...
activities.
Job rotation is a label given to many functional flexibiltiy schemes - see Coyne 2011 and wikipedia pages.
Financial or wage flexibility
FinancialFINANCIAL
FINANCIAL is the weekly English-language newspaper with offices in Tbilisi, Georgia and Kiev, Ukraine. Published by Intelligence Group LLC, FINANCIAL is focused on opinion leaders and top business decision-makers; It's about world’s largest companies, investing, careers, and small business. It is...
or wage
Wage
A wage is a compensation, usually financial, received by workers in exchange for their labor.Compensation in terms of wages is given to workers and compensation in terms of salary is given to employees...
flexibility is in which wage levels are not decided collectively
Collective bargaining
Collective bargaining is a process of negotiations between employers and the representatives of a unit of employees aimed at reaching agreements that regulate working conditions...
and there are more differences between the wages of workers. This is done so that pay and other employment cost
Employment Cost Index
The Employment Cost Index is a quarterly economic series detailing the changes in the costs of labor for businesses in the United States economy. The ECI is prepared by the Bureau of Labor Statistics , in the U.S...
reflect the supply and demand of labour. This can be achieved by rate-for-the-job systems, or assessment based pay system, or individual performance wages.
Other than the 4 types of flexibility there are other types of flexibility that can be used to enhance adaptability
Adaptability
Adaptability is a feature of a system or of a process. This word has been put to use as a specialised term in different disciplines and in business operations. Word definitions of adaptability as a specialised term differ little from dictionary definitions...
. One way worth mentioning is locational flexibility or flexibility of place . This entails employees working outside of the normal work place such as home based work, outworkers or teleworkers. This can also cover workers who are relocated to other offices within the establishment.
Flexibility for workers
However, labour market flexibility does not only refer to the strategies used by employers to adapt to their production/business cycleBusiness cycle
The term business cycle refers to economy-wide fluctuations in production or economic activity over several months or years...
s as it is in the definitions above. Increasingly the common view is that labour market flexibility can potentially be used for both workers and companies/ employers and employees. It can also be used as a method to enable workers to ‘adjust working life and working hours to their own preferences and to other activities’ . As companies adapt to business cycles and facilitate their needs through the use of labour market flexibility strategies, workers adapt to their life cycles and their needs through it (Chung, 2006). The European Commission
European Commission
The European Commission is the executive body of the European Union. The body is responsible for proposing legislation, implementing decisions, upholding the Union's treaties and the general day-to-day running of the Union....
also addresses this issue in its Joint Employment Report and its new Flexicurity
Flexicurity
Flexicurity is a welfare state model with a pro-active labour market policy. The term was first coined by the social democratic Prime Minister of Denmark Poul Nyrup Rasmussen in the 1990s....
approach, calling for an adequate methods to enhance flexibility for both workers and employers that is “capable of quickly and effectively mastering new productive needs and skills and about facilitating the combination of work and private responsibilities.” (Chung, 2008) ETUC also emphasize the importance of the development of working time flexibility as an alternative to implementing external flexibility as the sole method of increasing flexibility in the labour market (ETUC, 2007). In their report on working time, TUC has also argued that flexible working should be extended to all workers through stronger regulations (Fagen et al. for TUC, 2006).
See also
- Labour lawLabour lawLabour law is the body of laws, administrative rulings, and precedents which address the legal rights of, and restrictions on, working people and their organizations. As such, it mediates many aspects of the relationship between trade unions, employers and employees...
- Contingent workContingent workContingent work, also sometimes known as casual work, is a neologism which describes a type of employment relationship between an employer and employee...
- Corporate amnesiaCorporate amnesiaCorporate amnesia is a phrase used to describe a situation in which businesses, and other types of co-operative organization, lose their memory of how to do things. The condition is held, by some people, to be analogous to individual amnesia....
- Employment Protection LegislationEmployment Protection LegislationEmployment protection legislation refers to all types of employment protection measures, whether grounded primarily in legislation, court rulings, collectively bargained conditions of employment or customary practice. The term is common among circles of economists. Employment protection refers...
- FlexicurityFlexicurityFlexicurity is a welfare state model with a pro-active labour market policy. The term was first coined by the social democratic Prime Minister of Denmark Poul Nyrup Rasmussen in the 1990s....
- Labour economicsLabour economicsLabor economics seeks to understand the functioning and dynamics of the market for labor. Labor markets function through the interaction of workers and employers...
- Working timeWorking timeWorking time is the period of time that an individual spends at paid occupational labor. Unpaid labors such as personal housework are not considered part of the working week...