Http:// Copyright 2006 – Biz/ed Labour Market Flexibility.

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Copyright 2006 – Biz/ed

Labour Market Flexibility



Labour Market Flexibility



Employment Legislation



Employment Legislation

• Any form of legislation imposes responsibilities on a firm

• It is likely to lead to increased costs in employing labour

• This is likely to make the labour market less flexible

• Some legislation could be aimed at improving information flows



EU Directives



EU Directives

• Legislation passed by the EU is relevant in the UK

• Firms in the UK may complain that EU legislation makes the labour market less flexible

• Firms would point to higher unemployment rates in other European countries as evidence of this

• Government have opted out in the past (Social Chapter)



Geographical Mobility




• The ease with which an individual is able to move from one region to another in search of work

• Job opportunities may arise in certain areas, e.g. the South East of England

• Many things may prevent workers moving:




• Family ties• Different housing costs• Cultural differences• Lack of re-location allowances• Cost of re-locating• Simple unwillingness of people to

leave their ‘homes’



Occupational Mobility



Occupational Mobility

• The ease with which an individual can move from one type of job to another

• Such ease will depend on:– The differing skill levels of available jobs– The location of the jobs available– The willingness of an individual to change to

a different job– The age of the worker– The qualifications of an individual– The degree to which an individual has

transferable skills



Education and Training



Education and Training

• Government policy on education and training aims to improve the ease with which people can access work and move between jobs

• Recent plans for changes to 16-19 education (Tomlinson) in part a response to business concerns about literacy and numeracy levels and relevant skill levels of school leavers

• Part of supply side policy



Poverty Trap



Poverty Trap

• The phenomena whereby a person ends up being worse off by getting a job than claiming benefit because of the effects of the tax system

• Tax credits – aim to reduce the effects of low paid when getting a job

• Incentives to get work increase because the individual is better off in work than on benefit



Benefit System



Benefit System

• Attempts to reform the benefits system so that it helps those in need who cannot, for various reasons, help themselves

• Intention to make the benefit system support these people rather than making it a crutch that they come to rely on

• Reform of the benefit system – part of supply side policy – aims to improve the working of the market



Trade Unions



Trade Unions

• Trade Union legislation in the 1980s and 1990s restricted the powers of the unions

• In addition, the nature of the working environment and global trading conditions changed

• Many unions have adapted to these changes• Less militant and more willing to negotiate and

compromise• Recent cases of hard line militants gaining

positions of power – Andy Gilchrist (Fire Brigades Union) Bob Crowe (RMT)

• Union membership has fallen since the 1970s



Infrastructure



Infrastructure

• Improved infrastructure may improve the labour market

• More flexible working practices: hot- desking, flexible hours, working from home, child care facilities

• Better technology – broadband access• Transport facilities – commuter routes,

public transport, integrated transport network



Hidden Costs



Hidden Costs

• Importance to labour market flexibility of hidden costs:– Pension provision – contributions by firms– National Insurance Contributions (NICs)

percentage paid by employer – a tax on employment?

– Employment legislation– National Minimum Wage– Trade off between improving rights for

employees and the impact on the flexibility of the labour market

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