The degree oflabour market flexibility is the speed with whichlabour markets adapt to fluctuations and changes in society, the economy or production. This entails enabling labour markets to reach a continuousequilibrium determined by the intersection of thedemand and supply curves.[1][2]
Labour unions can limit labor market flexibility by negotiating higher wages, benefits, and better working conditions with employers. In the words of Siebert,[3] labour unions were seen to inhibit "the clearing functions of themarket by weakening the demand for labor, making it less attractive to hire a worker by explicitly pushing up thewage costs or by introducing a negativeshadow price for labor; by distorting the labor supply; and by impairing the equilibrating function of the market mechanism (for instance, by influencingbargaining behavior)."[4]
The most well-known concept of labour market flexibility is given by Atkinson.[5][6] Based on the strategies companies use, he notes that there can be four types of flexibility.
External numerical flexibility is the adjustment of the labour intake, or the number of workers from the external market. This can be achieved by employing workers ontemporary work or fixed-term contracts or through relaxed hiring and firing regulations or in other words relaxation ofemployment protection legislation, where employers can hire and firepermanent employees according to the firms' needs. Employers typically prefer high levels of unemployment because, as workers become more desperate for employment, they are willing to work for lower wages, thus increasing employer profits.
Internal numerical flexibility, sometimes known asworking time flexibility or temporal flexibility, is achieved by adjustingworking hours or schedules of workers already employed within the firm. This includespart-time,flexi time or flexible working hours orshifts (including night shifts andweekend shifts), working time accounts, leaves such asparental leave, andovertime. Many employers thus hire large numbers of part-time employees to avoid government regulations associated with full-time employees, such as the requirement that employers pay for health insurance of their full-time employees. This allows employers to maximize their own profits while decreasing thestandard of living of the working classes.
Functional flexibility ororganizational flexibility is the extent to which employees can be transferred to different activities and tasks within the firm. It has to do with organization of operation ormanagement andtraining workers. This can also be achieved byoutsourcing activities. Job rotation is a label given to many functional flexibility schemes.
Financial orwage flexibility occurs when wage levels are not decidedcollectively and there are more differences between the wages of workers. This is done so that pay and otheremployment costs reflect the supply and demand of labour and so that employers can force employees to compete for wages, thus lowering the average wage paid to employees and ultimately to maximize profits while decreasing the standard of living of the working classes. This can be achieved by rate-for-the-job systems, or assessment based pay system, or individual performance wages.
Labour market flexibility refers to more than the strategies used by employers to adapt to their production orbusiness cycles 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, or employees and employers.[7] 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".[8] As companies adapt to business cycles and facilitate their needs through the use of labour market flexibility strategies, workers adapt their life cycles and their needs through it (Chung, 2006).
TheEuropean Commission also addresses this issue in its Joint Employment Report and its newFlexicurity approach, calling for an adequate method 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."[9]ETUC also emphasizes 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, theTUC has also argued that flexible working should be extended to all workers through stronger regulations.[10] As authors Gerson and Jacobs agree, "flexibility and autonomy are only useful if workers feel able to use them" (Gerson & Jacobs, 2004, pg. 238).[11]
Some of the widely used arrangements that enable workers more flexibility in their work includeflextime,remote work, andpart-time jobs.
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