http:// copyright 2006 – biz/ed labour market flexibility
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Copyright 2006 – Biz/ed
Labour Market Flexibility
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Labour Market Flexibility
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Employment Legislation
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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
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EU Directives
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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)
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Geographical Mobility
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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:
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Geographical Mobility
• Family ties• Different housing costs• Cultural differences• Lack of re-location allowances• Cost of re-locating• Simple unwillingness of people to
leave their ‘homes’
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Occupational Mobility
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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
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Education and Training
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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
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Poverty Trap
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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
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Benefit System
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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
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Trade Unions
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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
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Infrastructure
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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
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Hidden Costs
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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