Flexible labour markets Flashcards
Define the term Flexible labour markets
Flexible Labour Markets mean that the labour markets quickly adjust to a competitive equilibrium
Flexible labour markets involve factors such as:
Easy to hire and fire workers.
Labour is occupationally and geographically mobile.
Government intervention does not distort the market
1 Why has there been an increase in labour market flexibility?
Globalisation has opened the UK to more international competition, therefore, to remain competitive firms have to keep labour costs relatively low and have sought to use more flexible labour contracts to keep labour affordable.
2 Why has there been an increase in labour market flexibility?
Technological change has made it easier to have flexible labour markets. For example, the internet has increased the ability for people to work from home or set up their own self-employment business.
3 Why has there been an increase in labour market flexibility?
Changing social environment e.g. increased female participation in the labour force, women are more likely to favour part-time, flexible work. Also, an ageing population has led to an increase in ‘semi-retirement’ with older workers choosing to work part-time
4 Why has there been an increase in labour market flexibility?
Privatisation. Private firms have sought to increase profitability by cutting excess workers and inflexible labour contracts.
5 Why has there been an increase in labour market flexibility?
The rise in gig economy. The Internet has enabled people to hold numerous jobs at the same time. For example, the taxi driver who works for a local company and Uber.
What is the impact of flexible labour markets?
Helps to reduce unemployment. Post-2009 recession, unemployment fell much quicker than after previous recessions. Many attribute this to more flexible labour markets
2 What is the impact of flexible labour markets?
Lower wage growth. More flexible labour markets can help firms keep wages low. SInce 2009, the UK has seen stagnant real wage growth
3 What is the impact of flexible labour markets?
More job uncertainty. Greater flexibility can lead to more zero hour contracts where workers have no guarantee of weekly hours, leading to underemployment.
4 What is the impact of flexible labour markets?
Poor labour productivity. The UK has suffered from poor labour productivity. This could be due to many factors, but increased labour market flexibility may discourage firms from investing in human capital. If workers are on short-term contracts then investment could end up being wasted.
