Labour Market Flexibility Flashcards
Numerical Flexibility
Where firms can easily change the number of workers employed
Constraints:
- contractional protection so have to wait tilll contract ends
- redundancy pay
- trade unions
Temporal Flexibility
Where firms can easily change the hours workers have to work
Constraints:
- not contractually obliged to work these hours
Wage Flexibility
Where firms can easily change the wages of workers
Constraints:
- harder due to the national minimum wage
- firms are reluctant to let wages decreases so wages are sticky downwards
- harder due to contracts
Geographical Mobility
The ease at which idividuals can move to another job which is better paid in another region
Constraints:
- family/culture
- very distruptive so may not be wiling to as to not negatively impact family
- poor infrastructure
- cost of living
- information failure so unaware of other jobs
Occupational Mobility
Where individuas have the skills to transfer to another industry
Constraints:
- firms dont want to train workers as much as they should as they worry that other firms will paoch them by offering higher wages
- free rider problem
Problems caused by a lack of geograpbhical mobility
- causes large wage differentials between different regions
- if need additional labour wont be able as there is a lack of supply of labour as people dont want to move there
Problems caused by a lack of occupational mobility
- lots of labour that isnt utilised
- can lead to hysteresis
- productive capacity decreases
Changes in flexibility and mobility
- the rise of zero hour contracts
- employment regulation
- immigration
- trade union schemes
- regional policy
- improved education and training
- reformation of the benefits system
- afforable housing schemes
The impact of a rise in zero hour contracts
Benefits:
- when the individual is contracted to zero hours in a week
- this is good for firms as if they are busy they can hire more workers and fire workers when they don’t need them
- lowers firms costs of production, lower prices so more competitive
- makes it easier to meet demand
Costs:
- it doesn’t provide people with a secure job or wage
- people have to pay for bills and mortgages so they need to know that they are working enough hours to earn enough
- can lead to underemployment as people working less than they potentially can
The impact of employment regulation
Benefits:
- in the UK employment laws have become a lot more stricter
- increases motivation and productivity when there is less regulation as people fear losing job
- after a recession firms confidence very low and so less likely to hire individuals as can’t get rid of them so if they have less regulation they are more likely to recruit workers as now easier to make them redundant
Costs:
- increase this firms costs of production as have to pay redundancy pay
- firms may be put off by the regulation and decide to set up in another country
The impact of immigration
Benefits:
- more elastic supply curve as now easier to increase supply of labour as more individuals can come into the UK
- can bring in higher skilled workers from other countries so productive capacity increases
- can fill in labour shortages and cause a downwards pressure on wages
Costs:
- more likely to work less than the national minimum wage so replaxce low skilled workers
- more pressure on public sector as need more schools and hospitals
The impact of trade union reforms
Benefits:
- trade union power has decreased which benefits firms as they won’t have as many effective strikes
- wages won’t go up as much so firms cop doesnt increase
- firms would have more numerical and temporal flexibility
- less distruptions so the UK is a better place to invest
Costs:
- greater amount of wage inequality
- worsened workers rights and can be exploited by firms
The impact of regional policies
Benefits:
- moving jobs to where people are
- the government takes measures to incentivize firms to move and reallocate to address regional inequality
- effective as a lot of people don’t want to move to another job in another region
- leads to more high skilled jobs in other regions
- firm’s benefit as well as there will be access to higher skilled workers
Costs:
- opportunity cost
- lack of infrastructure
- encouraging firms to locate in areas which are naturally inefficient
The impact of improved education and training
Benefits:
- individuals gain more transferable skills and improves their occupational mobility
- decreases the supply curve for manufacturing and low skilled jobs and increases the supply for high skilled jobs and so wage rates become the same in both Industries
- this benefits firms that are higher skilled as they can give lower wages and workers in manufacturing sector have higher wages so wage inequality decreases
- wage rates reach the factor price equilibrium
Costs:
- education and training may not improved flexibility as there is a higher number of individuals going into university then there are jobs
- this leads to people becoming over qualified so will refuse to supply labor in a job they think is low skilled despite the wages being very high
The impact of a reform of the benefit system
Benefits:
- if decide benefits should decrease then voluntary unemployment decreases
- lots of people actively start to look for work as wage replacement ratio is lower
- frictional unemployment decreases are people are likely to accept the first job offer they recieve
Costs:
- income inequality increases
- depends where on the economic cycle as if in a recession people may be willing to work but cannot find a job
- some people may not be able to work due to long-term health problems and so their standard of living decreases
