Wednesday, April 25, 2007

Policies for the Government to increase Labour Market Flexibility.

1. Subsidised Childcare provision.

This reduces the cost of childcare and therefore makes it easier for women to return to the labour Market. This is increases flexibility because; firstly there is a greater supply of labour; secondly, women are more likely to take flexible, part time jobs.

However, it is very expensive to subsidise childcare. Also, there is no guarantee that cheaper childcare will actually encourage women back into the labour market.

2. Increases spending on training and education.

If workers have a greater range of skills and training, then they will be able to take a variety of jobs. This is important for labour market flexibility because if people are made unemployed they can find work quicker.

However, this will cost money and require higher taxes. Also there is no guarantee the government will be able to increase labour productivity.

3. Reduce Minimum Wages.

This enables firms to set wages according to the dictates of the markets, rather than through government legislation. It will mean, in some labour markets, wages can fall closer to the equilibrium. This is important for flexibility. However reducing minimum wages may enable greater exploitation of workers, especially by monopsonies. Also, in the UK, minimum wages have been increased without causing unemployment.

Other policies to increase labour market flexibility could include:

  • Better information about job availability.
  • Reduce Power of Trades Unions.
  • Abolish maximum working week legislation (part of social chapter)

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