Friday, June 8, 2007

Government policies to increase labour market flexibility

Discuss policies to Increase labour Market Flexibility

(apart from reducing working hours and more flexible shifts)

Labour market flexibility refers to free movement of labour within labour markets. It also means wages, hours and conditions can change in response to different factors.

1. Reduction of Minimum wages / Trade Union Power.

Minimum wages can cause wages to be kept above the equilibrium. This means wages are not flexible and responsive to market conditions. If minimum wages are abolished wages can be determined by market equilibrium. This increases flexibility. However, minimum wages in the UK have not caused much , if any, unemployment, therefore it suggests that minimum wages are not much above the equilibrium. Min wages can also protect against the abuse of monopsony firms. Reducing min wages reduces protection for workers.

2. Education and training.

If workers have better education and training it is easier for them to move in between jobs. If workers are skilled and trained it will be easier to take on jobs in any sector. This is important in a fast changing economy. However, there is no guarantee that the education and training schemes will work. Also, if workers become highly trained they may be more reluctant to move; they may expect better and more secure job contract.

3. Government legislation to protect Temporary workers.

If temporary workers have legislation against unfair dismissal and the promotion of good working conditions it may encourage more people to take on temporary contracts, this is good for firms who need the flexibility of temporary workers. However, government legislation may actually make it more difficult to employ temporary workers and therefore, this policy may not actually increase flexiblity

other policies

  • better childcare provision.
  • This enables women to take on more part time jobs

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