Globalisation and Labour Markets

Readers Question: This one is about flexibility in the labour market . I am wondering why globalisation have made a contribution to the increase in flexibility . Is it becoz firms face a fierce competition so they have to hire workers only when they need them ?

Increased competition is certainly one factor. If a firm has a domestic monopoly it faces little competition therefore it is easier to make profits. If globalisation causes that firm to face increased competition from before, it will need to find ways to reduce costs. One way is to increase flexibility of labour markets. For example, giving workers flexible working hours and using temporary staff. This can help reduce unnecessary costs.

However, there is a debate whether labour market flexibility actually increases productivity in the long term. There is a concern that greater flexibility may reduce worker morale and lead to a high staff turnover which are less loyal to the company.

See also:

Why has there been an increase in labour market flexibility?

Government policies to increase labour market flexibility