Advantages and Disadvantages of Flexible Labour Markets
Flexible labour markets involve a minimum of government regulations. Flexible labour markets imply that wages and conditions are determined by market forces and not governments or trades unions. Flexible labour markets have the following features:
- Easier to hire and fire workers
- Limited if any regulations
Disadvantages of Flexible Labour Markets
- Part time and temporary staff may not get sufficient training from firms because they only have short term contracts. Therefore many low skilled workers will remain under-skilled because they never gain job stability and the training this encourages
- Flexible labour markets create greater job insecurity and stress. Job security is often as important to workers as the level of wages. This insecuity could lead to lower morale and lower productivity for the firm in the long-rin
- Rising inequality as non-unionised part-time workers get smaller pay increases. Arguably flexible labour markets have created a bigger gap between those 'insiders' with secure job contracts, and those 'outsiders' without job contracts.
- Higher search costs for workers needing to find new jobs. Also firms may have higher replacement costs for hiring more workers. Firms may end up paying a premium to employment agencies to help fill gaps in their workforce.
Advantages of Flexible Labour Markets
- Firms will be more efficient and competitive. Flexible labour markets help keep costs down for firms. For example, firms can get ride of surplus workers. This may help prevent the firm go bankrupt and protect jobs in the long term. Arguably with globalisation, it is increasingly important for firms to remain competitive within the global economy.
- With increased labour productivity there could be an increase in output and exports. There could be a lower rate of natural unemployment and lower inflation.
- Many workers will prefer flexible employment patterns because it suits their life style and offers a greater range of choice. For example, flexible labour markets have played a role in increasing female participation rates.
- May encourage inward investment. Multinational firms may be attracted to invest in countries with more flexible labour markets, creating jobs in the first place.
- Arguably countries with restrictive labour market practises, such as France and Spain have experienced higher rates of structural unemployment.
Essays and Revision Notes on Labour Markets
- Labour Markets home
- Demand for Labour
- Supply of Labour
- Wage Determination
- Labour Market Imperfections
Flexible Labour Markets
- Flexible Labour Markets
- Adv and Disadvantages of Flexible Labour Markets
- Increasing Labour Market Flexibility
- Changes UK Labour Markets
- Participation Rate
- Trades Unions
- Ageing Population