Increasing labour market flexibility

Labour market flexibility is seen as  a way to reduce unemployment, increase efficiency and encourage entrepreneurs to take a risk and employ workers.

Government can attempt to increase labour market flexibility in numerous ways.

How to increase labour market flexibility

  1. Reduce minimum wages and the power of Trades unions.
  2. Improve information for workers and firms
  3. Better education and training. This will enable workers to be more skilled and will help to reduce immobility’s in the labour market.
  4. Make it easier to hire and fire workers.
  5. Support zero hour contracts which enable firms to choose how much to employ workers
  6. Reduce protection workers have over collective dismissal.
  7. Abolish legislations, such as maximum working week and unfair dismissal.
  8. Encourage more immigration from overseas. This enables foreign nationals to fill labour shortages in the UK
  9. Enable more home-building in property hotspots to help reduce the price of housing and rents, making it easier for people to live in areas with high employment levels.
  10. Legislation to outlaw discrimination
  11. Improve child care facilities to encourage women to work
  12. Make it harder to receive unemployment benefits, so people have a greater incentive to get a job.
  13. Reduce poverty trap where working more hours leads to a small marginal increase in income because of higher tax and lower benefits.

Costs of increasing labour market flexibility

  • Higher income inequality – a division between those with secure jobs and those in increasingly flexible labour markets.
  • Workers on zero-hour contracts have fluctuating incomes which make it difficult to plan
  • High labour turnover leads to high costs of training workers.
  • High labour turnover reduces loyalty of workers to the firm
  • Can create an antagonistic relationship between workers and firms.


Published November 28, 2012 | Tejvan Pettinger
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