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
- Reduce minimum wages and the power of Trades unions.
- Improve information for workers and firms
- Better education and training. This will enable workers to be more skilled and will help to reduce immobility’s in the labour market.
- Make it easier to hire and fire workers.
- Support zero hour contracts which enable firms to choose how much to employ workers
- Reduce protection workers have over collective dismissal.
- Abolish legislations, such as maximum working week and unfair dismissal.
- Encourage more immigration from overseas. This enables foreign nationals to fill labour shortages in the UK
- 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.
- Legislation to outlaw discrimination
- Improve child care facilities to encourage women to work
- Make it harder to receive unemployment benefits, so people have a greater incentive to get a job.
- 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.