Negative aspects of a (too) flexible labour market

Although the European Union has clearly set its aim at flexicurity some analysts question the long-term positive effects of enhancing the labour market flexibility with the goal of creating more jobs. Kleinknecht and Naastepad (2005) argue that more flexible labour relations and reduction of wage-cost pressure resulted in high job growth on one side but on the other side gave negative incentives to labour productivity growth and innovation.

This can be explained as follows: successful organizational learning and accumulation of knowledge require stable and longer lasting labour relations, which create trust, loyalty and commitment of personnel, which helps to prevent a firm’s technology being easily leaked to competitors. As empirical evidence the authors point out that in the Netherlands (which saw great labour market reforms in the 1980s and thereafter a significant job growth) the economic growth in the 1980s and 1990s has been highly labour-intensive (more hours had to be worked in the Netherlands to produce a GDP growth of 1%).

Since more jobs in this case were created at the expense of innovation and labour productivity growth, tha latter in turn slows down the modernization process which is the basis of long-term economic growth. These aspects should be taken into consideration when reforming the labour market and the right amount of flexibility should be found.

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3 thoughts on “Negative aspects of a (too) flexible labour market

  1. Yes, I absolutely agree with this. In addition to this, flexible workers are sometimes not able to make more use of their leisure time to themselves as result of their job pattern.
    Instead, flexible means working more during your free time, evenings and weekends,suggesting that people are working longer hours for less money.

    A key challenge is how notions of effectiveness are being redefined. Being the first or the last in the office can no longer be a measure of an employee’s commitment and productivity and managing a flexible workforce will mean worrying less about how employees work and more about what they produce.

    Reply
  2. Yes, I think so too. Consequently according to the flexible labour market we should consider that it depens higly therefrom if the employess is flexible enough to abstain their own preferences within working more hours but finally getting a lower salary.
    Now the priority is to be most effective and managing a flexible workforce in order to get a high productivity.
    Nevertheless there it has only an establishing effort with an directly chance of the operation methods of the employees.
    Privatlife is subject to restrictions like having long hours.

    Reply

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