Labour Market Duality in Europe

Over the past 15 years a process of convergence across OECD countries has taken place as regards Employment protection legislation (EPL). In most cases, changes in the overall Employment protection legislation (EPL) strictness were driven by changes in the regulation of temporary employment. These regulations still makes the difference in cross-country comparisons. By easing rules concerning temporary employment, many European countries have chosen to enhance workforce flexibility.

Strict EPL gives incentives to the firms to use other sources of flexibility to have the possibility to adapt to ever-changing market conditions.

Thus, employment protection may affect the structure of employment by indirectly promoting atypical labor contracts which offer firms the work force flexibility they may need.

The expression “labor market duality” describes quite well the situation, where an economy is divided into two parts, called the “primary” and “secondary” sectors. In the primary labor market are the so called “insiders” who are mainly characterized by high incomes, job security, and normally good prospects for upward mobility. In the secondary labor market are the “outsider”, who are especially typified by low incomes, little job security, and little training.

Temporary contracts became a good way for firms to circumvent rules governing regular contracts and the high firing costs.

 According to a study realized by OECD in 2004, the incidence of temporary employment has grown faster in countries where the rules governing the use of temporary contracts have been significantly eased compared with the regulation of permanent contracts.

 Since many years is the EU talking about improving the situations of the so called “outsiders; but even the EU-institutions are employing them.                               25 000 people are working for the European Commission, 500 of them are working under temporary contracts and their number is still growing…

References:

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