Lecture 5 (part 2)
Traditional social protection programmes, largely modelled on male-dominated, full-time and continuous career patterns, have become both increasingly inadequate for a growing section of employees engaged in non-standard types of employment and more difficult to sustain financially owing to economic and demographic pressures.
Flexible labour markets:
beneficial to job creation, but;
reduced levels of economic security.
Flexicurity:
employment policies: best conditions for job growth;
social policies: acceptable levels of economic and social security to all, including those who enter de-regulated labour markets.
Model countries: Denmark and the Netherlands.
Why: models of how labour markets can be made more dynamic without compromising social protection.
Neo-liberal perspective: persistent levels of unemployment and widespread long-term unemployment in many European countries need for greater flexibilization and the de-regulation of labour markets.
European Commission (2007) critique:
often ‘policies aim to increase either flexibility for enterprises or security for workers; as a result they neutralise or contradict each other’;
flexicurity: response to this one-sided approach, satisfying the needs of both employers and workers;
‘third way’: between the Anglo-Saxon flexibility and (Southern) European strict job security
Origins:
first used by the Dutch sociologist Hans Adriaansens in the mid-1990s in connection with the Dutch Flexibility and Security Act and the Act concerning the Allocation of Workers via Intermediaries;
neologism was picked up by academics in the Netherlands and in other European countries (Denmark, Belgium and Germany) European Commission;
labour market policy reforms by the Danish social-democratic government in 1993 onward
Flexicurity is (1) a degree of job, employment, income and ‘combination’ security that facilitates the labour market careers and biographies of workers with a relatively weak position and allows for enduring and high quality labour market participation and social inclusion, while at the same time providing (2) a degree of numerical (both external and internal), functional and wage flexibility that allows for labour markets’ (and individual companies’) timely and adequate adjustment to changing conditions in order to maintain and enhance competitiveness and productivity.
Types of flexibility – employer perspective (following Atkinson, 1984):
external-numerical: the ease of hiring and firing workers and the use of flexible forms of labour contracts;
internal-numerical: the ability of companies to meet market fluctuations (e.g. via over-time, flexi-time, part-time, temporary work, casual work or sub-contracting);
functional: the ability of firms to adjust and deploy the skills of their employees to match changing working task requirements;
payment/wage: the ability to introduce variable pay based on performance or results.
Forms of security (employee perspective):
job: the certainty of retaining a specific job (with the same employer), e.g. via employment protection legislation;
employment: the certainty of remaining in paid work (but not necessarily in the same job or with the same employer), e.g. via training and education (and high levels of employment);
income: the certainty of receiving adequate and stable levels of income in the event that paid work is interrupted or terminated;
combination: the reliance on being able to combine work with other [family] responsibilities (work-life balance)
Flexicurity typology:
specific trade-offs (job security employment security).
European Commission: external-numerical flexibility income/employment security
Policy domains addressing these challenges according to European Commission:
Strict employment protection reduces the number of dismissals but hampers the transition from unemployment to work (OECD, 2007) Divisions between labour market insiders and outsiders, particularly where regulations differentiate between regular and other forms of employment contracts.
Majority of changes in employment protection took place at the margin favours the creation of segmented labour markets employees with atypical contracts carry the burden of adjustment to economic shocks more precarious employment, lack of adequate provision of training for those with atypical contracts and negative impacts on productivity.
High participation rates in lifelong learning high employment and low long-term unemployment.
Investment in human resources over the life course and strategies of so-called active ageing are strongly promoted by the EU as a response to rapid technological change and innovation in the face of demographic pressure increasing both the competitiveness of firms and the long-term employability of workers
Unemployment benefits are able to protect more effectively against labour market risks than employment protection, offsetting negative income consequences during job changes Reduce the risk of labour market segmentation and lower aggregate unemployment
Flexicurity – integrated approach to optimize the trade-off between these four components.
Possible reform strategy: more flexible employment protection improved social rights to the unemployed.
Main elements:
flexible labour markets; High external-numerical flexibility (little protection against dismissal)
generous unemployment support; High levels of income security (generous unemployment benefits)
strong emphasis on activation. High levels of employment security (labour market policy based on a right for retraining)
This combination is known as the ‘golden triangle’ of Danish labour market policy
Empirical examples:
grant for employers to cover the cost of hiring an unemployed person replacing employees on leave
avoidance of a low-wage segment of the labour market (the ‘working poor’) which is typical for many liberal economies such as the USA.
Result: since the early 1990s, employment rates in Denmark in both the public and the private sector increased substantially and unemployment declined from 12% in 1993 to 5% in 2001
Normalizing non-standard work: combination of atypical, flexible types of work with social security rights which are similar to those for persons in standard employment.
Active labour market programmes: providing temporary agency workers with employment protection, rights to training, wage guarantees and supplementary pensions
Prior to 1997: dual dismissal system (disadvantageous to temps)
1997 “Flexibility and Security Bill”: more employment and employability security for non-standard workers.
Critique: part-time workers – gained from better social protection, other groups such as so-called ‘flex-workers’ remained disadvantaged
Comparative context: less emphasis on activation strategies than in the Danish case and a more important role for other aspects such as temporary work agencies.
high spending on active labour market programmes;
decentralized public employment services;
emphasis on job security emphasis on employment security;
lifelong learning: in 1998, it was made possible for employees to take paid leave for up to 12 months for further education without additional costs for the employers.
social policies: the right of parents of young children to switch to part-time work, covered by full redundancy protection and the right to revert back to the previous working hours
external flexibility + activation: workers loosing accumulated rights to severance pay when changing jobs transferable entitlements reducing disincentives to labour mobility.
Since 1980s:
increased flexibility at the margins through liberalizing fixed-term contracts and temporary work agencies;
regulations concerning core jobs remained virtually unchanged;
employment growth restricted to flexible ‘outsider’ labour market;
transitions from fixed-term or part-time to open-ended or full-time contracts remained difficult segmented labour markets;
fixed-term workers – 1/3 of total employment; mainly consist of the young; lower wages + limited access to internal further training
Reforms since 2001:
eased the dismissal regulations of the insider labour market;
introduced security elements for fixed-term employees, although not fully overcoming the dual character;
easing dismissal protection in exchange for stricter regulation of temporary agency work;
employees who have signed two or more fixed-term contracts with the same company and have worked in the same post for more than 24 months automatically acquire an open-ended contract
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