Labour Market Flexibility, a Case Study

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Adrian Sossna

Bockett Daryl Ronald Bruce

Business and Society

22 April 2013

YBS Midterm


Times have changed; the days of lifetime employments are gone. Many are the factors that have sprung this development, the rise of multinational corporations and globalization on a broad front are among the main reasons. To combat lower wages, and increasing quality in third world countries, the western world has seen a rise in “labor market flexibility”; the practice of short and at times unsecure employment and contracts.

Critiques would argue that this system creates a society where people have increasingly insecure jobs while supporters say that the development is in fact positive for workers, as they are not anymore locked down to one firm and are freer to move on in their careers. I will in this paper argue that labor flexibility is not necessary bad; it's the market incentives and how they respond to an environment with unsecure employment forms that is the true problem.

Through the example of the American and Swedish approach to this I will argue that a system that is too ruthless is not the answer. I will then suggest a possible solution to the issue of labor flexibility.

Understanding labor market flexibility

The first point that needs to be understood is that the labor market is just that, a market, and markets will always seek to maximize profits. While the labor market might previously have been saved from this perspective the emergence of multinational corporations and comparable employee cost have seen an end to that. The rise of labor market flexibility is therefore not to be considered a trend or an unprovoked development; it’s a reaction by employers to adapt to an internationalized market, where employees, like other assets are sold i.e fired, to improve quarterly earnings. With this in mind it becomes quite clear that this is not a phenomena that can be considered in terms of good or bad but rather how much or if it...