Nick Ramsay says that the labour market has become more flexible to adapt with the economic climate.
Labour markets always reflect the health of a country’s economy. The way labour markets cope with changes in demand and providing products and services in difficult financial times shape the economic evolution of countries and is a story of evolving new relationships between governments, employers and working people.
Labour market flexibility is about reconciling demand to supply and is key to the supply-side of the macro economy, especially in helping a government reach its macro economy objectives. Flexible labour markets benefit from minimal government regulation.
While a flexible labour market will entail some disadvantages, the benefits ultimately outweigh the drawbacks, encouraging business development and competitiveness and continuous training for employees. Competitiveness is one of the most important factors that can guarantee the survival of businesses in the global race requiring increasingly skilled and trained employees. Up-skilling the workforce allows businesses to offer high quality products and helps workers secure better jobs and adapt to changing conditions, building their self-confidence and allowing them to move in search of better paid work.
Continuous training and re-skilling individuals to meet changing demands on the labour market can lower structural unemployment and reduce the unemployment rate, helping raise the standard of living.
The level of inward investment into a country or region is clearly linked to the degree of flexibility of the labour market. Multinational companies and foreign investors are attracted by a skilled workforce, contract flexibility and the openness of employees to relocate to a new job. Flexibility of working hours, part-time and temporary contracts also reduce gender disparity encouraging more women to take up employment. Factor in advances in technology that allow people to work from home and the combination reduces costs for employers and will encourage more people to get a job. A labour market is usually more flexible when there are more part-time contracts than full-time jobs, and there is also a correlation between the level of flexibility and the number of temporary contracts in a region.
The UK labour market is considered to be one of the most flexible in the European Union. The processes started with the closure of many heavy industries in the 1970s and 1980s and the move to a financial and service based economy. People were expected to relocate or re-qualify in order to get a new job, many of which entailed part-time and flexible working hours. A reduction in the Trade Unions reduced pressure on the Government and employers and a wider skillset emerged to cover the expanded area of the service sector. The UK Government of the 1980s adapted its policies to the changing times, promoting the UK flexible labour market as a key attraction to overseas companies and attracting more inward investments that created a more diverse job market. The UK became known as fostering the right environment for businesses to stay competitive and prosper.
Flexible Labour markets might seem a utopia for employers, so the UK Government has consistently legislated to protect employees even though some of these measures have come at the price of some flexibility in the labour market. The Minimum Wage is an obvious example of this, ensuring that employees get a proper payment for the job they do. Meanwhile employment laws protect workers from discrimination, unfair terms, faulty contracts and unfair dismissals. The UK Government was one of the first in Europe to legislate on the number of hours someone can work, establishing holiday entitlements and greater maternity leave rights. There has also been strict regulation on health and safety to protect people from exploitation and poor working conditions. All these regulations are seen as constraints on a labour market that tends to be more and more flexible, aiming to establish a better balance between employer and employee and safeguarding a labour market that is fair, efficient and flexible.
Wales is part of this general policy and needs to develop the right balance in the labour market. The Welsh Government has tried to develop programmes to reskill or train people, programmes that are government funded and monitored by the National Assembly for Wales to make sure that the goals are achieved. An important step taken recently to promote Wales as an area of flexible labour markets so as to attract inward investors has been the development of enterprise zones. Enterprise zones aim to help possible investors source the right infrastructure for their businesses and encourage skilled people to relocate in order to obtain a job in a specially developed and promoted area. The diversity of businesses in Wales proves the creativity, adaptability and skills of the Welsh people, particularly when you consider that around 98% of local businesses are SMEs.
In conclusion, Wales, and the UK in general, represent a labour market that is a good example of a right balance between fairness, freedom and flexibility that has helped the country overcome and recover from global financial crises, such as the banking crisis of 2008. This is strong proof that a healthy, flexible economy is vital if a country is to prosper in the modern global environment.
5 thoughts on “The benefits of a flexible labour market”
No argument Nick that a vibrant economy is a key to prosperity of any nation as you say but equally no nation can afford to marginalise people on the fringes to the extent that Tory party has done in the UK.
Of recent I get deluge of e-mails from David Cameron and other Cabinet members telling me effectively that ‘Arbeit Macht Frei’ but little or no mention of people in poverty.
Global economy is a reality of the modern world and those behind it care only for the ‘balance sheet ‘bottom line’ issues and their share holder benefits.
Because of this and scarcity of meaningful work any responsible Government must find a formula that provides those on low pay and those out of work with meaningful income to live with dignity – In short these people must have a decent life style and be poverty free.
This is not in support of the so called ‘Benefits Culture’ that a minority abuse but about fairness and Social Justice – Not heard much about the ‘Big Society’ from David of recent either!?
Then we have Wales, a divided little nation by culture and language under the current Labour Governance hell bent on creating a new social order by elevating a minority through public employment privileges whilst the majority no longer matter, unless they assimilate!?
Is there any truth in the wild rumours that the wonders of the new ‘dynamic’ Welsh zero hours, benefit sanctioned, food bank, shelf stacking flexi (sic) labour market will soon be extended to the Conservative group in the Assembly?
If not, why not?
Oh C’mon Nick! Say it’s not just for the ‘little’ people….
I’m sure many of us are already aware of flexibility in the labour market and what it means. What I’m not so clear on is what Nick Ramsay wants to add to the debate. Is he suggesting that we have found the right balance of flexibility and support? Because to me, the current prevalence of part-time contracts (and self-employment) does not represent success in the ‘global race’ so much as a vast underutilisation of the skills of the labour force. There are personal costs to be borne of this type of flexibility – skills can atrophy if left unused for too long – but there are also macroeconomic problems as well. Despite relatively high levels of employment, income tax receipts are nowhere near what we should expect them to be for the simple reason that people are not earning enough money.
There is no denying that the UK has maintained impressive employment figures. But at the end of the day that’s all they are – figures. When people aren’t actually getting what they think they should for the work they do, then all manner of social, political and long-term economic problems can be allowed to develop.
On a more technical note, how are enterprise zones aiding labour market flexibility? I’m not denying that they are a good idea, but surely their purpose is to provide savings for businesses on rent, business rates and infrastructure, rather than labour costs? Maybe I’ve misunderstood the concept, but in regards to making the Welsh labour market more flexible I’m not sure there is that much that devolution allows us to do!
I can’t agree that flexibility is all good. Women graduates work as waitresses. Women with good school qualifications work on the tills at supermarkets. Women with families do unsociable hours in care work on low wages. Women looking for careers routinely work for nothing more than a sentence on their CVs. Women with lively minds and personalities tie themselves to call centres. Women in the workplace do alot of low-paid work out of necessity (they must now cover their own pension costs by working throughout their lives, must work to help pay the mortgage, and must meet the costs of childcare while doing so), for which they have the wondrous reward of new clothes and make-up, and the delight of propping up the retail sector. This is by and large, a huge waste of women’s education, talent, and skills, and a huge disservice to all.
What policy-makers tend to ignore is that the greatest hope for generating new employment is the small business sector. Statistics and research confirm this.
These ‘jobs’ are not jobs as politicians seem to visualise them. To a small business, the establishment of each and every new post represents a massive commitment relative to the business in terms of time and money, both particularly scarce resources in a small business. In addition to the actual salary, there is a whole raft of additional fixed and variable costs that come with every employee, including the administrative costs and hassle that comes with ever-increasing red tape. Since the costs of employment are firm commitments, it is by no means impossible, or indeed unusual, for the employee of a small business to be better off at the end of a working week than his ‘boss.’
Yet politicians insist on treating all employee-employer relationships in terms of some 19th century cliché of masses of oppressed workers and wealthy bosses.
To meet their obligations as employers, small businesses are extremely unlikely to have established streams of income. They usually go from project to project, from contract to contract. It is essential that their arrangements with their employees – essentially their subcontractors – reflect their own income. They cannot afford the huge fixed overheads of keeping people on staff when there is no money coming in. So they cannot offer a ‘job for life.’ Indeed, the very idea of a ‘job for life’ in the private sector has been dead for years, and even a ‘career for life’ seems an antiquated notion, but politicians do not seem to have caught up with this. So a ‘job’ is no longer a job in the sense of a ‘job for life’ – if it ever was – but a job in the sense of a single contract. Whether the employee’s contract is fixed or temporary, or long-term or short-term, has to reflect whether the contracts by which the business derives the income to pay that employee are themselves fixed or temporary, etc.
Flexibility is not just a desirable option for small businesses – it is an essential precondition for their survival. The politicians who do not grasp this are the ones who then wonder why there are not more small businesses and more jobs.
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