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.
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