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TPP Week 14 G. Standing – The Renewed Growth of Labour Flexibility Summary In the era of market regulation and globalisation, there has been a shift from large enterprises and stable workforces with fixed wage rates towards flexible forms of production, employment and payment systems. Governments create spaces for these forms of flexibility by controlling unions, eroding protective regulations and by introducing legislations that facilitate labour market flexibility. International lobbies continue to promote flexibility, stating that it will lower unemployment, raise economic growth, improve incomes and reduce inequality. However, flexible markets have been linked to rising inequalities in the US, UK and New Zealand. Likewise, unemployment rates have not fallen during the period of growing flexibility since the 1980s. Different forms of flexibility: Production or organisational flexibility Until 1970s: large, stable enterprises and large-scale mass production Since 1970s: decline of large-scale (in-house) mass production, growth of multinationals, decentralisation regarded as essential for efficiency, tendency of downsizing and outsourcing, of loose strategic alliances between smaller firms. Large enterprises: Uncertainty increases with size and complexity of organisations (increased control needed; higher transaction costs). Inefficiency due to fewer incentives for employees, hence governments promote small firms, privatization, outsourcing etc. Division of labour (production chains): Large firms sub-contract smaller ones, save labour and costs through bypassing regulations. This also makes it easier for firms to alter production according to fluctuations in market demand etc. Concentration of capital increased, concentration of labour and production decreased, organisational flexibility increased. Wage system flexibility Unemployment is seen as evidence of lacking wage flexibility. Minimum wages, measures to reduce wage inequalities, labour unions etc. are regarded as market distortions. Hence, wage flexibility as essential for employment, economic growth, low inflation etc. Prescriptions: deregulation of formal labour sector, decentralisation of wage bargaining to individual worker-employer level, erode minimum wages... (E.g. World Bank, SAPs) Social Income: SI = W + CB + EB + SB + PB Social Income = money wage + community (family, kin etc.) benefits + enterprise benefits (non-wage benefits, insurance etc.) + state benefits (social welfare etc.) + private income benefits (through investments etc.) Relative shares of Social Income components in post-war era: E.g. Africa: higher shares of wages and community benefits, absence of other income sources; compared to Europe: medium shares of wages, enterprise and private income benefits, high share of state benefits, low share of community benefits. Shifting trends in the relative distribution of components across the world, linked to globalization and shifting economic and social policies: relative decline in share of state benefits, relative growth in shares of wages, private income benefits (for those able to save) further international convergence likely Decreased income security when people lose state and enterprise benefits, they fall back more on money wages and informal support systems monetisation of income Rather than letting wages adjust to market forces (avoidance of so-called price distortions), wage repressions were used in newly industrialised countries (NICs), e.g. Singapore, South Korea. Increased wage flexibility all over the world: Erosion of minimum wages; decreased wage share of GDP; widened wage differentials; turn from collective bargaining to concession bargaining; decentralisation and individualisation of wage determination; erosion of unions, etc. Labour cost flexibility Distinction between wage and non-wage labour costs: non-wage labour costs have risen faster than wages in industrialised countries. Debate regarding reduction of non-wage labour costs, e.g. protection costs: employment protection regulations may lower employment and raise unemployment. Employment (numerical) flexibility Employment flexibility refers to the ability of firms to hire and dismiss workers easily and at low cost. This can be facilitated amongst others through legislative changes that weaken employment protection. During the post-war era, ‚easy hire easy fire’ practices were seen as unacceptable, focus long-term macroeconomic advantages of slow employment fluctuations (investment in on-job training etc.). In the era of globalisation, pressures to reduce costs have risen. Higher unemployment rates have made it easier for firms to find non-regular (e.g. part-time, migratory) workers, and there is a trend towards less long-term commitments to workers. Also, the relative size of highly trained employee core groups inside firms shrinks. While the main advantage of employment flexibility for firms is costs reduction, there are also disadvantages like less loyalty of the workforce to the firm (and hence reduced quality). For the workers, retaining skills may be an advantage, but employment flexibility usually means insecurity, less ability to financial commitments… Work process (functional) flexibility Functional flexibility means that work organisation is adaptable to technological innovations and market fluctuations. This includes working time, job mobility and flexibility, and work organisation. Examples for functional flexibility: teamworking, teleworking, working time flexibility (e.g. shiftworking) (Germany as a leader in this sphere: ¾ of all firms have flexible working time practices). Job structure flexibility First two thirds of the 20th century: ‘Fordism’ and Taylorist job structures: labour control techniques involving highly developed technical divisions of labour, internally less flexible, static job structures high control and coordination costs, low training and turnover costs Since the 1970s: Emergence of federal job structures that are more flexible, consisting of a core (coordination) unit with several ‘satellites’. The rapidity of technological change and international diffusion have reduced the role of Taylorist mass production, giving way to smaller batch production with higher machine and system flexibility. Smaller firms (often sub-contractors) are concentrated on specific products, markets or services and depend highly on fashion, technological change etc., which results in less employment security. Also, new flexible structures have emerged, such as distance working, teleworking and virtual organisations, linked by information technology rather than one common workplace.