LABOUR FLEXIBILITY

The relaxing of labour regulations to introduce flexibility in wages, hours of work, work organization and to adopt flexible hiring and employment practices.

"Recent research confirms that the labour flexibility practices most widely employed by Italian companies are those related to functional flexibility - such as job enrichment, job enlargement, job rotation and the provision of training. These practices are supported by participative trade union strategies and by the fact that unions are less willing to negotiate on numerical flexibility and on wage flexibility."
(Eironline, Labour Flexibility and Company-Level Bargaining, 1997, visited 2011-03-11)

"For many indeed increasing flexibility in the labour market is synonymous with decreasing security in the labour market, because it obligatory means a rise in hiring and firing and of flexible forms of employment, such as fixed term jobs, temporary agency jobs and other forms of ‘atypical' jobs. And relative to an assumed number of ‘typical' jobs before the introduction of flexibility, such developments towards contract forms that offer lesser employment security look like a prove for a trade-off between flexibility and security."
(Auer, P., European Commission, visited 2007-03-11)

There are five main sources of labour market flexibility:

1. External numerical flexibility relates to a firm's ability to adjust its level of labour inputs to accommodate changes in demand. Changes that lessen or remove restrictions on costs associated with redundancy and termination, and those that facilitate growth of temporary, short-term and part-time contractual arrangements, as well as the emergence of externalization strategies are said to increase external numerical flexibility.
2. Internal numerical flexibility refers to a firm's ability to adjust the quantity and timing of labour input, varying the number and pattern of working hours rather than changing the number of employees, to meet variations in demand. Changes associated with the determination of working time, calculation of working hours in reference to longer time periods; and adjustments to overtime and shift working patterns are said to impact upon the level of internal numerical flexibility.
3. Wage flexibility refers to a firm's ability to vary wage levels according to criteria of ability to pay and productivity. A distinction is often made between downward wage flexibility associated with efforts to minimize wage costs and upward wage flexibility where firms can link pay levels to productivity improvements. Changes associated with the indexation of wages and minimum wage levels; the level (national, industry and enterprise) at which wage determination takes place in an economy; changes in pay, grade and skill structures and pay for knowledge schemes; the linking of pay to performance including gain-sharing and special bonus schemes; and rationalization of total elements of remuneration are said to be amongst the factors which can have an impact on the level of wage flexibility at the economy-wide and individual firm levels.
4. Functional flexibility refers to a firm's ability to deploy workers between tasks as demand for different types of labour changes. Flexibility of this nature depends on two factors. First, functional flexibility depends on the range of tasks workers can perform. Changes associated with the training of workers and the range of skills they possess affect functional flexibility in this regard. Secondly, functional flexibility is related to the firm's ability to deploy labour to different tasks to meet changes in demand. Changes associated with how jobs are defined and the demarcation between different categories of workers, and work organization in general, affect this second dimension of functional flexibility.
5. Procedural flexibility relates to the processes by which changes are introduced at the firm level to facilitate adjustment to changes. Procedural flexibility is generally taken to refer to the specific mechanisms for consultation or negotiation over aspects of internal labour market flexibility at the level of the firm. Procedural flexibility can also be taken to refer more broadly to the ability of management to introduce changes in the conditions and organization of work. Procedural flexibility refers to the extent to which regulatory mechanisms facilitate ongoing change.

Labour flexibility can be advantageous in an increasingly flexible market, where companies have to deal with fluctuating periods of high and low supply and demand. There are several ways in which companies can achieve labour flexibility:

• By varying the number of personnel through the use of flexible working time arrangements, flexible employment contracts, part-time work, on-call contracts and the hiring of seasonal personnel (numerical or quantitative flexibility).
• By using the employee's capacity to perform different tasks when needed, through job rotation, widening the scope of the job, and job enrichment (functional or qualitative flexibility).

(adapted from Wailes, N. and R. Lansbury, Collective Bargaining and Flexibility: Australia, International Labour Organization (ILO), 2000, visited 2011-03-11)

Flexicurity

Alternative policy approaches within Europe show that employment and social protection policies can support flexibility for firms while ensuring income and broader social security to workers at the societal level. The ILO has responded to the flexibilization debate and concerns by launching a project entitled "flexicurity." The project aims to develop a set of consensus-based employment policies, ensuring a balance between labour market flexibility and employment security in the sub-region. More specifically, this includes enhancing the capacity of government and social partners to develop strong expertise in the functioning of labour market institutions and their impact on the labour market situation as well as policy proposals during national tripartite seminars to identify possible policy choices based on flexicurity in the process of further institutional reforms, with a gender sensitive approach.
(International Labour Organization (ILO), Balancing Flexibility and Security in Central and Eastern Europe, 2010, visited 2011-03-27)