Explain what is meant by a flexible labour market and evaluate the role that a flexible labour market can have in improving the macro-economic performance of the British economy.

Authors Avatar

N. Henderson                01/05/07

Unemployment and Flexible Labour Markets

Explain what is meant by a flexible labour market and evaluate the role that a flexible labour market can have in improving the macro-economic performance of the British economy.

(30 marks)

        Since the 1980s, the labour markets have become more flexible. But what does this mean? How does this impact on the economy?

First of all, what is meant by a flexible labour market is a labour market in which movement between jobs is made easier. This may be done in different ways, one being wage flexibility as well as contractual flexibility. This is where shorter-term contracts are brought into use, meaning that workers must renew their contracts, if they are to stay in work, every few years, rather than the great lengths of time that have been used in previous years. Furthermore, the ability to change wage rates more easily means that the gap between supply and demand is reduced.

The ease of hiring and firing of workers is also a major cause of labour flexibility. Over the last 20 years, reforms to the UK employment system have meant that it is now easier to hire and fire workers. However, how does this all impact on the economy?

Join now!

The reason that a more flexible labour market has come about over the last 20 years is due to the changing social and business environments. Work has become increasingly high-tech over recent years, and so workers have had to become more ICT literate. As well as this, the demographic changes that have taken place are a rise in the divorce rate. This means that there are more single parent families, and so there is less availability for full time work, as childcare is both hard to come across, as well as being expensive. These factors, as well as the government ...

This is a preview of the whole essay