Advantages and Disadvantages of Flexible Labor Market - Case Study Example

Advantages and Disadvantages of Flexible Labour Market Introduction The global competitiveness, increasing unemployment rate and technological advancement have resulted to complexity in the labour market. The increase in competitiveness among the firms and workers has resulted to the emergence of flexible labour market to suit the interests of workers and control the cost of labour by the firms (Fromhold-Eisebith & Fuchs, 2012). In a flexible labour market, workers have liberty to balance work life and job experience by adjusting to jobs that suits personal interests. It helps the employers to improve the efficiency of workers by hiring competent workforce whenever appropriate and controlling of cost of labour. Flexibility refers to the arrangements between workers and employers to decide on favourable working terms in regard to working hours, wages, employment task, location, etc. (Kirpal, 2011). The flexibility framework is aimed at helping employers to minimize cost and manage resources depending on the demand while it helps employees to improve personal life. It is a way of satisfying the needs of workers and employers by establishing favourable terms of work. Flexible labour market is of great significance to the government because it helps in creating employment for citizens, increase economic growth and put control on inflation (Kirpal, 2011). This document examines the positive and negative effects of flexible labour market in the economy. Advantages and Disadvantages of Flexible Labour Market Advantages Increased job Satisfaction and gender equality Flexible labour market increases job satisfaction to most people because it enables workers to seek employment in firms of their choice (Weller, 2009). Also, it has increased gender equality in the labour market by increasing the number of female employees being hired based on competence. Furthermore, workers can adjust the working time by selecting the time and task convenient for them. Instead of operating in the confines of the company workers can choose to telecommute, work at home and decide the best time they are available for work (Fromhold-Eisebith & Fuchs, 2012). In addition, workers can take more than one job and schedule the working time to improve their working. Reduce Real Wage Unemployment Efficiency in the labour market occurs at equilibrium determined by the interplay of demand and supply of labour in the market (Kirpal, 2011). In a labour market regulated by the government through setting up of minimum wage rate, or having trade unions that exerts influence through its bargaining power it results to unemployment of real wage because wages are above equilibrium rate. In a flexible labour market, there is an increase rate of employment because many firms prefer semi-permanent workers due to low cost of hiring and maintaining the labour force. Firms operating in labour intensive activities such as agriculture and construction can enjoy low cost of labour resulting to increase in profitability (Weller, 2009). Consequently, firms can increase the output and export products due to competitive advantage they may enjoy in labour intensive operations. In a restricted labour market such as France or Spain there is an increase in structural unemployment. Therefore, flexible labour market can make workers and firms to lose control of the market which can increase the rate of real wage employment. Reduction of inflation Inflation can refer to a state of increasing prices of commodity or services. In a regulate market where companies have reduced power over the wage rate due to minimum wage rate and trade unions bargaining power the workers can bargain for wages above the equilibrium level. The move can be detrimental to the organizations because they may lose competitiveness (Kirpal, 2011). In order for the firms to avoid making loss, they result to increasing the price of the products that in turn cause inflation. However, in a flexible labour market the firms have some control over the wages and can only pay wages competitively in order to avoid operating at a loss (Fromhold-Eisebith & Fuchs, 2012). Consequently, the firms compete in reducing prices of products resulting to reduction of inflation. Creation of investment opportunities The returns of investment give the investors incentives to invest in more opportunities available in the economy (Weller, 2009). Therefore, in a flexible labour market firms have control over the cost of wages within the firm. They can achieve this by ensuring they hire workers who have adequate competence and productive enough to cover the cost of wages. Furthermore, managers can hire workers only when they are needed in the firms (Kirpal, 2011). Due to increase in returns when firms are in control of labour there is an incentive to expand the investments by creating more opportunities. Increase in workers efficiency and competitiveness In a flexible labour market, firms have better chances to improve their efficiency and competitiveness in employment of labour. It gives the firms an opportunity to get rid of surplus labour in case of labour inefficiency (Fromhold-Eisebith & Fuchs, 2012). Adjusting the labour cost in the firm to reduce the cost of labour by operating within its capacity. Removing redundant workers can help the organization to operate profitably and secure jobs for in the long run. Furthermore, in a globalized economy firms are focusing on increasing competence in order to offer consumers with innovative product and be able to withstand the pressure from the competitors (Kirpal, 2011). Therefore, in flexible market firms can increase competitiveness by getting rid of redundant workers and hiring competent workers. High rate of workers participation in the labour industry In a flexible labour market, workers have better opportunities to participate in the labour market. For example, many workers willing to work part time because they are engaged in other activities they can do so whenever they are available to work. This has helped nursing mothers to continue earning as they take care of the babies (Kirpal, 2011). Therefore, flexible labour market many workers have a chance to engage in the labour force according to individual interest and terms of service. Cost reduction Flexibility of labour market enables workers to reduce the cost of commuting from residential homes to the workplace. That has been achieved by adjusting the work location and participating in home based jobs (Kirpal, 2011). Employers reduce the overhead cost of the organization by engaging more work at home employees resulting to reduction of office expenses because of reduced floor area, and minimizing the cost of compensating workers for the injuries sustained at work, etc. Increase workers morale and participation in the labour industry Flexible labour market attracts qualified workers and increase participation and work morale. Most workers feel free and satisfied to work away from the office and by being able to adjust to the working time and location (Fromhold-Eisebith & Fuchs, 2012). Furthermore, companies can attract young talented workers with current skills and knowledge. Therefore, employees can increase productivity of the company. The cumulative effect of free labour market is the increased efficiency of workers that may result to the overall increase in productivity of the company. Disadvantages Inadequate training and Job insecurity Job stability is very critical to the workers just like the level of wages. However, in a flexible labour market there is a high level of job insecurity and stress (Kirpal, 2011). Consequently, workers lose working morale and reduce performance due to the prevailing job instability and work related pressure. The workers hired on short-term contracts such as temporary staff and part time workers may lack adequate training. The part time workers lack sufficient time to undergo training thus they rarely gain experience that can lead to promotion to higher ranks (Weller, 2009). Therefore, semi-skilled workers lack job stability and adequate training thus they remain under-skilled. Increase cost of changing job In a flexible labour market there are characteristics of high flow of work as workers search for better opportunities. As a result, the workers incur a high cost of searching for new jobs Kirpal, 2011). Consequently, companies incur a high cost of hiring new workers more often than necessary. In addition, employers lose much revenue as a result of decreased productivity of workers. Flexibility of labour market can disadvantage employees who opt to work at home by causing isolation since they work in the absence of other workers. They workers may feel lonely and secluded (Weller, 2009). Furthermore, working at home can increase the cost of communication as the workers attempt to get in touch with their colleagues or their seniors, as well as the cost of establishing a different working place away from the office (Fromhold-Eisebith & Fuchs, 2012). Also, working outside the office can burden the worker to deal with complicated issues that would otherwise have been dealt with by their seniors. Increase wage inequality Another issue is the rising rate of inequality in the labour market. The inequality arises because permanent workers are unionized and earn higher pay while the non-unionized part-time workers earn meagre pay (Fromhold-Eisebith & Fuchs, 2012). Consequently, the differences in wage rate create an enormous gap in the flexible labour market. In a flexible labour market, the wage rate may be less than the market wage rate for the people with basic salaries. After all, flexible workers may lose overtime to compensate for the extra time spent in completing a given task even though permanent workers could get compensated for the overtime (Fromhold-Eisebith & Fuchs, 2012). The main challenge in the case of is that workers operating away from the office are not put under any supervision thus they make personal arrangement on how they can achieve a certain target. Therefore, under flexible labour market the wage rate of the workers cannot be determined by total number of hours they have worked. This may result to employees earning less than the standard wage rate (Weller, 2009). Therefore, in a flexible labour market employers can exploit workers by paying them lower than what they deserve. Conclusion Flexible labour market influences industrial relations and working environment both positively and negatively. It can create employment opportunities, reduce inflation, and improve economic growth increase labour flexibility. Organizations can attract young qualified workers, reduce operating expenses, improve workers morale and satisfaction, and can generate internal employment opportunities. However, flexible labour market has adverse consequences to the workers and to the organization. Some of the negative consequences include increase cost of communication, isolation and loneliness of workers, increase wage inequality and loss of compensation for the overtime that the result to lower than standard wage rate. References Fromhold-Eisebith, M. & Fuchs, M. (Ed.) (2012). "Industrial Transition: New Global-Local Patterns of Production, Work, and Innovation." Ashgate Publishing, Ltd. Kirpal, S. (2011). "labour-Market Flexibility and Individual Careers: A Comparative Study.” Springer Science & Business Media: 94-288. Weller, J. (Ed.) (2009). "Regulation, Worker Protection and Active labour-market Policies in Latin America." United Nations Publications: 221- 280. Read More