Division of Labour

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Flexible Labour Markets. - Benefits and Disadvantages
Flexible labour markets involve a minimum of government intervention, they are labour markets which work efficiently and are competitive. Many supply side economists argue flexible labour markets are of great importance in reducing unemployment and improving the competitiveness of the economy. Advantages:

1. Opportunity to exploit 24-hour economy
2. Contributes to an improvement in the inflation-unemployment trade off 3. Flexible wages and flexible employment helps to ensure that markets clear rapidly eliminating any excess supply or demand, so economies automatically move into long run equilibrium at potential output. 4. Higher productivity growth in the long run (which then helps to improve competitiveness) 5. Flexible employment suits more flexible life-styles

6. Stronger employment creation during an economic upturn
7. Flexibility makes the economy more attractive to inward investment 8. The economy can respond more flexibly to an external economic shock – because wages and employment are more flexible 9. Increases Labour Participation Rates: Flexible labour markets can be beneficial for workers. This is because it gives them more options of, when and where to work. This is particularly helpful for women with young children, for example, they can work part time and still look after their children. However, although flexible labour markets have created work in the part-time, service sector, there has been less success in creating permanent, full time jobs.

10. Flexible labour markets help to reduce costs for firms; for example, workers can be employed when they are needed. It is not necessary to pay for workers who are not productive. This will help attract inward investment. It is argued one reason, for higher unemployment in France is that there are costs in hiring and firing workers, this reduces the incentive for firms to expand.

However, although they have some benefits, these...
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