The viability of flexicurity
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1. The document discusses the concepts of flexibility and security in employment. It defines types of flexibility like numerical, functional, and wage flexibility as well as types of security like job, employment, and income security. 2. The "common principles" of flexicurity are described as more flexible and secure contracts, lifelong learning strategies, effective active labor market policies, and modern social security systems. Flexicurity is presented as a compromise for perceived pressures from technology and trade. 3. Examples from Denmark are given, which experienced higher but shorter unemployment during the financial crisis compared to other countries, though its employment services faced increased demands. The document questions whether flexicurity truly addresses changes in the labor market like job polarization
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The viability of flexicurity
- 1. Paul Lewis, The viability of flexicurity 28 May 2015 WOERRC and UACES workshop on Flexicurity
- 2. Unpacking flexicurity Types of flexibility External-numerical – the number of workers Internal-numerical – the total worker-hours required in any period Functional – the types of activities that workers perform Wage – the remuneration of workers Types of security Job security – maintain the same job with the same employer Employment security – maintain employment through a different job, possibly with a different employer Income security – maintain income levels, or close to them, during periods of unemployment and subsequent re-employment Combination security – the security to balance work and personal life (Wilthagen and Rogowski 2002; Wilthagen and Tros 2004)
- 3. The ‘common principles’ of flexicurity 1. more flexible and secure contractual arrangements, from the point of view of both employer and worker; 2. lifelong learning strategies in order to ensure workers' ongoing capacity to adapt, and increase their employability; 3. effective active labour market policies in order to facilitate transitions to new jobs 4. modern social security systems providing adequate income support during transitions. EC emphasises that employees desire flexibility and employers security as well as the other way around. (EC 2007;8)
- 4. A response to ‘common pressures’ A compromise solution to perceived pressures of technology and trade – Broadly neoclassical Market adjustments Positive vision of supply-side upgrading to the knowledge economy Security components to gain the acceptance of social partners? (Mailand 2010)
- 5. Adjustments following the crisis Internal-numerical flexibility more prominent than external, e.g. Germany, Austria, Norway, Belgium, Canada, Japan and Korea (see OECD 2010; Andersen 2012) Wage adjustment also used to reduce layoffs Can flexicurity be linked to this? (European Council 2009 cited in Meardi 2012:155)
- 6. Flexicurity promotes adjustment through employment not hours Andersen (2012), data from OECD (2010) for the period 2008-9.
- 7. Can flexicurity function in a recession? Lack of demand challenges unemployment outflows Pressure upon Activation Programmes Costs of ALMP and UIB will automatically rise – Fiscal capacity required ‘Six pack’ and ‘two pack’ mitigate against this
- 8. The case of Denmark Gross flows averaged 25%, same as the US Unemployment rose more quickly than the OECD average, adjustments were in employment not hours Average duration of unemployment increased but still impressive – 60% re-employed in 13 weeks – 80% in 26 weeks (cohort from q3 2009) Confidence in re-employment highest in the EU at 70% in 2010 Youth unemployment low for EU Taken from Andersen (2012)
- 9. The case of Denmark, 2 However, ALMP began to struggle to cope with the volume increase Too early to assess increases in persistent unemployment Not clear regarding the quality of transitions – Employment security? – Long term income security?
- 10. Revisiting original premises Is flexicurity a response to change caused by SBTC and globalisation? Work polarisation rather than upgrading (Autor et al., 2006; Spitz-Oener, 2006; Goos and Manning, 2007; Dustman et al., 2009) Industrial manual work substituted for service manual work (Nolan and Slater 2010) ‘hollowing out’ or the ‘pear shaped economy’
- 11. Revisiting original premises Does flexibility, even when combined with security, create polarised outcomes? For low-skill occupations: Allowing companies to flex to marginal changes in demand Encouraging further de-skilling Reducing employment security and long-term income security For professional occupations: Providing opportunities for greater income through movement (VoC dependent) Opportunities for ‘combination security’? (VoC dependent)
- 12. Conclusions We need to treat flexicurity as a clear set of policies or principles and objectives for it to have internal coherence Very few countries can be said to have implemented it pre-crisis There are necessarily increasing fiscal commitments to such a model post-crisis The forces of change which it was said to address have not had the consequences envisaged for the work Its viability depends on the types of work in an economy
Editor's Notes
- As has been pointed out in the academic literature, both flexibility and security are multi-dimensional concepts. Wilthagen (Wilthagen and Rogowski 2002; Wilthagen and Tros 2004) has identified four types of flexibility that he relates to four types of security:
- The policy literature on flexicurity focused almost exclusively on external-numerical flexibility, explicitly trading job security for employment security. This may be seen in the first three components or pillars of flexicurity (EC 2007) which are geared to reducing EPL for permanent employees in order to reduce the gap between permanent and temporary protections, while employing lifelong learning strategies and active labour market policies (ALMP) to facilitate employment transitions. Only the fourth pillar may be understood as showing a concern with income security, and then primarily through the period of transition, not with regard the income achieved in subsequent employment.
- Allow the market to adjust the numbers in employment, making job matching more efficient (ALMP), adapting supply to meet the presumption of shifting demand (lifelong learning) and smoothing the transitions for individuals and households as they move out and into employment (social security). Minimal employment regulation and market determined wages would provide companies with the flexibility to adapt their employment while labour markets would theoretically clear at wage levels that equate with the marginal product of individual workers. Workers should have the opportunity to improve their skills and corresponding employability, productivity and wages (debate over who pays) - largely paid for by themselves - if necessary by accessing loans based on the expected future return on their investment in ‘human capital’ (Leitch 2006:15). ‘social partners’ include trade unions and some Southern European states (Mailand 2010).
- We suggest that such a step would create incoherence for the principles of flexicurity as they had been developed. Those countries that employed greatest use of short-working time did so within national institutional contexts of high levels of EPL, in the case of Germany working time accounts that were established through collective agreements, and in several other countries, e.g. Japan and Italy, through state sponsored schemes related to unemployment insurance (Tros 2012:9). The point is that these features are not just absent from earlier expositions of flexicurity, they are in tension with them.
- As Tros (2012) notes, different strategic combinations of particular types of flexibility and security are possible and are encouraged to different degrees in different national institutional contexts, firms and workplaces. For example, functional flexibility can potentially enhance job and employment security, while wage and internal flexibility can also enhance job security. However, for flexicurity to have any meaning at all, I think we need to be clear that it does not and cannot encompass all types of flexibility and security.
- Gross flows in the labour market are higher for high flexibility countries In order for flexicurity to be effective during an economic downturn the inflow of newly unemployed workers needs to be matched with new employment to become an outflow before workers’ skills atrophy and they become ‘long-term’ unemployed. This is both a qualitative question of the type of successful programme as well as a quantitative one of cost. However, it is important to note that even if successful at keeping the duration of unemployment short, the cost of ALMP and social security will automatically increase in line with the increasing flows of workers into unemployment. If the duration of unemployment also increases, which we would expect to be a function of demand as well as the institutional design of ALMP and social security, then costs will increase further, with the worse-case scenario that large numbers of workers end up as long-term unemployed and an ongoing burden upon welfare states.
- There are very few examples of countries which were employing the full range of flexicurity policies prior to the crisis. Denmark stands out with its high ALMP spend of 4.7% of GDP, replacement rate of 68% and EPL of 1.8.
- Some of the targets to begin an activation programme were being missed, the duration of programmes had decreased and there were some criticisms of the content. The share of people in employment post-activation at different points in time were also declining post-crisis.
- It may be an academic question to ask whether flexicurity can succeed given that few countries have implemented it and fewer still are in a position to implement it given current fiscal constraints. However, I think it is important to ask whether it could have worked as originally envisaged. Both skill-biased technological change (SBTC) and globalisation/trade hypotheses suggested that demand in developed countries would reduce for low-skill occupations and activities and increase for higher skilled ones. Unfortunately the evidence did not fit the theory particularly well. Empirical studies of the UK,US and Germany using detailed occupational-industry classifications have found that, whilst employment in the top two deciles of jobs has increased dramatically since the 1970s, it has also unexpectedly increased in the lowest two deciles. This suggests polarisation in the workforce, with an increasing proportion of low-paid workers and an increasing proportion of high-paid workers (Autor et al., 2006; Spitz-Oener, 2006; Goos and Manning, 2007; Dustman et al., 2009). In Nolan and Slater’s (2010) longitudinal study of the UK, they found that industrial manual work was being substituted for services manual work between 1992 and 2006, almost 1:1, and in 2006 nearly two fifths of all work performed measured in hours was manual. Growth in professionals was greater in lower-level…. Terms such as ‘hollowing out’ or the ‘pear shaped economy’ are more accurate depictions of what has occurred. It is also doubtful whether these changes are really as profound as the futurology literature suggests, or whether to a great extent, the structures of work in terms of occupations at the top of the distribution have changed that much.
- For example in retail supply chains and personal services. Temporary and part-time contracts can be seen as a manifestation of this kind of behaviour. From a business perspective technology needs to have standardised working practices and enabled a high degree of supervision and control in order to ensure continuity of service as workers are moved in and out of processes of production or delivery. The extent to which previous periods in the history of industrial capitalism de-skilled labour was an issue of considerable debate during the second half of the 20th century, but David Harvey makes the case that Marx viewed capitalism as containing inherent processes which reduce skilled labour to simple (Harvey 1982:119). It may be that the present period allows this to occur in services to an extent that it did not occur in industry, for a variety of reasons, creating a larger pool of low-skilled service work that utilises abstract labour at the bottom of the labour market. At the other end of the labour market, flexibility may be viewed as more positive to professionals, particularly if there are barriers to entry that create shortages of supply in geographical hotspots of high demand. A less co-ordinated wage system may encourage worker transitions through the market and provide opportunities to raise wages. In these circumstances workers may also be able to negotiate the kind of ‘combination security’ discussed earlier, but to a large extent this will depend upon different national working cultures and the role of the state in enabling workers, particularly women, to balance family and professional demands. However, this scenario places choice in the control of the worker, not the worker responding to having been made unemployed. Activation programmes also seem to be less important in such a positive vision.