Labour Rigidity in UK and European Countries

Labour Rigidity in UK and European Countries

Introduction

Recent labour market reforms undertaken in the Spanish state have been justified with the topic of labour rigidity. The dogma that has been trying to impress upon people is that if the employer will be easier to dismiss then feel encouraged to invest in job creation. Therefore, for those who pontificate with that dogma, the recipe for job creation passes through the flexible labour market.

To expose the fallacy that lies behind this statement is necessary to understand the basis on which rests the labour market. So, euphemisms aside, in the current economic system the employer is not more than the consumer of a commodity called labour power, which uses raw material for the production of goods or services. The labour force is provided by the workers, whether salaried or self-employed small business owners. The sale of this merchandise is usually done in a market that is under a regulation that prevents its value will be exclusively to the laws of supply and demand. Under these laws, any product that excels in wealth will tend to lower its price. Workforce is more than enough, so that in the absence of a regulation establishing a minimum working conditions would be less advantageous for workers. Usually these minima have the force of law and laid down in the UK case, the Statute of Workers and collective agreements. The minimum insured in these laws not only have to refer to salaries, but other benefits such as vacation, length of days, severance pay, etc., which obviously represent a cost to the employer or employer but also have to clarify the existence of state aid to which they are welcome in creating new jobs or convert existing indefinite (Siebert, 1997, p.40).

Discussion

Labour Rigidity

From the viewpoint of the sensitivity of real wages to unemployment, Italy, Germany, and France and Finland are European countries (among the eight studied here) that labour markets were less rigid in the 90s. Then comes the United Kingdom, the Netherlands, Denmark and Sweden, where wages have appeared virtually insensitive to changes in the unemployment rate. It is estimated that the unemployment rate is replaced by the employment rate as an indicator of tensions on the labour market provides a comparable hierarchy of degrees of wage rigidity measured at the macro level. Estimating the dynamics of employment over the same period gives a less contrast, since the adjustment is on average one year in Germany, a year and a half in the UK and Denmark, and two years France, Italy, the Netherlands and Sweden.

Italy emerged as the country where the real wage rigidity is less strong. The reforms of the early 90s appear to have significantly shortened the dynamic adjustment of employment to production, bringing it closer to that of other European countries studied. The sensitivity of real wages to unemployment, already among the highest in European countries in 80 years, has also increased slightly in recent ...