Employment and Employment and Decent Work in the Decent Work in the Era of FlexicurityEra of Flexicurity

Robert BoyerPSE - PARIS-JOURDAN SCIENCES ECONOMIQUES

(Joint research unit CNRS-EHESS-ENPC-ENS)48, Boulevard Jourdan 75014 PARIS, France

Phone: (33-1) 43 13 62 56 — Fax: (33-1) 43 13 62 59e-mail: robert.boyer@ens.fr

web site: http://www.jourdan.ens.fr/~boyer

“Development Forum on Productive Employment and Decent Work”, panel 3: Labour Market Flexibility and Decent Work, New-York, United-

Nations, ECOSOC Chamber, 8-9 May 2006

Introduction

A basic question:How to promote decent work and productive

employment in the era of globalization and flexibility?

The method :1.What do theoretical advances tell?2.Do international comparisons show the

superiority of flexibility strategies for OECD countries?

3.What are the constraints and opportunities for developing countries?

I. Theory: A reappraisal of the flexibility/security debate

The inadequacy of the typical pure competition model:

1 In a stochastic world , it is not rational to adapt instantaneously.

2.In a complete macroeconomic model, the maximum speed of adjustment of employment may generate structural instability.

3.Similar results for capital adjustments.4. To take risks and accept changes, individuals

have to benefit from a minimum degree of security.

Figure 1 – Why the competitive equilibrium theory is not suited for assessing the impact of the security

brought by welfare systemsIndex of

performance

1 Optimal level ofsecurity

0Index of security

The market view : security introduces a distance with respect to the general equilibrium that is a Pareto optimum.

The institutionalist view:Full security may be contradictory with the requirement of a capitalist economy.No security at all may create instability in the employment relation and institutional equilibrium.In between, some security may be optimum for economic performance as well as for welfare.

The externalities associated to the various forms of security have to be taken into account:

1 Income security: a contribution to demand and an impact upon expectations.

2.Employment security: an incentive to investment in firm specific skills.

3.Representation security: more commitment and acceptance of technical change.

4.Life security: significant impact upon productivity and welfare.

5.Skill security: more productivity and adaptability to changes

Figure 2 – How various securities may enhance dynamic efficiency

From possible static inefficiency to a contribution to dynamic efficiency and growth.

1 Security is a cost in the short run…..

2…but also an investment in a form of“social capital”...

3…hence a possible contribution to an endogenous process of growth.

Figure 3 - A reconciliation of two opposed visions of the impact of

welfare

II. Empirical evidence for OECD economies : flexicurity and not only

flex-flexibility

1.Job security contributes to workforce redeployment

Figure 4 – Quality of job prospects and insecurity, selected European

countries, 1995-2000 (percentage)

Source: ILO (2004),

World Employment report 2004-

05, p. 206.

II. Empirical evidence for OECD economies : flexicurity and not only

flex-flexibility

1.Job security contributes to workforce redeployment

2.Labor market policies can reduce job insecurity

Figure 5 – Job insecurity and spending on labor market policies, selected OECD

countries, 2000

Source: ILO (2004), World Employment report 2004-05, p. 207.

II. Empirical evidence for OECD economies : flexicurity and not only

flex-flexibility

1.Job security contributes to workforce redeployment

2.Labor market policies can reduce job insecurity

3.Small open economies have more active employment policies

Figure 6 – Spending on labor market policies increases with openness, selected

industrialized countries, 1970-2000

Source: ILO (2004), World Employment report 2004-05, p. 190.

II. Empirical evidence for OECD economies : flexicurity and not only

flex-flexibility

1.Job security contributes to workforce redeployment

2.Labor market policies can reduce job insecurity

3.Small open economies have more active employment policies

4.Active welfare may complement innovation policy

Figure 7 – Changed in MFP growth and change in business R&D intensity

Source: Bassanini A., Scarpetta S., Visco I. (2000: 27)

-Spain

France

Japan

Austria

Greece

Netherlandfs

Belgium-Germany

PortugalNew Zealand

United States

Ireland

CanadaSweden

FinlandDenmark

Australia

-2

-1,5

-1

-0,5

0

0,5

1

1,5

-0,4 -0,2 0 0,2 0,4 0,6 0,8

Difference in Business and Enterprise RD intensity between 1980-90 and 1990-98

Dif

fere

nci

es i

n m

ult

i fa

ctor

pro

du

ctiv

ity

(MF

P)

grow

th

rate

bet

wee

n 1

980-

90 a

nd

199

0-98

II. Empirical evidence for OECD economies : flexicurity and not only

flex-flexibility1.Job security contributes to workforce redeployment

2.Labor market policies can reduce job insecurity

3.Small open economies have more active employment policies

4.Active welfare may complement innovation policy

5.A whole spectrum of configurations for workers secutity

Table 1 – Employment or employability protection?

A typology of OECD countries late 1990s and early 2000s

Source: ILO (2004), World Employment report 2004-05, p. 209.

III. More security for workers in developing countries

1.Constraints and opportunities for productive employment and decent work

Table 2 – Obstacles and opportunities for decent work in developing

countries1. Large hidden obstacles to open employment Large informal sector

Frequently attributed to the excessive security granted to the formal sector

2. Weak states Social compact Role of consumers of third world products

3. Weak / non existing unions Institution of representative unions by State regulation

4. Low income level and resources for insurance

Human development: a condition as well as an outcome of economic development

5. Rural activity as structurally uncertain Move from the agriculture to the services 6. Large macroeconomic instability The smaller the economy, the more likely

flexibility, significant welfare 7. More uncertainty with the opening to the

world economy Globalization may be a trump:

- Higher wage for multinationals - Higher wage in the export sector - Codes of conduct

8. Rare public training Shortage of skilled labor as an incentive for upgrading competences

III. More security for workers in developing countries

1.Constraints and opportunities for productive employment and decent work

2.The ambiguous impact of globalization on labor standards

Figure 8 – Chances and constraints on productive employment and decent

work

III. More security for workers in developing countries

1.Constraints and opportunities for productive employment and decent work

2.The ambiguous impact of globalization on labor standards

3.A method for drawing a dividing line between flexibility and security

Figure 9 – A growth diagnostics approach to employment creation

III. More security for workers in developing countries

1.Constraints and opportunities for productive employment and decent work

2.The ambiguous impact of globalization on labor standards

3.A method for drawing a dividing line between flexibility and security

4.The institutional setting in order to promote the related configurations

Table 3 – The paths to workers security

WHAT CONDITIONS WOULD FAVOR DECENT WORK?

Business codes Corporate Social Responsibility (CSR) National labor law ° Scarcity of workers

Collective voice of workers ° Full employment Social conflicts

Social compacts

III. More security for workers in developing countries

1.Constraints and opportunities for productive employment and decent work

2.The ambiguous impact of globalization on labor standards

3.A method for drawing a dividing line between flexibility and security

4.The institutional setting in order to promote the related configurations

5. Some developing countries do suceed

Table 4 – Some developing countries are quite successful in enhancing

security

IV. Conclusion

1.Modern theorizing: a minimum workers security is required given the specificity of the wage labor nexus.

2.For OECD countries flexicurity delivers better outcomes than conventional flexibility

3.Employment diagnosis and alternative institutional designs opens some strategy for developing countries

Many thanks for your Many thanks for your attentionattention

Robert BOYERPSE, CNRS, E.H.E.S.S.

48, Boulevard Jourdan 75014 PARIS, France

Tél. : (33-1) 43 13 62 56 – Fax : (33-1) 43 13 62 59

e-mail : boyer@pse.ens.frweb site : http://www.jourdan.ens.fr/~boyer/