Labour market Essay Example | Topics and Well Written Essays - 3000 words

Labour market - Essay Example Labour market flexibility refers to the ability and the willingness of labour to respond to changes in the market condition, including changes in the demand for work force and the wage rate. The labour market flexibility is an imperative aspect of how labour markets adjusts to supply and demand, it is therefore has a key role to the supply side of the macroeconomics. A flexible labour market is when firms are under fewer regulations concerning the labour force and therefore, can set their own wages, change their work hours and fire employees (Michie & Sheehan 2003, P.131). In contrast, a labour market with low flexibility is bound by some rules and regulations such as requirements from trade unions and minimum wage restrictions. It is good to note that, labour market institutions were seen to block the clear functions of the market by weakening the demand for work force, thus making it not attractive to hire workers by pushing up the wage or by distorting the labour supply, leading t o impairing the equilibrium of market function mechanism (Benner 2003, P.629). The most distinction of labour market flexibility is based on strategies companies use, and they can be grouped into four: External numerical flexibility, it refers to the number of workers from the external market or the adjustments of labour intake. It can be achieved by employing workers temporarily or on fixed contracts, therefore, the employer can hire and fire employees according to the company’s needs, by following the protection legislation. Internal numerical flexibility, it is achieved by adjusting schedules or working hours of workers employed in the firm. It includes part time, overtime and shifts. Functional flexibility, it is where the employees can be transferred to different tasks within the company, it mostly deals with organization of operations in a firm. Financial flexibility, it is where there are differences