The objective of Labour Market Reform is to breathe modernity, dynamism and responsiveness into economies exhibiting labour-related competitiveness dysfunctions. Policies for reforming the Labour Market have far-reaching consequences on the productivity and competitiveness of an economy. The risk of implementing wrong and inappropriate policy can be grave. How do policy-makers ensure that their policy prescriptions are fit-for-purpose and will deliver the desired outcomes in terms of improved productivity and competitiveness at the firm level, sector level, industry level and national level? How can proposed reform policy measures be modelled and pre-tested for feasibility before being moved into an implementation phase ?
Dear Silburn,
The Classics now adopt a price setting view, perhaps in response to the Keynesian wage setting view. So, the dynamics of the modern labor market can be view by solving these equation. Please look at the attach file for some implications for policies.
Price Setter: p – we = b0 – b1u (b1>0)
Wage Setter: we – p = y0 – y1u (y1 ³ 0)
Dear Silburn,
I think Computable General Equilibrium (CGE) models can do better. CGE models can help you see the efficacy of reforms in labor markets not only on labor markets but also the whole economy. It helps you see the effects from macroeconomic to household level effects of the reforms.
Regards,
I think the best way to approach this question is by considering the political rationale behind labour market reforms and seeking to align reforms with an underlying economic theory. For example, the UK government in 1979 strongly believed in free markets (an economic view) and also philosophically were against worker representation (i.e unions) as this reduced the share if capitalist (i.e firm owners) income as unionised workers received a higher share of firm income. Of course the two are linked. Their view was that higher worker shares of wealth created reduced the incentives for capitalists to invest in their firms. Generally labour market reforms could be lumped into two categories. Reforms that protect workers (e.g minimum wage legislation) and those which act in the interests of capitalists (e.g anti-union legislation). To fully achieve the benefits of 'freeing' up labour markets through making the market more competitive, there must be fairly free movement of labour (i.e workers compete for jobs and move to where there is higher demand for labour). This might be true to a degree in the US, but it is not normally true in Europe. This is often where reforms to free up labour markets fails, particularly where the jobs are in regions where living costs are higher than those in areas where there is higher unemployment. Hope this helps a bit? Cheers, Marc
Marc
You have illuminated the two sides of the debate quite nicely. Would you say that, in Europe, that the pendulum has swung from the unionist view to the capitalist view in recent times ? If so, why has that change occured and are the unions now co-opted participants ?
Silburn
Dear Lall,
Thanks for sharing.
What ultimately determines whether the price setting or the wage setting perspectives prevails ?
Silburn
Thanks Amsalu,
Found an into paper on CGE for labour markets at "Boeters Savard 2011 The labour market in CGE models" from Netherlands Bureau for Economic Analysis
http://econstor.eu/bitstream/10419/54977/1/684260395.pdf
Silburn
- Badges
- Science topic
- Similar topics
- Linguistics
- Composition Studies
- Publication