Employment and the Changing Market
Around the world, Labour markets are increasingly dividing. Many countries are seeing a rising inequality in the way different groups of workers are treated which is having a significant implication on society and the future of work.
The workforce is usually divided into two groups; those with jobs and those without; those in the system and those outside of it; those with open ended contracts and those who jump from one short term contract to another. Usually, these differenced are seen between generations. In a number of the economies in Southern Europe, there is a marked difference between the fate of older workers and that of the younger generation.
Older workers generally look for jobs that offer security and where they can’t be fired; whereas younger workers are often shut out from these contracts as they are no longer offered, as employers fear the high costs and rigidity implied. Instead, younger workers find jobs under fixed-term contracts which offer no job progression and no chance to build up pension rights, holiday entitlements, etc.
This is obviously an unsustainable state of affairs as one half of the workforce is essentially enjoying a job for life, at the expense of the other half which has very little, or no job security at all.
On the other hand, people have work, but in the black economy (the part of a country’s economic activity which is unrecorded and untaxed by its government.) So people never actually become part of the system. While this is highly unsatisfactory for the workers as they never get a chance to become part of the employment market, it is also damaging to economies and governments who lose out on social security and tax payments into their national finances, and for companies who have no security whatsoever about their workers. The main cause of this is the fear of employers to properly hire staff, due to the lack of agility in the available forms of work.
Badly functioning labour markets with either little or over strict regulation are often the root of two speed systems and high levels of undeclared work. The more the labour market structures are open and flexible, the more inclusive they become and the higher the levels of labour market participation. In today’s fragile economic environment, labour markets need to be agile and allow businesses to respond to the ebb and flow of economic demand.
With unprecedented levels of job creation and destruction now a fact of life, even open ended contracts no longer offer unending security. It has been revealed that 50% of contracts are terminated within just two years. Indeed, the idea of a permanent contract is now increasingly irrelevant in our 21st century service based economies. They are gradually being replaced by a wide range of different contractual agreements including open ended, agency work, part time, freelance and fixed term contracts.
Rather than seek a return to the days of almost exclusively full time, open ended contracts governments must maintain labour market regulation that allows a balance of contracts within employment markets, ensuring that all contracts offer adequate levels of protection and security for all parties. They will need to overhaul their social security systems too, so that rights and benefits such as sick pay and pensions are attached to individuals not companies, and are portable, allowing workers to carry them from job to hob throughout their working lives.
In this way, we are ensuring that people remain constantly in work and make ongoing transitions – from school or unemployment to work; from job to job; and from temporary roles to full time work and from shrinking industries to sectors they are expanding.
Source: The Global Recruiter, Issue 157, September 2015: A Tale of Two Work Forces