European Employment Policy - Essay Example

Introduction The charter of European Union is based upon different economic theories which have been proposed to discuss the impact of minimum wages on labor market. The proceedings of the labor market is based on the exchange of resources between the employee and employer, the employee receive wages in return for their labor services to the employer. Labor market is considered to be most competitive market, where the established market price is much closer to the value of the product. Therefore, the employee is likely to receive marginal value, in the competitive market, excluding the factor of minimum wage. Therefore minimum wage laws have been introduced which foresee crisis of unemployment, if fewer employers are interested to hire labor, where as more people are willing to offer their services. Therefore, the law intends to maintain the equilibrium, to avoid social and economic turmoil. The amount of labor supplied by the workers is directly proportional to the nominal wage, a certain increase in the wage, forecast increase in the labor supply. The observation is based on the assumption that an employee hired at a low wage will prefer to consume 'leisure and forego wages', a slight increase in the nominal range, it becomes difficult to practice leisure and avoid labor, therefore there is an increase in the number of workers wiling to offer labor. The relationship between the labor supplied and nominal wage is function of different variables including price. A substantial increase in the price level will reduce the number of workers, at all wages (Wascher, 1995). Charter of European Union: Employment Policy The charter of European Union has observed that there exists an inverse relationship between the nominal wage, and the 'amount of labor demanded by the organizations'. A substantial increase in the wages is likely to compel the organizations to reduce recruitment schemes. The relationship has been derived on the basis of an assumption that the organization prefers saving for increased proportion of profitability i.e. such level of production is aimed by the organization which increases the profit i.e. the difference between expenses and revenue. The revenue is based on the price of an item, and quantity of the items sold (Christopher, 2005). The expenses include the amount of wages, which is based on the labor and services. Therefore, the company will prefer to maintain a minimum threshold level to secure profit, on the basis of reduction in the wages, as more workers are employed, the labor wage increases which turn the organization less profitable. The price factor may compel the organizations to recruit the employees for all wage levels (Gold, 1993). As per the regulation, the commission has defined a minimum age for the employment; the minimum age is greater than the minimum school leaving age. The charter has focused upon the fact that parent employees shall be provided parental leave, and parent employees have been urged to spend their time with their families particularly children. The charter has listed provisions for the access to childcare during working hours. The charter has defined a maximum limit for the weekly working hours; the maximum weekly working hours shall not be greater than forty eight, which is inclusive of the working hours. As per the charter, the employees are eligible for at least four week's paid annual leave, on unconditional basis. The charter has described minimum rest period which shall be eleven hours on daily basis, and minimum one day on weekly basis. The charter has limited the duration of work during might hours, and has limited the working hours during night time to maximum of eight hours (Gold, 1993). Minimum Wages and Labor Market: Equilibrium It has been predicted that minimum wage laws are expected to increase unemployment, if minimum wage is established above equilibrium wage. It is because, a large number of employees will be interested in offering their services in exchange for higher wages, on contrary on small and limited number of such opportunities will be available. Also, the organizations will be careful about the recruitment scheme, and ensure that only well qualified people are hired on high wages, therefore there is expected to be little scope for the least skilled and inexperienced employees, thus within the labor market the unemployment level will increase (Kane, 2007). Another factor which has the potential to deteriorate the condition and extend the unemployment crisis is monopsony within the labor market. If the employer has the authority to determine the wages for the employees, it is expected that the unemployment rate will diminish because minimum wage may boost employment. The equilibrium between the labor demand and labor supply will exist only at a point when applied wage is equal to the requirements of the labor and organizations. Wages are more than the equilibrium wage, will result in unemployment i.e. the excess supply of labor. 'Using the matching function formulation along with Nash bargaining between workers and firms, the results of Hosios inform us that an efficient labor market equilibrium requires that the elasticity of the matching function with respect to the size of the set of searchers be equal to the share of the surplus they receive' (Kane, 2007). European Account: Study It is important to understand that minimum wage is a practice control factor applicable on the labor, which can be regarded as the captivity of the economic rights of the low-paid labors, and their prospects. The increased minimum wage limit is expected to reduce European's labor freedom index to 87 percent. In the case of free market economy, the maximum utilization of the land, information, capital goods, and labors achieved through price allocation. If the prices are kept free floating, the market is considered to be real free in launch of its economic policies and business plans, which have an impact on the labor market, and the fixture of minimum wage. 'Estimates of the bargaining power parameter, although significantly lesser than a percent, are significantly larger than estimates of the match function elasticity and as a result yield an optimal minimum wage rate less than the then current value' (Linda, 2007). Considering the example of an organization, the organization has the right to increase its wages to capture the attention of the labor for the employment. Wages are considered to be suitable indication to discuss the expansion of business activities, and direct employment. 'Freely floating prices allocate resources efficiently to places where they will take root and boost economic productivity' (Christopher, 2005). Price signals have been disturbed and distorted through implementations of labor regulations, which hamper market mechanism, and restrict economic freedom of employers and employees. Minimum wage is considered to have significant impact on economic freedom, the labor supply and demand mechanism undergo disruption due to the allocation of government specified minimum wages (Linda, 2007) If the situation is not existent, the minimum wage can be regarded as 'crude instrument' which relocate the labor market towards efficient allocation. 'The labor market is not excused from the basic economic principle that artificially high prices cause lower demand'. The National Bureau of Economic Research observed that many analysts were of the opinion that minimum wages have negative impact on the labor market, 'almost all point to negative employment effects'. More specifically, the study also revealed that there is, 'relatively overwhelming evidence of stronger unemployment' impacts on less experienced workers (Linda, 2007). Effects and Alternative (Tax Credit) The increase in the level of minimum wage is considered to be blockade for the reformed economic policies of any country; furthermore it disrupts international competitiveness, labor freedom. Labor freedom, like property rights and business freedom, a detailed study report issued by European Union Economic Forum concluded that, all these factors are considered to be important parameters for the evaluation of country's overall economic freedom as measured by the Index of Economic Freedom (Kane, 2007). The labor market should be based on labor freedom to strengthen the scope of economic activities that correlates the ability of workers and businesses to interact without any surveillance or official restrictions by the government. The minimum wage is although considered to be an important measure for supporting the poor and less skilled worker, but such conditions affect the business activity and shatter the economic plans of the organizations, and consequently the labor market is affected (Wascher, 1995). 'The minimum wage disrupts the natural interaction of supply and demand and leads to inefficient allocations of labor and, eventually, increased unemployment', on contrary the government discourage the practice of competitiveness, and transform it into level economic battlefield, with restricted scope of advents (Swinnerton, 1996). The sole objective of minimum wage is to provide higher income to low earners, but to avoid the negative fallout of labor market, the execution of such policy should be avoided, and therefore policies based on negative income tax or earned income tax credit should be introduced to favor the low wage earners. Such methodology is considered to be economic efficient. The classical analysis of minimum wage support the idea that higher wage earners should help the low earners, the restriction of higher minimum wage is likely to affect the services and jobs of the low wage earners, therefore the labor market can be strengthen by providing sufficient incentives to ' low wage workers at the expense of other low wage workers and businesses employing low wage workers' (Linda, 2007). European Charter: Affirmative Action As per charter, the commission has emphasized on the importance for different countries and regions to "redress its long history of racial and sexual discrimination" and the matter of grave significance can only be achieved through exercising "the nation's most ambitious aspect"' which is affirmative action. The Affirmative Action has incited internal divisions between nations and regions, and therefore it has further complicated the present. The critics have expressed their concerns towards the struggle for the provisions of equal rights for all the employees citizens, and have argued that sufficient provisions have been introduced and incorporated, as per which "favoring members of one group over another simply goes against the European grain" (Linda, 2007). However, the particular representatives of the Affirmative Action has responded that provisions have not been fully incorporated, and any such move to introduce such provisions has been boycotted, and believe that "grant of modest advantages to minorities and women is more than fair, given hundreds of years of discrimination that benefited whites and men". As per the charter, the employment process shall be based on the primarily principle of human rights, as per which each and every segment of the society should be provided with equal right and status, in particular the minorities and the women population. The concept of Affirmative action originated after the evolution of the civil rights movement, the action has given enough consideration towards the employment, education and contracting decisions. The human rights and organizations which are considered to be the torch bearers of the Affirmative Action have establish certain timeframe for the achievement of goals which emphasis on 'increased diversity, and use recruitment' (Caroline 2004), and has denounced the practices based on preferences, which were previously adopted for the achievement of such those goals. In its contemporary form, the Affirmative action can be regarded as the call for an admission or preference of the applicant having affiliation with the minority segment, based on racial, gender or ethnic divisions. The actions and policies initiated and approved as per the injunctions of the Affirmative Actions are not based upon quotas, biased attitude, preference to the unqualified candidates, and the purpose of the Affirmative Action is not to 'harm or damage the interest of any individual or party through reverse discrimination' (Caroline 2004). European Practices: Labor Relations The demolition of the Berlin Wall, and the implementation of the democratic reforms through out the Eastern Europe was responsible for the revolutionary changes in the region, and changes were accompanies by certain amendments in the trade relations among the European countries, and it was observed that the trade barriers between the European countries were removed, and the countries were associated with each other in different trade and economic agreements. Such development in trade and economic sector with the European region was responsible for the reforms in the labor relations. The detailed inspection of the European labor relation classify it into two major theoretical models, that is based on the descriptive evaluation and review of the conditions responsible for the development of the labor movement within the national and regional community, which is characterized by the continental studies. It has been observed that rigidities associated with the labor market are influenced the employment opportunities and have therefore declined the employment, rates. The approach of European Union is based on theoretical and comparative reviews and research. During the industrial revolution, three models of unionism and three different models of labor relations evolved in Europe. The Marxist Union supported the labor relation model approved by the German federation; the model is based on the preventive measures and actions practiced by the organization and parliament towards the collection of the contracts at industrial level. The German approach is based on the influence of the Socialist parties and unions on the parliament of the particular country; the influence is mounted for the introduction and implementation of required and expected regulations and legislations. Secondly, the anarchistic unionism is the derivative of the French model of labor relations; the model is widely acceptable and practiced in Spain and Italy, beside France. The French model is based on the practices related to protest and calls for strike; the organization factor has been ignored, however the unrealistically progressive labor market policies have hampered the employment rates, and have given rise to such forces which have been responsible for the downsizing within the market (Mark, 2003). In France, the labor enjoys stain relations with the employers, therefore the union has no other choice but to resolve the concerns with reference to the unenthusiastic employers, however such institutions have expressed their concerns and regret towards reformation. It is observed that French model encouraged the exploitation and vindication of the legislative issues, and such opportunity is then taken to launch protest and strikes against the employers and the federation. Before the advent of World War I the British adopted a labor market system which can be regarded as identifiable type, in the case of the labors which were confined to British Isles, the union played a limited and restricted role, and avoided representation of the workers through their platform, the reluctance on the behalf of the unions was responsible for the mobilization of the labor staff purely for political gain and interest, and therefore such practices have truly restrict the domain of their services and activities. The British model is therefore based on the system which has eschewed 'political activity and bargaining collectively' with the federation and the employers. Such unions provided the employers with the provisions for the management of the labor conditions during the recruitment process. After World War I, the Soviets evolved their own labor relations model, in which the employees were motivated and encouraged by the unions to work hard for increasing the production activities, the union introduced and promoted industrial discipline which was responsible for the unprecedented rise in the production activities. The unions played a crucial role and responsibility of the transmission belt as per the guide lines of the Communist Party. After the formation of Yugoslavia at the end of World War II, another theoretical model of labor relations evolved which was based on the concept of self-management. The model made the union experience severe stress, although the production activities were on rise, however the government emerged as a more autonomous body. It was believed that, model was based on the principle according to which the labor relations were influenced and controlled by the party, in this case there was enough opportunity for the union and the employees, for example, the party and the union enjoyed the authority of the works councils at enterprise level due to such combination. It is also believed that, 'the broader growth strategy that of promoting high productivity is fundamentally flawed in a labor surplus economy of European countries'(William, 2004). European charter: Insight As per the charter, the organization should assign the managerial responsibilities to the employees of various divisions, keeping in view the difference of area of specialization of the employees. The organization has to compulsorily introduce and offer employment positions i.e. "accountants, position classification and labor relations specialists, fiscal analysts, training and development specialists, criminal investigators, taxpayer assistors" (Gold, 1993), in all such respective departments the managerial skills are required to ensure the performance improvement and management development. The Internal Revenue Service has performed required exercises and reviews which has led to the identification of "twenty one generic skills that managers need, these twenty one skills are divided into four categories: interpersonal skills, analysis and decision making skills, managing systems and organizations, and understanding operations". The Myers-Briggs Type Indicator and Adjective Check List incorporate the self-assessment relevant to the interpersonal skills category which encompasses, "self-awareness, understanding individuals and groups, and communications" (Gold, 1993). The scheme has converged the interpersonal skills and managerial skills, and the influence of the respective aspects has been monitored. The Myers-Briggs Type Indicator and The Adjective Check List has been a source of insight for the participants which have helped these participants to resolve their respective concerns having relevance to the career development process. The techniques have relevance towards the leadership and career development processes. The Myers-Briggs Type Indicator was designed as per conclusion of the Carl Jung's Psychological Type. The Myers-Briggs Type Indicator has enabled the participants to concentrate and focus upon managerial skills and leadership qualities, and "the assessment of their preferences with regard to judging and perceiving" (Gold, 1993). In Europe, the deregulation process was responsible for the phenomenal changes in the labor relations, before the implementation of the deregulation, the concept of the unionized industry was responsible for the high labor cost, and reflected the usage of the labor in bulk; the working methodology became expensive, and was responsible for increase in the wage rates. Before deregulation, the high cost was bear by the customers, and the deregulation was significant milestone in this regard. The charter of European Union is of the firm opinion that when the industry is on the verge of collapse, it is suitable to downsize the industry, so that the expenses can be reduced. However in European countries the employer and federation take it to be their mortal, legal and social responsibility to provide earning opportunities to their employees in consistent manner, and ensure that the means are stable, irrespective of any worsening situation or turmoil. The report suggested that there is 'high levels of flexibility in the European labor market, although the firm level response to labor legislation has not been analyzed' (Howard, 2002). References 1. Caroline Skinner, Imraan Valodia. Fairness & Division Of Labor Market Societies: A comparison of the U.S. and German Labor Market. Berghahn Books. 2004 2. Mark Blaug, Hyeong-ki Kwon. Who's Who in Economics. Edward Elgar Publishing. 2003 3. William Jack Baumol, Alan Stuart Blinder. Economics: Principles and Policy with Infotrac. Thomson South-Western. 2004 4. Howard R. Vane. Labor Market Policy, Flexibility, and the Future of Labor Relations. Michigan State University Press. 2002. pp. 56-76. 5. Tim Kane, Ph.D. and Anthony B. Kim. A Higher Minimum Wage Equals Less Economic Freedom. 2007. Prentice Hall. pp. 125 6. Neumark, D. and W. Wascher. Minimum-Wage Effects on School and Work Transitions of Teenagers. American Economic Review 85. 1995. pp. 244-249. 7. Card, D. and A. Krueger. Myth and Measurement: The New Economics of the Minimum Wage. Princeton: Princeton University Press. 1995. 8. Swinnerton, K. Minimum Wages in an Equilibrium Search Model with Diminishing Returns to Labor in Production. Journal of Labor Economics 14. 1996. pp. 340-355. 9. Christopher J. Flinn. Minimum Wage Effects on Labor Market Outcomes under Search, Matching, and Endogenous Contact Rates. New York University Publications. 2005. pp. 45. 10. E. Wertheim. Negotiations and Resolving Conflicts: An Overview. Northeastern University Publication. 2003. pp. 34. 11. Linda Hantrais. Social Policy in the European Union. Palgrave Macmillan. 2007. pp. 176-189. 12. Michael Gold. The Social Dimension: Employment Policy in the European Community. Macmillan. 1993. pp. 243-248. Read More