Flexibility and Nonstandard Contracts - Essay Example

Flexibility and Non Standard Contracts” By      March 2009    This research assignment is all about increased level of flexibility in employment. Over the past two decades, the Fordist model has been gradually replaced by the flexibility model. Due to globalization, firms face a varied demand curve. In order to meet the demands of the people worldwide it is vital that flexibility is allowed to continue. However the flexibility model leads to some labor market problems. The aim of this paper is to critically comment on the viewpoint that the end of the Fordist model lead to a crisis in terms of non standard contracts. Introduction According to the Fordist notion of production, the example of a worker was that of a person in an assembly line who was responsible for some kind of specialized work. With the exclusion of even a single person the entire process of production was hindered and could be affected. With this system of production the worker could specialize in just one skill. Hence, the time and the money that was spent on the training of the personnel before could be reduced. Also, the doing of just one kind of work by the laborer meant that he or she could be more specialized in that job which in return meant better quality products. Although the Fordist model was beneficial in the sense that it lead to the saving of time and also to the mass production of quality products, yet according to econometricians this system was inefficient because the division of labor left the employees with no chance of flexibility as they were expected to do the same kind of work together. Because Fordism did not prove to be a solution to the economic crises of 1970s-1980s, an alternative system of production was introduced which basically led to more flexibility. From the crises it was deduced that the firms that had successfully emerged out from the crises were the ones which instead of mass production concentrated more on the needs of the consumers. According to Barbeiri(2009), since there was a large variety of consumer choices and fast changing market patterns, these firms used more computerized production technologies in order to compete with the market for good quality and novel products, rather than accepting the Ford’s concept of reducing the per unit costs by mass production. Thesis Statement and Research Methodology In this paper I would critically evaluate the notion that the end of the Fordist mode of production led to a crisis in the traditional contract of employment and to the diffusion of new forms of flexible employment contracts. For the purpose of research I have basically analyzed literature reviews. Flexibility The drive for increased flexibility in employment since the last two decades has led to a progressive increase in varied contractual forms of employment. Such types of contracts vary considerably as far as job security and working conditions are concerned. As the market consists of an eclectic source of customer choices the contracts as Brussels (2006) states, include annual hours contracts, fixed term contracts, part timers, casual workers, zero hour contracts, freelance contracts etc. Such diversity in the contractual employment is widespread and is found in the labor markets of almost all the developed countries namely the US, the United Kingdom, France, Germany etc according to Brussels (2006). In 2001, the people working in the non standard (temporary) contractual arrangements constituted 36% of the labour force in the European Union. This percent has been increased to 40% in 2005 which means that more and more people are entering into transitory contracts. Moreover, 50 per cent of total French employment growth in the 1990s was due to transitory employment. For Germany this figure was almost 100% as Beriberi (2009) relates. Furthermore, the increase in the part time employment has also increased drastically from 13% to 18% in the last 15 years. Statistics also show that nearly a third of the working women population work as part timers. With such a great portion of the labour force working in the transitory sector, it is important that the capabilities of such people be enhanced so as to help them with the recruitment process. It is vital that the rights of the people are not violated in any way and this can only be done if it is made sure that they get ample opportunities. The implementation of certain laws can help meet the above mentioned objective. Labor Laws Labor laws are the laws that are used for the benefits of an employee. Through these laws, the governments can regulate the working of an employer and make sure that the people who are subordinate to the employer are by no means discriminated against. Some of the functions of the labor law are to provide job and income security to the employee, to make sure that the employee gets additional benefits from the employer etc Today, the Labor laws generally (for example in the case of European Union) pertain to people who are permanent full time employees of an institution or a firm. Such laws, used primarily to assess the employment status of the employees, hold the employers responsible if the workers are underpaid or do not have job and income security in order to avoid the exploitation of the laborers by the employers. It is however, difficult to make such laws for those working on a temporary basis. As I mentioned earlier the contracts vary from profession to profession. For the government, it is hard to collect data for every job and then assess the financial status of the employees. The diverse forms of non standard work has made it very difficult to differentiate between labor and commercial law, as Brussels(2006) states, so there are no labor laws as such for people who work on temporary contracts. Since the set of rules for standard work contracts are quite strict in contrast to none for the temporary ones, as far as the rights of the laborers are concerned, employers prefer to keep people on a temporary basis. A strong preference on the part of the employers leads to an increase of the people working in such contracts. In essence, this has a number of implications associated. The Implications of Increased Flexibility In the global markets, businesses try to be competitive by adopting flexibility in employment. Organizations that have adopted such a policy have shown tremendous increase in the productivity and performance according to Appelbaum et al. (2000). The hiring of people through non standard contractual terms means that the employers would not have to incur the costs associated with the employees. This approach is mostly adopted by small firms that tend to reduce their administrative costs in order to maximize the profits. As the consumer trends change consistently throughout the world, businesses are more inclined to the use of the non standard contract agreements as Barbeiri (2009) relates. The adoption of increased non standard contractual accords may be beneficial for the economy and for the labor force as a whole because it would provide people with new and improved opportunities. Workers may have more choice too because of the different flexible work timings, unlike the Fordist system where the people were supposed to do one job for a fixed amount of time. According to a survey carried out Cynthia around 25 to 40 % of the people who worked on such contracts said that they preferred temporary jobs over the permanent ones. The primary reason given was that it helped them to work whenever they wanted to. As a result, they were able to spend more time with their families and hence had a healthier life. Also some people favored such jobs because such jobs, according to them, were easy to find as Barbeiri (2009) states. Furthermore, people considered these jobs ‘useful’ because such jobs, as they stated, could let them to enter more readily in to the permanent job market. For example according to Booth et al. (2002)) in the United Kingdom, it is easier for people to find permanent jobs as they have been trained in their temporary. Through this notion of flexibility, people may indeed benefit from such contracts, but widespread use of such contracts is not always constructive. More people doing such jobs mean that a considerably large population of the people is over signified in such atypical jobs. Since the government cannot regulate the temporary contracts, as a consequence, more and more people are constrained of any rights of job and income security. Also, the working conditions might not be suitable for some of the employees. Moreover, there is a very less chance of medical and other facilities being provided to temporary workers. Since there is no regulation by the government in most cases of such non standard work, the employer is not held responsible. The major problem that is faced by many such employees is that of job security. According to Brussels(2006) in a report by the Organization for Economic Corporation and Development there is a great deal of evidence that people having temporary jobs are more likely to be unemployed as compared to their counterparts who have permanent jobs. This might be because once the contract ends the person may not be able to find any other suitable job that would relate to his/her skills. Since the job security in such contracts is not ensured, the employer would not be bound to re hire the worker once the contract is over so the individual might remain unemployed and cannot enjoy any secure and stable market position in the long run as Barbeiri (2009) states. Hence, the drive for flexibility can actually force the laborers to accept offers that may initially seem worthwhile but may affect the future prospects of the individual. Along with the inherently insecure nature of such a job, people may also suffer from labour segmentation. Generally, such transitory jobs are mostly taken by people who are unskilled. The service class members on the other hand feel no need to take such jobs since they have permanent jobs. Transitory jobs for unskilled labour might prove to be a ‘trap’ because they offer no job security. After the contract is over, the industrial unskilled labourer has no guarantee that he or she would find another job. With no job security, they might be forced to remain unemployed. On the other hand, according to Barbeiri (2009) such jobs can prove to be a ‘bridge’ for the people who are skilled, because they might find permanent jobs later on in life. Hence, their standard of living can increase while that of the unskilled labor class is likely to fall. This divides the labour force into two classes. The number of more flexible jobs as they increase leads to an increase in the gap between these two groups of the labor force. This wage inequality between the two labor segments was reported by Wim Kok, Chairman of the European Employment Task Force who said that a permanent divide might emerge between the ‘insiders’ (the people who have permanent jobs or the skilled and educated people who worked on a temporary basis previously but now are a part of the permanent labor force) and the ‘outsiders’ (the transitory unskilled labor) as Brussels (2006) relates. Also, the mobility towards the permanent jobs for the unskilled labour is usually lower. This is because the permanent jobs require a number of skills which the unskilled labour does not possess. As a result the labour segmentation is increased further since the unskilled labour cannot have any permanent job. In most of the developed countries the ‘insiders’ are greatly sheltered while the unskilled ones are not given any kind of protection. This may also occur due to the implementation of certain laws. The law of partial and targeted labour market deregulation according to Brussels (2006) might lead to an overall increase in the already existent wage inequality in the flexibility model. In this law the labour market is deregulated ‘at the margins’ which means that for the permanent contracts the rules are strict as they were before, but for the transitory contracts it deregulates them on the basis of age and skill. Due to this distinction the men, generally more skillful, come under the ‘insider’ category while the women and the young have to face problems as they might be underpaid for the same job. This may create gender differences in the labor force because mostly the women are part timers. The women who are already dependent employees (as they are mostly part timers) will suffer from greater monetary problems and in the long run would be a burden on the economy. This law may increase the labour segmentation further and will reduce the living standards of the groups of the labor force population who are already poor. Hence this law has to be removed in order to reduce the labour segmentation. Solutions It is important that the governments of the developed countries try to find solutions to the problems that the people of their states are facing due to an increased flexibility of employment. The government should try to make labour and social security laws that are designed to provide protection to the disadvantaged people. It is important to help those people because temporarily they may work but in the future because of no job security they might be a burden on the economy. Furthermore, it is vital that the government invests in these people in the form of education so that they do not have any problems in finding jobs. An example of such a law can be the Austrian Reform as Brussels (2006) states. According to the Australian Reform, people can work with their employers until they find alternative jobs. As a result, the job security is prevalent among members of the labour force. Also, the employers do not in any way exploit the workers because the firms are regulated by the law. Moreover, labour segmentation can also be avoided this way. When all the people are working, unskilled laborers would not have to search for jobs. As a result the wage inequalities may be reduced and every one would enjoy a better standard of life. To conclude, increased globalization has led to a move towards a knowledge based economy. Rapid technological progress and ever changing consumer patterns have resulted in the increase in the flexibility in employment. As the flexibility in the markets is increasing a great number of opportunities are being created for both skilled and the unskilled labour but the increase in the flexibility of employment is also disrupting the traditional contractual system. The crisis in the traditional contractual system has led to the violation of the rights of workers as there is no proper law to safeguard the rights of such laborers. In the absence of any law, people will have no job security and hence will have no future prospects to achieve successful market transitions. The presence of such a crisis does not in any way mean that the Fordist model should be followed. Flexibility in employment may lead to some problems but with the increased level of consumer choices that we have today, it is important that flexibility continues. However, to make sure that no one suffers, it is important that some laws be made that could provide the laborers with a ladder of opportunity and lead to an investment in the human resource rather than the depletion of their productive capacity. It is important that a regulatory framework is established that can support the workers irrespective of them being permanent or transitory employees. The government should consider three things before making any labour related law, flexibility, increased job security and reduced labour segmentation. If such a law is made and implemented it would, the result would be a more stable and secure labor market. References Adalberto Perulli. (2002). Economically dependent / quasi-subordinate (parasubordinate) employment: legal, social and economic aspects. Venezia. Universta Ca Foscari De Annie Thébaud-Mony. (2000).Non-standard employment, subcontracting, flexibility, health.France.Université de Paris-XIII Arne L. Kalleberg. (2003). Flexible Firms and Labor Market Segmentation: Effects of Workplace Restructuring on Jobs and Workers. USA. University of North Carolina. Barbeiri (2009). Flexible Employment, and Inequality in Europe. UK. Oxford Journals. Brusell (2006). Modernising labour law to meet the challenges of the 21st century. United Kingdom. Green Pape Eurlex Chigon Kim. (2007).Flexible Employment, Perceived Job Insecurity, and Employed Job Search. New York, USA, All academic research Cranford, Cynthia. (2007). Flexible Work or Flexible Employment? Flexibility against Security in the Private Home Care Sector in Los Angeles, New York. [Internet]. Available from James Derrick (1990) Sidaway Post-Fordism, Post-Modernity and the Third World. UK. Blackwell Publishing Handel, Michael. (2005) .Effects of Post-Fordism on Job Quality [Internet]. Available from < http://www.allacademic.com/meta/p110643_index.html\> [Accessed March 2010] Mario Giaccone (2008). Use and abuse of non-standard employment contracts. Italy. Fondazione Seveso Institute. Read More