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Transcending the Flexibility Debate? Deregulation and Employment in Britain 1979-1997

  • Simon Deakin
  • Hannah Reed
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    Over the last ten years, the debate on labour market flexibility has increasingly become polarised between two distinctive and potentially irreconcilable viewpoints. On the one hand, concern over high levels of persistent unemployment and low levels of employment in Europe has led some to argue that the 'European social model', based on systems of social protection and collective employee representation, has obstructed the operation of labour markets, limiting necessary adjustments to changing demand, hindering innovation, and restricting job creation. On the other hand, critics of the deregulatory strategy point to associated social risks and question whether the deregulation of the labour market is necessarily an inherent component of increased flexibility. This paper seeks to assess the case for and against labour market deregulation by evaluating the British experience in recent years with specific reference to the economic impact of changes in employment law and social security. The growth of inequality and the failure of the labour market policies of the 1980s and early 1990s to deal with social exclusion might, in themselves, give pause for thought even if it were accepted that these reforms had enhanced efficiency. However, the British experience suggests that the nature of the link between flexibility and efficiency is itself open to doubt. It is increasingly being recognised that an under-regulated (or, more accurately, ineffectively regulated) labour market is one in which there is under-investment in 'capabilities' such as those associated with training, labour mobility and job security. This perception may open the way to a new agenda for labour market policy which transcends the flexibility versus rigidity debate.

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    Paper provided by ESRC Centre for Business Research in its series ESRC Centre for Business Research - Working Papers with number wp132.

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    Date of creation: Jun 1999
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    Handle: RePEc:cbr:cbrwps:wp132
    Note: PRO-2
    Contact details of provider: Web page: http://www.cbr.cam.ac.uk/

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    1. Deakin, Simon & Wilkinson, Frank, 1991. "Labour Law, Social Security and Economic Inequality," Cambridge Journal of Economics, Oxford University Press, vol. 15(2), pages 125-48, June.
    2. Stewart, M.B., 1989. "Union Wage Differentials, Product Market Influences And The Division Of Rents," The Warwick Economics Research Paper Series (TWERPS) 323, University of Warwick, Department of Economics.
    3. Bertola, Giuseppe & Ichino, Andrea, 1995. "Wage Inequality and Unemployment: US vs Europe," CEPR Discussion Papers 1186, C.E.P.R. Discussion Papers.
    4. Paul Gregg, 1997. "Jobs, Wages And Poverty: Patterns Of Persistence And Mobility In The Flexible Labour Market," CEP Special Papers 03, Centre for Economic Performance, LSE.
    5. Lindbeck, Assar & Snower, Dennis J, 1986. "Wage Setting, Unemployment, and Insider-Outsider Relations," American Economic Review, American Economic Association, vol. 76(2), pages 235-39, May.
    6. Simon Deakin & Frank Wilkinson, 1999. "The Management of Redundancies in Europe: The Case of Great Britain," LABOUR, CEIS, vol. 13(1), pages 41-89, 03.
    7. John T. Addison & W. Stanley Siebert, 1991. "The Social Charter of the European Community: Evolution and controversies," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 44(4), pages 597-625, July.
    8. Emerson, Michael, 1988. "Regulation or deregulation of the labour market : Policy regimes for the recruitment and dismissal of employees in the industrialised countries," European Economic Review, Elsevier, vol. 32(4), pages 775-817, April.
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