Labour market flexibility

By making the labour market more responsive to changes in the
macro-economy improves international competitiveness and increases

What is a Flexible Labour Market?

A flexible labour market has several aspects:-
Occupational (functional) flexibility

i.e a workforce with transferable skills. Skills that can be used a range of
different jobs

The benefit of this is that a worker with transferable skills will be able to
move easily from one job to another in other words they will be
occupationally mobile.

Occupational flexibility can be improved through increased training, and by
providing incentives for workers to adapt their skills.

Ease and cost of hiring and firing workers:

Reforms to UK employment laws now make it easier to hire and fire workers -
this reduces the costs to the employer of making modifications to the size of
their employed labour force. Output and employment can more easily be

Contractual flexibility:

Instead of having a workforce of full ime permanent staff some jobs are now
offered on short term contracts and on temporary and part time basis.

Some 25% of all workers are now part time in the UK
Flexible contarcts increase the numbers of workers working shifts or

Through contractual flexibility employers can match more easily their
workforce with the changing demand for their product.

Wage flexibility:

Wage flexibility refers to the ability to change real wages to eliminate
imbalances between the supply of and demand for labour. E.g.

performance related pay
regionalisation of pay awards
(different pay for the same job in different
areas of the country)

5. Geographical flexibility:

ie the ability to travel between areas to complete work