Flexibility-security Nexus: the Concept of Flexicurity

• Meenakshi Shree Gautam

Introduction

Workers, companies, sectors of industry, national governments have usually been found facing a twofold expectation. On one side, there is a strong demand to bring more flexibility to labor markets, employment and work organization, while at same time an equally strong demand for providing security to employees, especially the vulnerable groups.

Flexicurity suggests that the flexibility and security can co-exist at the same time. But increasing flexibility in the labor market can be seen with decreasing security in the labor market, because it might reflect a relaxation in the regulation of hiring and firing and in flexible forms of employment.

The concept of flexicurity has been addressed at a various EU summits. In the mission of the European Union, enhancing of both flexibility and security has been considered with an aim to ensure sustainable economic growth with greater jobs and increased social cohesion.

In India, when examined under the purview of the flexicurity, schemes like the MNREGA, and Unemployment Insurance Scheme on the planned extension of social security turn out to be the elements of an emerging domestically developing form of flexicurity. The analysis of the Indian labor markets in the context of flexicurity have been found to exist in the organized sector, but that too requires a clear-cut analysis of real rigidities and of security issues.

Peter Auer, in his short paper on “Security in labor markets: Combining flexibility with security for decent work”, has discussed the concept and analyzed the topic of flexicurity, its importance, employment stability, country differences and convergence/ divergence in the European Union and the issues of what looms beyond flexicurity.

Flexicurity: The concept and the shift from job to employment security

Flexicurity is not merely a certain ‘species’ of the labor market policy/strategy but it also concerns a certain state or condition of the labor market. In the case concerning the flexicurity as a condition of the labor market, flexicurity has to be defined both as a typical form of security and as a typical form of flexibility.

Flexicurity refers to the job, employment, income and ‘combination’ security that encourages and allows for enduring and high quality labor market participation and social inclusion, and at the same time provides a degree of numerical, functional and wage flexibility that allows for timely and adequate adjustment of labor markets and companies to changing conditions to ensure and enhance competitiveness and productivity.

In the former generation of labor economists and the industrial relations school (for example the internal labor market “school” – Doeringer et Piore, 1971) job and employment security, were considered as related to one another in the following manner: job security was taken to be analogous to the task security. The job classification, under this system, proved to be inflexible in regards to new needs of polyvalence and multi-skilling with new types of goods and service production.

And therefore, the job security rule was often replaced by employment security that guaranteed employment with the firm, but not on any particular job. This shift in the concept was seen with a shift from qualification to competence, more polyvalence and new forms of work organization creating space for more internal flexibility than before.

There seems to be a trade-off between job and employment security comprising of employment and job changes. The shift from job to employment security was a shift from an internally rigid system towards a more internally flexible system that maintained employment security and long-term jobs with one company.

The transition from job to employment security has been described as:

Internal and external adjustments

Internal adjustments are important for flexicurity because they can compensate for the missing external forms of adjustment. To illustrate this point, author has quoted the example of Germany where internal forms of adjustment are preferred to external ones. The author mentioned about the research conducted by an institute which confirmed the author’s proposition that internal adjustments are indeed used to compensate for the external forms of adjustments.

Wage flexibility, important for providing cost flexibility, has been excluded from the concept of flexicurity. Internal flexibility is used both as an emergency measure at the time when job cuts come into view and as a preventive approach for eliciting more efficiency and upholding the occupation affiliation.

An important question raised in the paper is whether one can balance the flexibility needs of individuals arising out of their choices and the needs of the employers. Both tend to be determining the steadiness of flexibility and security. It has been seen that in flexicurity countries, both the above mentioned aspects of the flexibility are complementary, while in the rest of the countries, there seems to be a trade-off between the two.

The author has also highlighted, based on the empirical evidence that the flexible countries with moderate employment protection but bounteous protection by labor market policies do better in terms of decent jobs. This observation suggests that a certain degree of mobility, when “protected” is desirable for worker’s security and delivers better results than either “unprotected” mobility or too much employment stability.

Therefore, labor market reforms that account for the need of stability, flexibility and security result in optimal outcomes. Neglecting any one of these elements, along with the social dialogue, tends to produce suboptimal results either for productivity, employment performance or workers’ security.

Conclusion

The author concludes by suggesting that one cannot imagine an absence of stable jobs and a total shift of security towards public unemployment and employment schemes. The author also highlights the fact that more research is needed to establish a strong link between objective and subjective data as for now, one can only conclude that maximizing of employment protection needs more than tenure in order to match objective and subjective employment security.

Following common elements have been outlined by the author to achieve “in-employment flexicurity” combined with “out-of-employment flexicurity”:

• Employment protection through innovative employment contracts
• High degree of social protection by active Labor Market Policies
• Access to social rights since they link possibilities for temporary exit from the labor market (flexibility) with return options (security).)
• Complementarity between the individual and employer oriented flexibility
• High degree of internal flexibility in high performance work systems
• Effective social dialogue

Developing, sustaining and improving such a system has to be complemented by a functioning social dialogue which would allow the industry and the government to bargain over possible trade-offs, accountabilities and expenses of the system.

References

Auer, P. (2012). “Security in labor markets: combining flexibility with security for decent work”, Economic and labor market analysis papers, ILO (International Labor Office), Geneva.

Auer, P., Jha Praveen (2009). “labor market reforms in India: Barking up the wrong tree?”, The Indian Journal of Labor economics, Vol. 52, No. 1, pp. 71-81.

Lerche, J. (2012). “Labor Regulations and Labor Standards in India: Decent Work?”, Global Labor Journal, Vol. 3, No. 1, pp. 16-27.