European Labour Markets are too Rigid

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The issue of labour market organisation has probably gained momentum throughout the 1980s all the way into the current crisis and the constant levels of unemployment in Europe are fuelling this debate. With increasing inflation and the oil shocks of the 1970s it was proven that central institutions could no longer keep under their control such an interconnected world trade flow. Deregulation, championed in Europe by the British government of Thatcher, argued that state intervention and central organisation of the economy were inefficient and that it was preferable to leave market organisation to the ‘invisible hand’, market forces, which was considered to be more efficient. Nonetheless, this liberal conception of labour markets has yet to prove its theory whilst there are still specific cases of coordinated labour markets in Europe that have fared reasonably well in contrast to some extent. To deal with some of these issues, this essay will attempt in the first place to provide a general understanding of what should considered as a labour market, followed by what is usually understood as either a flexible or a rigid system of labour market. This shall be the foundation upon which the Swedish labour market will be re-examined to determine the extent of their rigidity, since it is considered as being the paradigm of a highly coordinated labour market, followed by an examination of general tendencies within a deregulated labour market. To conclude with, some remarks regarding economic performance such as unemployment levels will be briefly looked at to see whether there is an actual dichotomy between the style of labour market and economic performance in Europe. Note that some terms are used interchangeably in this essay, such as coo...

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...adopt a fully-fledged liberalisation of labour markets in the light of the social upheaval it may cause.

Works Cited

Comisiones Obreras, 2010: Valoración de la Ley 35/2010, de 17 de septiembre, de medidas urgentes para la reforma del mercado de trabajo, Madrid.

Michie, J. and Sheehan, M, 2003: Labour market deregulation, ‘flexibility’ and inno-vation, Cambridge Journal of Economics, Vol 23: 123 – 143.

Pontusson, J. and Swenson, P. 1996: Labour Markets, Production Strategies and Wage Bargaining Institutions: The Swedish Employer Offensice in Comparative Perspective, Comparative Political Studies, Vol 29: 223.

Teague, P. and Grahl, J. 1998: Institutions and Labour Market Performance in West-ern Europe, Political Studies Vol 46 No 1.

Vos, K. 2006, Europeanization and Convergence in Industrial Relations, European Journal of Industrial Relations Vol 12.

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