Marrying Labour Flexibility And Protection

The distinction between those in permanent, full-time jobs and those in temporary and flexible employment is one of the major divides in contemporary labour markets. This distinction is often justified by the need for flexibility. But who needs flexibility and why?

A prominent interpretation is that flexibility is demanded by capital. As capital underwent fundamental changes on the way towards a post-industrial society, it had to reorganize. Globalization led to the opening up and creation of (new) markets, with financial capital gaining in importance compared to industrial capital. These changes generated a fertile soil for developments like mass offshoring, relocation, and flexibility. Overall, flexibility is reinforced because of the needs of capital, and workers are expected to adapt to the new ‘flexible’ conditions of capital development.

This interpretation is not wrong, but incomplete. Not only the nature of capital, but also that of labour has changed. We have witnessed a shift from production-related, industrial work to service work, and currently, in the context of digitalisation, from dependent service work to independent, autonomous working or self-employment. These changes have fundamental implications for the rules governing the organisation and coordination of work. Specifically, the regulatory system defining the way how people work nowadays needs to be scrutinised, (re-)created and/or reinforced as a result of these changes.

This implies revisiting the debate around the causes of flexibility and assessing its effects in the light of the current transformations in both capital and labour. This reconceptualisation should ideally accompany the re-institutionalisation of the idea – and legal construct – of the employment relationship. This is because security has long been traditionally linked to a particular type of employment contract, i.e. the permanent or open-ended contract. But this idea seems to have become obsolete, so a new employment status may be needed. This should be based on a comprehensive approach to work, capable of reconciling the need for flexibility and the freedom it entails with that of protection in enhancing social inclusion, particularly of the vulnerable groups in society (e.g. women, young people, or migrants). If we fail to do so, the growing inequality already visible in contemporary labour markets may even increase.

Just to give an example: temporary employment does not ‘per se’ produce segmentation and, subsequently, inequality in the labour market. However, if a worker is permanently trapped in temporary work, he or she remains in an unprotected, insecure position for too long. This creates precarity. Precarious work entails a problem for the welfare state, too. The eligibility criteria for social insurance benefits often disadvantage workers with temporary and sporadic work records; furthermore, in the long-run, a ‘class’ of precarious pensioners may arise, facing poverty in old age as their pension contributions were rather limited due to their unstable, insecure working life.

At this point the question arises: how far have recent labour market reforms in Europe engaged in reconciling flexibility and protection? In general, most reforms have reinforced flexibility to boost the economy, stimulate employment and improve a country’s competitiveness on the global market. Such reforms have worked along mainstream lines of flexibility, on the argument that labour market deregulation is necessary to create employment at the margins. Therefore, reforms have frequently promoted employment while reducing employment protection. For example, Germany started a decade of reforms with an ambitious package known as the ‘Hartz reforms’. Its main pillars were the deregulation of temporary work, new rules on jobs that the unemployed can reasonably be expected to accept and the merger of unemployment benefit and social security.

These reforms have arguably provided flexibility for capital while boosting the German economy and raising employment. But while those on permanent contracts have initially kept their high protection, a growing group of workers on the margins has provided high levels of flexibility without being compensated by adequate levels of security. A recent BaUA-survey (2016) about working-time developments among 20,000 workers in Germany highlights the social consequences in terms of job quality of increased flexibility, for example work intensity and pressure at work. Those in paid dependent employment work on average five hours more per week than contractually agreed upon; workers doing regular overtime are less satisfied with their work-life balance and are more likely to report health issues like insomnia; and the self-employed and those having more than one job work the highest amount of hours.

Other European countries have taken up similar trajectories. For instance, during the recent economic and financial crisis, labour market reforms – especially in Southern European countries – were mainly pointed towards flexibility and competitiveness, e.g. by reinforcing contractual flexibility and decentralising or even dismantling sector-level collective bargaining. One of the few examples where this flexibility was compensated with increased protection was Italy, as workers at the margins may for instance profit from the longer duration and higher coverage of unemployment benefits. Other EU member states are reforming their labour markets at this very moment. For example, the French government has just presented its reform plans – which resemble the main ideas of the German Hartz reforms – in late August. In Belgium, discussions about increased flexibility especially with regard to working-time have been ongoing since the start of the year.

Labour market divisions are not caused by employment protection. Conversely, protection is an essential mechanism for establishing a level playing field for and between capital and labour. This certainly does not mean that labour markets do not need reforms. As previously implemented policies targeting social inclusion and equality cover fewer people nowadays, reforms are indeed required. Therefore, there should be a debate on the needs of labour and how to translate them into policy as the premiss for a high-productivity and high-trust society.