Edited by Roger Sugden, Rita Hartung Cheng and G. Richard Meadows
Chapter 5: Notes on labour market flexibility: questions for the new economy*
Stanley Siebert ItalyÕs three main trade unions declared last night that nearly all their 11m members had supported a one-day general strike in protest at labour market reforms proposed by Silvio BerlusconiÕs centre-right government . . . The government plans to reform Article 18 of the WorkersÕ Statute which gives judges the right to reinstate a sacked worker if he or she is found to have been dismissed without just cause. (James Blitz and Fred Kapner, Financial Times, 17 April, 2002) 1. INTRODUCTION This chapter is concerned with labour market institutions and earnings/income inequality. It is clear that institutions such as strong trade unions with extended collective agreements coupled with minimum wage legislation have reduced earnings inequality amongst OECD states (Lucifora, 2000). Strong unions also passionately support employment protection laws underpinning job security Ð as the quotation above shows. The conclusion here is seemingly optimistic (Lucifora, p. 10): ÔGovernments can have a role in supporting those institutions which have proved effective in dealing with the problem of growing earnings inequalities and low wage employmentÕ. Yet many rich countries with low earnings inequality at the same time present a picture of high and concentrated unemployment, plus low and declining labourforce participation. Italy Ð where earnings inequalities on some measures have even declined Ð is a case in point (DellÕ Aringa and Lucifora, 2001, Figure 10). Unemployment and low labourforce participation may be attributable to the very unions and minimum wage laws Ð together with high social security taxes and employment protection laws Ð that we praise for...
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