Employment and Decent Work in the Era of Flexicurity Robert Boyer PSE - PARIS-JOURDAN SCIENCES ECONOMIQUES (Joint research unit CNRS-EHESS-ENPC-ENS) 48, Boulevard Jourdan PARIS, France Phone: (33-1) Fax: (33-1) web site: Development Forum on Productive Employment and Decent Work, panel 3: Labour Market Flexibility and Decent Work, New-York, United- Nations, ECOSOC Chamber, 8-9 May 2006

Introduction A basic question: How to promote decent work and productive employment in the era of globalization and flexibility? The method : 1.What do theoretical advances tell? 2.Do international comparisons show the superiority of flexibility strategies for OECD countries? 3.What are the constraints and opportunities for developing countries?

I. Theory: A reappraisal of the flexibility/security debate The inadequacy of the typical pure competition model: 1 In a stochastic world, it is not rational to adapt instantaneously. 2.In a complete macroeconomic model, the maximum speed of adjustment of employment may generate structural instability. 3.Similar results for capital adjustments. 4. To take risks and accept changes, individuals have to benefit from a minimum degree of security.

Figure 1 – Why the competitive equilibrium theory is not suited for assessing the impact of the security brought by welfare systems The market view : security introduces a distance with respect to the general equilibrium that is a Pareto optimum. The institutionalist view: Full security may be contradictory with the requirement of a capitalist economy. No security at all may create instability in the employment relation and institutional equilibrium. In between, some security may be optimum for economic performance as well as for welfare.

The externalities associated to the various forms of security have to be taken into account: 1 Income security: a contribution to demand and an impact upon expectations. 2.Employment security: an incentive to investment in firm specific skills. 3.Representation security: more commitment and acceptance of technical change. 4.Life security: significant impact upon productivity and welfare. 5.Skill security: more productivity and adaptability to changes

Figure 2 – How various securities may enhance dynamic efficiency

From possible static inefficiency to a contribution to dynamic efficiency and growth. 1 Security is a cost in the short run….. 2…but also an investment in a form ofsocial capital... 3…hence a possible contribution to an endogenous process of growth.

Figure 3 - A reconciliation of two opposed visions of the impact of welfare

II. Empirical evidence for OECD economies : flexicurity and not only flex-flexibility 1.Job security contributes to workforce redeployment

Figure 4 – Quality of job prospects and insecurity, selected European countries, (percentage) Source: ILO (2004), World Employment report , p. 206.

II. Empirical evidence for OECD economies : flexicurity and not only flex-flexibility 1.Job security contributes to workforce redeployment 2.Labor market policies can reduce job insecurity

Figure 5 – Job insecurity and spending on labor market policies, selected OECD countries, 2000 Source: ILO (2004), World Employment report , p. 207.

II. Empirical evidence for OECD economies : flexicurity and not only flex-flexibility 1.Job security contributes to workforce redeployment 2.Labor market policies can reduce job insecurity 3.Small open economies have more active employment policies

Figure 6 – Spending on labor market policies increases with openness, selected industrialized countries, Source: ILO (2004), World Employment report , p. 190.

II. Empirical evidence for OECD economies : flexicurity and not only flex-flexibility 1.Job security contributes to workforce redeployment 2.Labor market policies can reduce job insecurity 3.Small open economies have more active employment policies 4.Active welfare may complement innovation policy

Figure 7 – Changed in MFP growth and change in business R&D intensity Source: Bassanini A., Scarpetta S., Visco I. (2000: 27)

II. Empirical evidence for OECD economies : flexicurity and not only flex-flexibility 1.Job security contributes to workforce redeployment 2.Labor market policies can reduce job insecurity 3.Small open economies have more active employment policies 4.Active welfare may complement innovation policy 5.A whole spectrum of configurations for workers secutity

Table 1 – Employment or employability protection? A typology of OECD countries late 1990s and early 2000s Source: ILO (2004), World Employment report , p. 209.

III. More security for workers in developing countries 1.Constraints and opportunities for productive employment and decent work

Table 2 – Obstacles and opportunities for decent work in developing countries

III. More security for workers in developing countries 1.Constraints and opportunities for productive employment and decent work 2.The ambiguous impact of globalization on labor standards

Figure 8 – Chances and constraints on productive employment and decent work

III. More security for workers in developing countries 1.Constraints and opportunities for productive employment and decent work 2.The ambiguous impact of globalization on labor standards 3.A method for drawing a dividing line between flexibility and security

Figure 9 – A growth diagnostics approach to employment creation

III. More security for workers in developing countries 1.Constraints and opportunities for productive employment and decent work 2.The ambiguous impact of globalization on labor standards 3.A method for drawing a dividing line between flexibility and security 4.The institutional setting in order to promote the related configurations

Table 3 – The paths to workers security

III. More security for workers in developing countries 1.Constraints and opportunities for productive employment and decent work 2.The ambiguous impact of globalization on labor standards 3.A method for drawing a dividing line between flexibility and security 4.The institutional setting in order to promote the related configurations 5. Some developing countries do suceed

Table 4 – Some developing countries are quite successful in enhancing security

IV. Conclusion 1.Modern theorizing: a minimum workers security is required given the specificity of the wage labor nexus. 2.For OECD countries flexicurity delivers better outcomes than conventional flexibility 3.Employment diagnosis and alternative institutional designs opens some strategy for developing countries

Many thanks for your attention Robert BOYER PSE, CNRS, E.H.E.S.S. 48, Boulevard Jourdan PARIS, France Tél. : (33-1) – Fax : (33-1) web site :