Flexible Labour, Firm Performance and the Dutch Job Creation Miracle

Unlike internal ('functional') forms of flexibility of labour, external ('numerical') forms of flexibility (i.e. high shares of people on temporary contract or a high turnover of personnel) yield substantial savings on a firm's wage bill. Savings on wage bills lead to higher...

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Bibliographic Details
Published in:International review of applied economics 2006-04, Vol.20 (2), p.171-187
Main Authors: Kleinknecht, Alfred, Oostendorp, Remco M., Pradhan, Menno P., Naastepad, C.W.M.
Format: Article
Language:English
Subjects:
determinants of labour productivity growth
Economic analysis
Economic performance
Economic theory
Employment
Employment creation
Enterprises
firm growth and employment
Flexible hours of work
Flexible labour
Job creation
Labour economics
Labour market structure
Labour productivity
Netherlands
Productivity
Productivity growth
Studies
wage costs
Wages & salaries
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Summary:Unlike internal ('functional') forms of flexibility of labour, external ('numerical') forms of flexibility (i.e. high shares of people on temporary contract or a high turnover of personnel) yield substantial savings on a firm's wage bill. Savings on wage bills lead to higher job growth, but do not translate into higher sales growth. Externally flexible labour appears to be related to lower labour productivity growth, the effects being different for innovating vs non-innovating firms. We discuss these findings from firm-level and worker-level data against the background of the Dutch job creation miracle during the 1980s and 1990s. Modest wage increases and flexibilization of labour markets may indeed create lots of jobs. However, this is likely to happen at the expense of labour productivity growth, raising serious doubts about the long-run sustainability of a low-productivity-high-employment growth path.
ISSN:0269-2171
1465-3486
DOI:10.1080/02692170600581102