Essay on Flexicurity

Literature Review on Flexicurity
Flexicurity appeared as a term in the second half of the 1990s and back then was seen more as a policy to protect atypical workers. In the following decade the concept of flexicurity became broader and caused much heated debates in academic and public domains, both in Europe and beyond. In the last two decades, flexicurity has been criticized by many scholars, while others praised it as a solution to simultaneously protect interests of employees through employment security and allowing employers to achieve high levels of flexibility.

Present paper is a review of nine articles devoted to the concept of flexicurity and its application in different parts of the word. There is no consensus among scholars about the benefits of flexicurity. Vandenberg as well as Haahr and Andersen speak in favour flexicurity, while Auer is more sceptical. Some of the authors tend to agree that flexicurity is an appropriate solution for the EU countries (Haahr & Andersen), while some try to find its application also in the developing world (Vandenberg; De Gobbi; Boyer). Most of the authors tend to agree, that there is no single right solution or model for the developing world and flexibility/security mix should be adjusted for each individual country.

There is no strict definition of the term “flexicurity,” it is rather a set of policies, then a precise rule. When Haahr and Andersen talk about flexicurity, they are referring to the Danish Model, while Boyer and Vandenberg use the concept more loosely. Vandenberg refers to flexicurity as a model in which “flexibility and security are both present and some effort is made to balance them.” According to Auer, the broad definition of flexicurity leaves place for misunderstanding and sometimes contradictory conclusions. Peter Auer sees one of the problems of flexicurity in its imperfect and imprecise definition developed by the European Council of Ministers of Labour and Social Affairs. Auer advocates not only a more clearly defined policy set, but ideally also a name change.

The flexicurity model Haahr and Andersen present consists of three elements:

  • flexible labour markets (flexibility for employers to hire and lay off workers to quickly respond to external changes),
  • income security (through a generous welfare system) and
  • active labour market policies (with emphasis on lifelong learning and vocational training).

Haahr and Andersen, while praising the Danish model of flexicurity, do not suggest, however, that it can be easily applied in the other European countries given the differences in the social contexts. Starting from the early 20th century, Denmark has been creating social and political conditions, which at the end made the flexicurity model possible. At the same time the authors are convinced, that in the current context of the European labour markets, flexicurity proposes the only correct framework for development and that “the replacement of formal job security with a broader commitment to employment and income security“ will make the restructuring processes in Europe go smoothly.

Paul Smith in his article discusses labour market relations in Australia. While some of his colleagues suggest that Australia should apply European model of flexicurity, Smith argues that Australian social policy regime, which is referred to as “social protection by other means” is not a failed model, however, flexicurity and European experience offer a lot to learn from and should not be dismissed completely. Australia has simply evolved into a different system – “a hybrid of the welfare society and the welfare state.”

Auer wrote his article in 2010 and hence is able to discuss flexicurity in the light of the recent financial crisis. Analysing performance of different European countries Auer comes to the conclusion that because of the poor performance of the “flexicure” countries (Denmark, the Netherlands, Sweden, Finland and Austria) during the recession, there might be an inbuilt weakness in the system, however, he warns against premature conclusions and urges researchers to wait until the countries fully get out of the recession in order to analyse performance throughout the whole economic cycle. Auer praises usage of work-sharing over lay-offs and internal versus external adjustments, using “non-flexicure” countries – Germany, France and Belgium – as examples – countries, which showed the best performance during the recession.

Auer provides evidence that the “flexicure” countries perform better on various socio-economic indicators, however, unlike other authors he does not immediately contribute this to the implementation of flexicurity policies – “these countries had high social expenditure, a well-functioning social dialogue and high collective bargaining coverage before flexicurity, it might well be that the former explain their relative good performance, rather than vice-versa.”

Sharkh has explored correlation between flexibility of labour markets and labour market efficiency and well-being and came to the conclusion that countries with very flexible labour markets (Malaysia, Jamaica, Zambia, Nigeria, Malawi, Kenya) “having no unions, no dismissal protection and no social safety net, report high unemployment rates, the lowest growth rates, the highest absolute poverty rates, great inequality and a large shadow economy.” Countries such as New Zealand, United Kingdom, Canada and United States also have highly flexible markets (but with more employee protection than the first group), while they tend “to perform well regarding (un)employment statistics, inequality is high and GDP growth is, at best, average.” Sharkh shows evidence that the flexibility of labour markets alone does not necessarily lead to positive socio-economic results.

Countries with the most extensive employee protection (Spain, Germany, Italy, Portugal, Poland, Norway, Sweden, France and the Netherlands) have high unemployment rates and gender inequality. Further, the author came to the conclusion that countries with moderate social insurance and employee protection (Finland, Czech Republic and Denmark) overall perform better than others. However, different combinations of labour market protection and social security produce different sets of outcomes. Overall, countries with more flexible labour markets score better on unemployment rates, while countries with more employees’ protection have better results when it comes to poverty and equality.

The concept of flexicurity is traditionally not applied to the developing countries, because of some existing gaps in socio-economic development:

  • unemployment insurance is extremely low or inexistent at all, which drives people to take any available job, which in turn leads to underemployment;
  • many workers are informally employed or are self-employed and in this case would not be affected by legislature;
  • social dialog is not common in developing countries and legislative reforms usually rest in the hands of government;
  • labour force is growing quickly, while labour productivity is extremely low and vocational training is not always avaiilable. (Vandenberg; de Gobbi; Lee; ILO)

Taking into account the above-mentioned issues, some authors explore the possibility to apply adjusted flexicurity models to the developing world. Boyer represents the opinion that developing countries cannot immediately adopt flexicurity, but it is the right path to follow and based on the individual domestic conditions they can find the most appropriate security/flexibility mix. Both Boyer and De Gobbi believe that “one size fits all” approach is impossible and country-specific models should be implemented. (This view is also supported by the ILO report on ASEAN region). Boyer emphasizes that many developing countries have labour surplus and significant parts of population employed in agriculture, many people work unofficially and avoid taxes. Under such conditions it is difficult to organize labour unions and governments cannot “implement economy-wide labour standards.”

Vandenberg also tries to tie the concept of flexicurity to the developing countries in Asia and suggests that the concept of flexicurity can be useful for developing countries in order to map out future evolution of labour market policies and determine existing gaps in the current systems. The author comes to the conclusion that flexicurity is more applicable to Korea, Singapore and Malaysia, which have majority of working people formally employed, rather than to China, India and Sri Lanka. Lee’s report confirms that China still has a long way to go to flexicurity. Unemployment security has been introduced in China relatively recently, but it is not applicable to all levels of population. Unemployment payments are set at a very low level in order to motivate people to find a new job as soon as possible. Promotion of re-employment through vocational training and consultations is existent, but not well-developed. Society still has to work on creation of more jobs and poverty remains one of the main problems in the mainland China.

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