Labour market flexibility

The degree of labour market flexibility is the speed with which labour markets adapt to fluctuations and changes in society, the economy or production. This entails enabling labour markets to reach a continuous equilibrium determined by the intersection of the demand and supply curves.^[1]^[2]

Labour unions can limit labor market flexibility by negotiating higher wages, benefits, and better working conditions with employers. In the words of Siebert,^[3] labour unions were seen to inhibit "the clearing functions of the market by weakening the demand for labor, making it less attractive to hire a worker by explicitly pushing up the wage costs or by introducing a negative shadow price for labor; by distorting the labor supply; and by impairing the equilibrating function of the market mechanism (for instance, by influencing bargaining behavior)."^[4]

^ Standing, 1989; Jimeno and Tohara, 1994
^ Karanassou, Marika; Sala, Hector; Snower, Dennis J. "The Macroeconomics of the Labor Market: Three Fundamental Views" (PDF). Institute for the Study of Labor. Retrieved 15 September 2022.
^ Siebert, 1997: 43
^ Siebert, Horst (Summer 1997). "Labour Market Rigidities: At the Root of Unemployment in Europe". Journal of Economic Perspectives. 2 (3): 43. doi:10.1257/jep.11.3.37.

[1] Standing, 1989; Jimeno and Tohara, 1994

[2] Karanassou, Marika; Sala, Hector; Snower, Dennis J. "The Macroeconomics of the Labor Market: Three Fundamental Views" (PDF). Institute for the Study of Labor. Retrieved 15 September 2022.

[3] Siebert, 1997: 43

[4] Siebert, Horst (Summer 1997). "Labour Market Rigidities: At the Root of Unemployment in Europe". Journal of Economic Perspectives. 2 (3): 43. doi:10.1257/jep.11.3.37.

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