Methodological Issues in Labour Economics: Procedures for Procedural Rationality?

Abstract. This paper examines methodological issues in labour economics, by examining the claim that it is moving closer to notions of procedural rationality advocated by Herbert Simon. A content analysis of the Journal of Labor Economics shows that the orthodox methodological perspective of deductivism has a strong hold in labour economics, and the nature of the empirical work is also allied to this perspective, casting doubts as to whether labour economics has moved towards procedural rationality. The paper then explores the possibilities of a bridge between labour economics and the schools of institutional labour economics and industrial relations. The paper argues that the former needs to borrow in a more constructive way from the latter in order to construct the procedures for procedural rationality.     

From the Marginal Equilibrium to the Generational Paradigm. Microeconomic Behavior in a Dynamic Model of Social Equilibrium

ABSTRACT: The purpose of this paper is to formulate an initial hypothetical framework describing microeconomic behavior of labour market agents in a dynamic model of social equilibrium. To this end we outline an alternative hypothesis concerning the process of determination of labour demand and of the allocation of employment requirements on a generational basis. Reformulating the microeconomic model to consider labour as a quasi-fixed factor, comparable to a population, and which follows a biological, more than a mechanical logic, the paper assigns primary roles to careers and dual markets, the first-job market, and factors of asynchrony and social control mechanisms. At the same time, the generational determinants of the supply of labour are identified, together with the processes of identification and selection between labour demand and supply. On the basis of these considerations the concept of the generational paradigm is brought into the analysis. This paradigm designates the set of determinants of labour supply and demand behavior that are functions of time, of social and institutional variables, and of the technical and organizational structure of production. The paper ends with an initial thesis that the working of the generational paradigm is a crucial factor in the overall social equilibrium.     

Temporary Employment in France: A Decade Statement

One of the more important aspects of French labour market changes since the mid-1970s is the growth of temporary work; fixed-term contracts and interim contracts. With a survey of French literature since the early 1980s, this article analyses explanatory factors of temporary work: macroeconomic factors: institutional framework, workforce supply to user firms, economic fluctuations; microeconomic factors: firm/ plant characteristics, economic and social firm strategies. Models of firms supplying temporary jobs are presented.     

Technical Progress,Life of Capital and Employment

This paper examines the hypothesis of a quickening of capital replacement, triggered by the acceleration of technical progress. We present a microeconomic model of replacement processes inspired by the “unbalanced growth” school, highlighting the role of productivity in determining the growth path. The model distinguishes between two types of enterprise, stagnant and progressive, on the basis of productivity trends and shows that prolonged acceleration in the rate of technical progress may be sufficient reason for a rational entrepreneur to make replacements earlier, thus approaching a system of continuous restructuring. We then discuss the main theoretical implications for aggregate employment and the fundamental questions of measurability of the effects. To this end, we undertake an empirical test of aggregate data for the manufacturing sector in four leading economies (the United States, France, Germany, the United Kingdom) from 1970 to 1991. We estimate labour demand functions in which the traditional explanatory variables are supplemented by proxies that capture the effect of a shortening of the life of capital equipment (the replacement rate and the ratio between depreciation and gross fixed capital formation). The empirical evidence confirms the shortening of the average lifetime of capital and is consistent with the main implications of the microeconomic model. The results show, at least indirectly, a negative correlation between an increase in speed of technical progress and the growth of employment.     

The impact of Japanese plants on local labour markets

Japanese direct investment is assuming an increasing importance in the U.K. economy, especially in the manufacturing sector where Japanese management and manufacturing techniques have aroused particular interest. Until recently this investment in manufacturing has been primarily restricted to plants of an assembly-based nature and Japanese companies have sought out labour markets which best satisfy the needs of this type of operation. However, early signs are appearing which suggest that new Japanese manufacturing investment is becoming increasingly sophisticated. In the light of this emergent trend, this paper uses recent research to draw attention to the labour market problems that are likely to occur as the skill requirements of Japanese employers increase. The paper then concludes by discussing strategies which individual firms should adopt to protect themselves from any consequent labour market disruption.     

Unemployment,Labour Institutions and Innovation

ABSTRACT: This contribution endorses the transactional trilogy of institutional economics in order to suggest a theoretical framework for re-examining the relationships between unemployment, labour institutions, and technological and organisational innovation. Labour institutions are usually called into question in the debates on European unemployment. Although the advocates of the biased technological change thesis defend it in order to improve the employment of unskilled workers, this article argues that a deregulation of the labour market may in fact generate losses of dynamic efficiency with respect to knowledge accumulation, the organisation of production and national capabilities of innovation. In addition, the impact of technological and organisational innovation on employment partly depends on the capabilities of firms and nations to initiate institutional learning, regarding bargaining, managerial and rationing transactions.     

Call centres: A decade of research

Call centres have, over the past decade, become a central element in the way information services are produced and delivered to the public. Much as automobile factories or textile mills were treated as both objects of curiosity and as metaphors for their age, call centres have garnered attention both in their own right as a new means of organizing particular types of work and as an important venue from which to undertake the study of other elements of management practice, including human resource management. This paper critically examines all aspects of research that has been undertaken on call centres, from the publication of the first novel pieces of research up to the most recent contributions. A good deal of effort has gone into classifying call centres, comparing the organization of work in them with other types of work and considering the extent of variation between call centres. Depending upon the theoretical lens that is used (e.g. labour process theory, high‐performance work systems theory, HR perspectives, gender theory, etc.) different aspects of call‐centre work are emphasized and different conclusions regarding call‐centre employment and its possibilities are reached. These contrasting results are compared and evaluated in this review. It is also the case that the study of call centres invites critical reflection upon theories of management, and this is also entered into in this paper. Additionally, the continuous spread of call centres into new realms of professional work activity and into new spaces of the global economy throws up challenges that are brought to the reader's attention for our understanding of this approach to managing informational work.     

Union Power in a Welfare State

Abstract. Most West European countries have suffered from stagflation for many years. Mainstream economics has debated the question in particular in terms of the demand and supply of goods, labour and capital. But in recent contributions a new element has been introduced: the institutional structure of the economy as a source of imbalances. In this article we focus on the institutions of the labour market. For more than a century West European unions have been struggling to transform market economies into a more efficient and just order. Moral persuasion, strikes, and revolutionary threats were their main weapons. After the Second World War governments yielded to the pressure by building up, together with the unions, a welfare state. During the sixties however, the struggle was renewed, although the governments continued to improve the social security system and maintained their responsibility for full employment. A short sketch will be given of the ideological struggle during the first half of the twentieth century, leading to a significant institutional change: the transformation of a system of private wage bargaining into a collective wage bargaining system. Then the neoclassical, the Marxist and the Keynesian view on the effects of union power on the economic performance of a market economy and of a welfare state will be presented. The conclusion is drawn that the methods required to transform a market economy into a welfare state are anomalies as soon as a welfare state is more or less realized. This is particularly so, because the transformation of a welfare state into a centrally planned economy cannot be considered desirable. In present circumstances, it would be appropriate to pay more attention to the design of an extensive system of mediation and arbitrage to reduce the use of the strike weapon.     

Explicit versus Implicit Profit Sharing and the Determination of Wages:

ABSTRACT: This paper considers the claim that explicit profit sharing reduces the marginal cost of labour This is contrasted with the view that implicit profit sharing occurs through wage bargaining Using a microeconomic data set from the UK we find no evidence that the introduction of profit sharing reduces base wages and hence the marginal cost of labour However firm profitability is found to have a positive effect on wages which supports the hypothesis of implicit profit sharing through wage bargaining These findings suggest that it is hard to justify the favourable tax treatment of profit related pay found in the UK     

The New International Migrations and the Changes in the Labour Market

Abstract. The article intends to point out some of the main changes that are taking place in the structure of the labour market in Europe and the role played by the recent waves of immigration from Third World countries. The main features of these new migratory flows are that they involve a much larger number of states, both as sending and as receiving countries. Secondly the majority of the migrants workers tend to hold secondary labour market jobs or to work in the informal sector. These two aspects make today's international migrations very different from the intraeuropean migratory waves that concerned a much lower number of countries and were directed towards industrial areas.     

Mismatch in the West German Labour Market? Economic Restructuring and Unemployment in the 1980s*

Abstract. The paper briefly investigates theoretical arguments for mismatch unemployment; it presents a vacancy-unemployment curve for Germany and investigates various reasons for outward shifts of the curve. Both variables, unemployment and vacancies, are decomposed into flows and duration to identify the underlying processes of these shifts. The analysis of the components with the help of change-duration curves shows adverse trends for unemployment and vacancies over the business cycles. Unemployment duration has increased while vacancy duration has decreased. Mismatch in the labour market can therefore hardly be blamed to have been an obstacle for economic expansion in the German economy during the 1980s. Persistently high unemployment in Germany has to be interpreted as a hysteresis process which was driven by macroeconomic policies, increasing labour supply and restructuring imbedded in the German institutional framework.     

Size and Characteristics of Foreign Immigration in Italy

ABSTRACT During the 1980s, Italy radically changed its position in the international migration system, from supplier of labour to user of foreign labour. But the nature of Italian immigration is different from that which has marked the post-war process of European development: new immigration flows are no longer an instrument of quantitative rebalancing of labour markets, but instead acquire a function of qualitative rebalancing in sectors where there appears to be a lack of labour supply in particular jobs and qualifications. This paper combines the information available from official sources with those obtainable by the numerous special surveys which have been carried on the phenomenon in the last few years. This framework allows us to underline — even with the limitations due to still-backward documentation — the characteristics of present immigration, by now firmly rooted in the country but still far from reaching a stable and definitive arrangement.     

Multiple Rhythmically Varying Prices,the Timing of Factor Demands and Induced Technological Change

ABSTRACT: This Paper the existing literature on optimal capital utilisation and shiftwork patterns by arguing that labour is not the only input to exhibit a price which varies over the time of day week or year Indeed in certain situations as in the w e of capital intensive industries which are heavy consumers of electricity labour costs may not even be the most important consideration The introduction of a second varying input price can completely alter the optimal operating times of production units Once this extension has been adopted it is a fairly easy final step to demonstrate that some firms face a strong inducement to develop technologies which allow them to use their capital and labour independently This type of technological change has become commonplace in recent years but largely unexplained by the existing literature These developments have important implications for the organisation of work patterns and the flexible use of the labour input     

Temporary Workers in Italy: Who Are They and Where They End Up

Abstract. Temporary work has been an important component of employment growth in Italy since the early 1990s. This paper focus upon labour market transitions of temporary workers in order to test whether temporary work enhances the subsequent labour market chances. We use propensity score matching to compare subsequent employment outcomes of people who have recently acquired a temporary job with those of people who remained unemployed. Individuals' hetero geneity explains a good amount of the raw differences in the subsequent labour market status of temporary workers and the comparison group. Yet there appears to be a sizable net gain from experiencing a temporary work. Our benchmark average estimate is a 30 percentage points rise in the ‘satisfactory employment’ chances 1 year after the start of the temporary work experience. The net gains are the largest for females and adult people and the areas with low unemployment; moreover, gains are the largest for the most recent years in our sample and for those people who were (according to the propensity score estimates) either least or most likely to exit from unemployment.     

Small Enterprise: Finance, Ownership and Control

Finance, ownership and control issues have received a great deal of attention in recent years as centres of interest in the 'new institutional economics'. Much of the debate has been fuelled by the inability of neoclassical economics to explain the continued existence, and increasing importance, of small enterprises. Developments in agency theory, information asymmetry and signalling theory, and transaction cost economics are identified as contributing to a new approach. The concepts distilled from a review of these developments are then used in the analyses of well-known phenomena involving small enterprises. These include capital structure and access to capital markets featuring the finance gap, the underpricing of new issues and the small firm effect. In addition, going private, by means of management buy-outs, and franchising are examined. It is seen that the economic literature on finance, ownership and control helps to explain both the advantages and disadvantages of small enterprises. Their continued existence is seen as being due to a trade-off of various costs and benefits.     

More Jobs Through Less Employment Protection? Evidence for West Germany

ABSTRACT: In reaction to growing criticism of the allegedly negative employment effects of job protection regulations (lay-off and dismissal restraints), the West German government in 1985 introduced new legislation facilitating the conclusion of temporary (i.e. fixed-term) work contracts in order to stimulate employment growth (‘Employment Promotion Act 1985‘AZPA). The research unit ‘Labour Market and Employment‘ at the WZB has evaluated the employment and labour market impact of the new legislation for the period 1985-1988, and apart from providing a detailed analysis of the socio-economic and institutional diversity of job arrangements covered by the category of temporary (i.e. fixed-term) employment, the project‘s focus has been on the impact of minor changes in the institutional frame- work as effected by the EPA on firms‘ employment policies, as well as on the overall level of employment. Results show that like in most other European countries the temporary work force in Germany has considerably grown over the past years in both absolute and relative terms, this increase, however, being largely due to cyclical factors as well as medium-term structural changes on the supply and demand side of the labour market rather than to changes in the regulatory framework as effected by the EPA. The impact of the new regulations on firms‘ hiring decisions and on the overall number of hirings in the total economy have to be regarded as rather modest, in fact amounting to not more than an estimated 25,000 additional hires per year or roughly 0.5|X% of all employment contracts concluded in the private sector. This marginal positive impact on firms‘ employment decisions, however, is counterbalanced by unintended substitution effects and an increase in involuntary quits arising from them when labour demand declines. Even under the overall positive employment development given in the period under investigation the net employment effects of the EPA temporary work legislation thus are shown to be at best marginal. In case of a deterioration of the overall economic situation, however, the increase in temporary job arrangements supported by the new legislation is likely to lead to accelerated workforce adjustments by firms and thus over time to result in a depression of the overall level of employment. From a theoretical point of view, the findings suggest that measures aiming at de-regulating labour relations such as the EPA largely fail to modify essential behavioral parameters of economic actors in economic environments which for decades have adjusted to a relatively high level of welfare state regulation, as has been the case in Western Germany.     

Short-Run Wage Flexibility and Labour Market Adaptation in Western Europe

ABSTRACT: This paper starts by reviewing some of the evidence relating to movements in relative wages, asking what have been their causes and whether they serve to allocate labour across labour markets. Much of the research has tended to focus on the statistical sources available, and therefore to focus on movements of pay between industries rather than firms, between occupations, and between workers with different levels of qualification. This has greatly constrained the possibility of linking these different dimensions to look at the ideal question, namely to what extent do relative wages respond to labour supply and demand pressures, and to what extent do they help to reconcile these two pressures. In addition, evidence from studies based on data obtained from individual firms also broadly supports the view that wage differentials are not very responsive to supply and demand pressures, and also that they are mostly not very effective in promoting the adaptation of labour supply and demand across labour markets. The paper ends by considering briefly some recent policy ideas for increasing the responsiveness of relative wages to demand changes.     

Solving the Labour Problem Among Professional Workers in the UK Public Sector: Organisation Change and Performance Management

This paper draws together evidence from across the UK public services to present an analysis of public sector organisational change that has been observed and experienced since the 1980s. The argument is that the pattern of persistent change, packaged as a myriad of reform measures, has been centrally concerned with solving the labour problem—low worker productivity and managers not being able to manage—in what are labour intensive services. The now familiar managerial discourse of empowerment and high commitment working practices is highlighted and express linkages are drawn between such themes and the day-to-day practices of performance and human resource management, seen here to be key levers in solving the same labour problem through a reduction in the quality of working lives of many public service workers.     

Zukunftstrends und ihre Implikationen für das Coaching

Future trends and its implications for coaching In this theoretical work the author analyzes the current personal requirements in labour and its psychological impact to individuals, taking a psycho-sociological perspective. Focusing the employee who nowadays has to act like an entrepreneur, this bears a new personal strain: to establish his or her value and bring it to the market. This changed view is contrasting the traditional labour relations and its psychological effects should be supported by coaching in the future.     

Rising Earnings Inequality and Returns to Skills in the United Kingdom Labour Market*

Abstract. Since the later 1970s, earnings inequality in the United Kingdom has been rising steadily. It is argued that this rise reflects increasing returns to skills, as proxied by factors like education and occupation, while the strengthening labour market position of relatively skilled workers was also reflected in improving relative unemployment and labour force participation rates. These trends are best explained by a rise in the relative demand for skilled labour, implying that the most efficient way of restraining earnings inequality growth is through vigorous educational policies.