Question

1- Describe the concept of flexibility in flexibility and types of flexibility within the framework of an example.

Answer 1

SOLUTION

CONCEPT OF FLEXIBILITY

FLEXIBILITY

Labour market flexibility refers to the willingness and ability of labour to respond to changes in market conditions, including changes in demand for labour and the wage rate. Labour market flexibility is an example aspect of how labour markets function to adjust the supply or demand in the market. Labour market flexibility is central to the supply-side of the macro economy, and to its overall performance in achieving macro-economic objectives.

The demand for labour, is, of course, a derived demand. In the short and medium term, the demand for labour adjusts to changes in the national income and the business cycle. In the longer term, the demand for labour can change as a result of large-scale and deep-seated changes to the structure of the economy, often brought about by changing technology or through globalisation and deindustriliasation.

TYPES OF FLEXIBILITY WITH EXAMPLES

There are several type of wage flexibility including

• Relative wage flexibility which relates to the adjustment of wage rates between regions

Example: Adjustments which is being used in relative wages

• Real wage flexibility - the flexibility of real wages (nominal wages adjusted for inflation) to adjust the economic shocks.

Example: The failure of expected real bargained wages to adjust productivity or unemployment shocks triggers and adjustment mechanisms which influence the nominal wage inflation.

• Numerical flexibility- changing number of workers

Example: A company that has the ability to deploy the employees to the best effect and illustrates numerical flexibility would be Sainsbury's.

• Functional flexibility- redeploynment of workers to different tasks

Example: Suppose a person named as John is working in function X ( recruitment/ performance management/ employee engagement ) and he knows the work of function Y also.

• Financial flexibility- Changes in wages and other payments

Example: Leverage: The use of debt to increase the total profits returned to the company's equity holders

• Working time flexibility- changes in working hours and labour market

Example: The employee may choose to start between 7:30 - 9:30 AM and finish between 3:30 and 5:50 PM. This arranngement establishes the core hours are between 9:30 AM- 3:30 PM when all employees will at work.