European Business: Impact of Labor Market Flexibility and Mobility

This report assesses the critical role of labor market flexibility and mobility within the European business landscape. It delves into the challenges posed by unemployment, the scarcity of skilled labor, and the impacts of economic fluctuations, especially in the aftermath of the 2008 financial crisis. The report emphasizes the importance of adaptable labor markets in fostering economic competitiveness and stability, exploring how flexible employment models, such as temporary and part-time positions, contribute to reducing unemployment rates. Furthermore, it highlights the significance of training and education initiatives in addressing skill shortages and supporting workforce development, particularly in light of demographic shifts and the evolving demands of the labor market. The analysis underscores the need for policies that promote both labor mobility and flexibility to enhance the efficiency and competitiveness of European businesses, ensuring sustainable economic growth and resilience in a globalized environment.

European
Business
Impact of labor market flexibility and
mobility

EU-MARKET FLEXIBILITY AND MOBILITY 1
Introduction
This report aims to assess the importance of labor market flexibility and mobility in European
countries. The international market faced issues of increasing the lack of skilled labors and also
increasing the unemployment tendency amongst them (Moloney, 2010). Flexible labor market
refers to the process that allows companies to make changes to their labors according to the
market and economical environmental fluctuations, so that they can improve organizational
productivity (Callaghan, 2018).
When it comes to European market, the labor flexibility attracted considerable attention of the
European market in the year of 1980 (Lindley, 1997). Yet in 1896 it had gained huge attention
after debate contributed by the OCED and efforts by the government. In the year of 2008
European market faced various challenges due to the international financial crisis and this led to
create various fluctuations such as unemployment and shortage of skilled labor. There are more
than 25 million labors unemployed and the number is still increasing. Hence it is essential for
government to take steps and create market flexibility and mobility, so that the issue can be
resolved and organizations can again compete for the international market and contribute to the
rise in the European economy (Bekker, 2018).
The report will provide an overview of European labor market flexibility and mobility and their
importance to European business.

EU-MARKET FLEXIBILITY AND MOBILITY 2
Labor market flexibility and mobility, importance to European business
The flexible movement of labor is the major achievement of the integration process of Europe. It
leads to an increase in the intercultural understanding and also helps European communities and
business environment more inclusive. In the coming next 15 years, the workforce and employers
of European countries such as Poland and Germany will face the significant decline as there are
fewer growth opportunities for many businesses and due to increment in the unskilled labor force
(KAS, 2018).
Labor mobility is a major aspect that affects the European business environment. European
businesses continuously facing challenges due to strict regulations and these regulations restrict
them to producing new jobs. Hence this leads to allow young European to earn opportunities by
relocating. Increased labor mobility lead to use more efficiently more use of HR. And this need
for European business market and there are millions of people unemployed in Europe (Basso,
2018).
Unemployment is the major reason for the essentialness of the labor market flexibility and
mobility. According to the report, European labor market facing unemployment since 2008 and it
increased more in 2011. Currently, the country has 25 million people unemployed and the
numbers are still growing. Hence it is important for the European business competitiveness in the
global market. At the same time, it is also beneficial for the workers (Theodoropoulou, 2018).
Exchange rates and foreign trade policies also lost the significance as the instrument of flexibility
and as significances of the Eurozone. And this also leads to an increase in the importance of
labor market flexibility (Zimmermann, 2009).

EU-MARKET FLEXIBILITY AND MOBILITY 3
Labor mobility can help European business owners as there are millions of unemployed people,
hence if people will find a suitable job in abroad will decrease the domestic employment rate. At
the same time, it will lead to provide the country economic support and ease the lack of skills in
the country. Higher labor mobility will not only help economically but also it helps employees to
come out of unemployment and develop their skills add to their qualification.
Flexibility and mobility are two different factors for success in the European market and lead to
an increase in the economic stability in the European business (Theodoropoulou, 2018).
Unemployment
Unemployment and low employment is the major reason that arises the need for market
flexibility and mobility for the European market. Many European countries facing high level of
long term unemployment and the low level of employment (KAS, 2018). The OCED also
provided the strategy as it is essential for the European market to build higher labor flexibility
lead to increase the new jobs and lesser the unemployment rate. They provide a strategy based on
compressive empirical analysis. It states that the restrictions and regulations of the free
environment are the major factors that can affect labor flexibility. Countries such as the USA and
Great Britain also follow the Anglo-Saxon rule which focuses the labor flexibility to lessen the
unemployment. Hence it is important for the European market to apply these approaches so that
they can decrease the unemployment rate and support the country’s economy (Mireia Julià,
2018).

EU-MARKET FLEXIBILITY AND MOBILITY 4
In order to make the market more flexible the country making various approaches such as
temporary employment and part-time and mini-jobs and provide bargaining policies and build
internal flexibility (Burns, 2018). Restrictions such as the ban on setting the fixed-term contracts
and upper staff limits were lifted. Also, organizations are looking for providing equal benefits for
temporary and permanent staff. The role of temporary employment can majorly help in
unemployment. And this can be identified from the Netherland example in which the employers
provided temporary jobs so that they can find a job and develop the skills and then find the
regular job. The new collective bargaining system and hiring temporary staff can be used by
many sectors to creating long-term labor flexibility and also helps the business to reduce the staff
cost. However, the temporary staff is the key factor in Germany improving competitiveness
especially those companies who deal with the export business. Hence the additional market
flexibility and profits in the context of staff cost and many jobs can be retained (Burns, 2018).
Mini jobs and part-time jobs also become widespread in European countries since 2003 due to
serval changes being made. Mini jobs become more popular for the specific European business

EU-MARKET FLEXIBILITY AND MOBILITY 5
industries such as hospitality and retail industry as these industries represent the flexible and
cheap job model for the business owners (Wigger, 2019).
Shortage of skilled staff
After the financial crisis, the high level of unemployment significantly reduced, hence the
number of workers has been increased. Training and Education policies become more important
in supporting to revitalize the economy in combination with the market labor reforms.
Demographic changes can lead to the labor potential shrinking by 18mn in 2050. This combined
with the skilled labor shortage that is already facing some industries such as science, medicine
and nursing and engineering technology, hence it is essential to provide training and serve to
mobilize all workers (Andersen, 2016).
However, there is still a challenge when it comes to unskilled workers and long term
employment. At the bottom end of the labor market, it is not so much about increasing the
numbers of people employed as about maintaining employment stability while improving
upward mobility. Also fair regulation of the labor market can help to improve the situation.
While the minimum wage is not the solution top low paid employees yet it could be effective in
setting the minimum level pay to the without burdening the labor market seriously (Guzi, 2018).
As the labor market in the EU is still not recovered from the economic crisis that started in the
year 2008. The labor market in the EU facing challenges by some changes in the demographic
composition of the workforce and increased in work complexities and process. The labor force in
Europe expected to expand hence the and due to challenges and strict regulations are increasing
the issues for many business owners. In this scenario, the needs of labor market flexibility and
mobility has been increased. According to the report, if the institutions do not become more

EU-MARKET FLEXIBILITY AND MOBILITY 6
flexible, labor market flexibility will be significantly decreased which leads to the growth of
market disequilibrium for the market and institutions as well (Martina Burmann, 2018).
According to the report, Germany facing a shortage of qualified workers. Recently Steffen
Kampeter the HOD of German employers’ association states that let workers retire without any
deduction at the age of 63 after 45 years of experience which is a heavy mortgage for pension
fund and labor market; it leads to increase the shortage of skilled labor (Festing, 2018).
Flexible labor market will provide the regulation-free environment and that will support
organizations who want to retire older employee before the age of 63 and hire young employees
to work. Early retirement possibility is the new and fair plan with which the government
increasing the labor market flexibility. And this is the point where Germany took advantages
earlier and also it was the first EU member to adopt this and raise the official retirement age 65-
67. The impact of these new reforms has been felt within Germany. And in order to make the
Labor market more flexible, the government has been provided the various reforms such as
temporary employment, mini-job, and self-employment. These can provide a more flexible
retirement age and it will lead to creating a workplace which can be adopted by the different age
groups and also provide unskilled workers systematic training opportunities (Robert, 2019).
Training for more seasoned representatives has been to some degree dismissed in Germany.
Managers will in general spotlight their preparation endeavors on more youthful, very talented
staff. As time passes by, representatives can wind up with an absence of suitable abilities,
particularly the individuals who were not all that very qualified in the first place, and this can
make their working lives increasingly troublesome in the medium term (Andersen, 2016). Albeit
statistic changes imply that businesses are probably going to give more consideration to this

EU-MARKET FLEXIBILITY AND MOBILITY 7
specific gathering of workers, it would likewise bode well to give open subsidizing to prepare
representatives who are let alone for training programs. Though labor market reforms of
flexibility are the major source that can come in a reduction in unemployment and increase the
number of skilled labor in Germany (KAS, 2018).
Mobility and flexibility has becomes the key to increase skilled labor. Due to unemployment
workers would go cross borders for the work and increase their personal and professional skills.
The decline working populace the contracting working populace makes it even more
fundamental to make the most ideal utilization of the aptitudes of the entire populace. This can
be accomplished by guaranteeing that youngsters are given the most ideal chances to pick up
abilities and capabilities – nobody ought to be deserted. It is likewise critical to expand the
quantity of working ladies and moms by improving childcare arrangement and making working
hours progressively adaptable (Callaghan, 2018). There has just been accomplishment in the
region of work for more established laborers; however this ought to be expanded still further by
offering all the more preparing for more seasoned individuals and trying endeavors to make
occupations that are reasonable for more established specialists. There must likewise be a
proceeding with spotlight on incorporating the long haul jobless and incompetent specialists into
the work advertise by methods for actuation and aptitudes improvement programs (KAS, 2018).
Increased competency and efficiency
The European economy becomes significantly more competitive in recent years after becoming
more flexible. As it can be able to keep labor unit cost stable and also can reduce it. The major
reason for this been sustained productivity accumulates mutual wage restraint. Increased labor
flexibility and working hour’s flexibility with the short term and the mini job helped European
companies to enter into the international competition. This increased competitiveness through

EU-MARKET FLEXIBILITY AND MOBILITY 8
market flexibility and mobility is higher than is seen in other countries since the past some years
and also reflects the European strategy (KAS, 2018). Apart from that the collective bargaining
agreements and developing them to make more flexible also combined them with the long phase
of pay restraint is essential for developing the productivity and competitiveness of the European
economy and helping it to sustain in the situations like financial crisis. However structural
unemployment has been decreased and employment beginning dropped. The more market
flexibility means lower level of economic growth. Hence the EU has to maintain or need to take
some steps to increase employment level. Still Flexible market and mobility given the essential
boost to the competitiveness of the EU countries, and at the same time this increasing flexibility
has led to the greater diversity of employment contracts and conditions (KAS, 2018).
Stabilizes economic cycle
European countries have performed great since the 2008 global financial crisis. European
countries faced various challenges such as unemployment and unskilled labor. These counties’
economy was able to keep the people in work moderately stable in 2011 and reached the highest
employment. This great management of economic crisis with least and minor consequences is
mostly down to grow labor flexibility in terms of pay and working hours. And this is the reason
that made Germany and other European countries’ economic cycle stable (Bekker, 2018).
Germany is one of the European countries that can be considered as a leader which taking
advantage of the market flexibility such as flexible working hours, part-time employment as
regulation for these instruments. By making some changes and promoting flexibility while the
crisis was at its most critical, these countries were capable to safeguard its experienced
employees during the difficult times, specifically export-oriented businesses (KAS, 2018).

EU-MARKET FLEXIBILITY AND MOBILITY 9
Hence these European countries tremendously performed by taking immediate steps and made
some changes in economic environments and build the labor market flexibility and mobility so
that unemployment and other challenges can be overcome and increase the competitiveness of
the businesses in the international market.

EU-MARKET FLEXIBILITY AND MOBILITY 10
Conclusion
It can be concluded from the above discussion that the European countries faced various
challenges due to the financial crisis. Hence these countries made strategy and introduced
flexibility and mobility so that the European economy can come back to the battle and compete
into the international market. The driving forces behind the market flexibility and mobility are
the issues associated with the funding the welfare state. And for companies' the driving forces is
above all gaining better competitiveness by giving long term and stable employment for the
flexible condition. The major reason is that why market flexibility is important for the European
country and their business is that unemployment and shortage of skilled labor which is impacting
the EU economy. Also, mobility is essential as it contributes to the optimal allocation of
resources that generates extraordinary welfare. Also, Mobility ensures that speedy adjustment of
labor market specifically into the regional level. Although the increment in skilled labor is
cannot be satisfied by native countries also if the barriers can be overcome. Majority of EU
unskilled workers will be unemployed until more non-EU skilled immigrants help to generate
jobs for them and this is only possible with the increment of the labor market flexibility and
mobility.

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