Labour Market Institutions and Productivity

Labour Utilisation in Central and Eastern Europe

Beata Woźniak-Jęchorek, Michał Pilc

• Publisher: Routledge
• Year: 2020
• ISBN:
  9781000202557
• Edition: 1
• Topic: Economics
• Subtopic: Labour Economics
• Index: Economics

This book explains the role of formal labour market institutions in keeping the labour utilisation in Central and Eastern Europe above the level characteristic for Western European states. It provides an innovative and enriching take on labour utilisation at large and how various formal labour market institutions can affect the ongoing trend in labour utilisation in a way that is not covered by the extant literature. The impact of labour market institutions on labour market outcomes is analysed throughout 12 chapters, both from a cross-country perspective and in detailed case-studies, by 21 labour market experts from various CEE countries.

Most chapters are based on empirical methods yet are presented in an easy-to-follow way in order to make the book also accessible for a non-scientific audience.

The volume explores three key questions:

• How can labour utilisation be increased by labour market institutions?
• Which CEE countries managed to create a labour market institutional framework beneficial for labour utilisation?
• How should the labour market institutions in CEE countries be reformed in order to increase labour utilisation?

The book argues that the legacy of transition reforms and a centrally planned past is still relevant in explaining common patterns among CEE countries and concludes that increasing the stock of skills accumulated by the employed and improving utilisation of these skills seems to be the first-best solution to increase labour utilisation.

The book will be of interest to post-graduate researchers and academics in the fields of labour economics, regional economics, and macroeconomics as well as scholars interested in adopting an institutional analysis approach. Additionally, due to the broader policy implications of the topic, the book will appeal to policymakers and experts interested in labour economics.

Part I

Labour market institutions and labour utilisation across the CEE region

1
Labour market regulation and labour utilisation in CEE countries

Beata Woźniak-Jęchorek and Sławomir Kuźmar

Introduction

The debates about labour market regulation are often heated, reflecting ideological differences about the role of government intervention on the market. The opinion that labour regulations are needed to circumvent the weak bargaining power of employees in employment relationships, inadequate insurance against the risk of unemployment, to moderate effects of downswings in aggregate demand, and to enhance investments in human capital is characteristic for an institutionalist approach. From this perspective, institutions can reduce inequality and cut transaction costs, thereby enhancing productivity. The other ‘distortionist’ view underlines the advantage of the market process and argues that strict protection legislation increases the dualism of the labour market by favouring regular workers, increases effective labour costs, discourages hiring, and impedes adjustment to economic shocks (Freeman, 1993; Masso & Eamets, 2004). In the distortionist approach, institutions impede economic efficiency and can have perverse equity effects. These two visions differ significantly in their theoretical starting points, research methods, limitations, and even what constitutes evidence. The institutionalist research often downplays the value of sound empirical analysis that challenges its assumptions. In turn, the distortionist approach tends to be ahistorical, clinically measuring the impacts of institutions without appreciating that they have evolved through a social and political process as a part of a given society’s social contract (Betcherman, 2015, p. 126).

Labour market regulations are usually understood as the rules determining, inter alia, what types of employment contracts are permissible, setting boundaries for wages and benefits, hours, and working conditions, and proscribing certain employment practices. However, regulations providing social protection for workers can be understood more broadly as an important part of the institutional framework around the labour market, including also rules for trade unions and collective bargaining, unemployment insurance, active labour market programmes, minimum wages, and equity legislation.

Generally, the labour regulations were designed for wage and salary work and presume widespread compliance, either voluntarily or through the enforcement capacity of the state (or trade unions). These assumptions are more difficult to maintain in CEE countries than in Western ones. In the case of Central and Eastern Europe, employment forms are more diverse, with large shares of workers in non-wage activities such as self-employment and family enterprise work. Even many wage employees are in the informal sector. Furthermore, the power of trade unions in this part of Europe is much weaker due to low unionisation. Therefore, setting an appropriate level of labour market regulation is dependent on country- or region-specific domain and made complicated by the fact that formal rules may differ due to various factors, e.g. the size of a country and the market, national social policies, social, cultural, historical, and legal traditions.

The nature of employment, coupled with limited administrative and enforcement capacities, raises questions about how labour markets are regulated in CEE countries, especially in the domain of job security rules, and how these regulations affect the labour utilisation. This question is an important part of the vigorous and continuously growing d...

Table of contents

• Cover
• Half Title
• Series
• Title
• Copyright
• Contents
• List of figures
• List of tables
• List of contributors
• Foreword
• Introduction
• Part I Labour market institutions and labour utilisation across the CEE region
• Part II Labour market reforms and utilisation: learning from countries’ experiences
• Conclusions