Causes and Consequences of Labor Market Flexibility

Introduction

Globalization and technological change have transformed the workplace and the organization of labor. At the core of these major developments is the degree of flexibility in the labor market. Alternative work arrangements, e.g., outsourcing, sub-contracting, flexible scheduling, and flexible pay jobs have become a common feature of labor markets across the globe.

Economic Perspectives

While most economists would argue that labor market flexibility facilitates reaping the benefits of globalization and technology growth, these developments can have far-reaching consequences for the division of resources in society. Indeed, the recent decades have witnessed a sharp rise in wage inequality. LABFLEX is motivated by these developments and seeks to investigate the causes and consequences of labor market flexibility.

Research Questions

LABFLEX raises a series of questions:

1. Do differences in job contracts reflect shifts in worker preferences, or do they mirror advances in technology that facilitate gains from organizing job tasks differently?
2. What are the impacts of flexibility in job contracts on wage inequality and gender wage gaps?
3. Are workers being compensated for the adverse work conditions or the higher income risks, or do changes in job contracts reflect changes in the sharing of rents between workers and firms?
4. How do labor market institutions affect flexibility?
5. What is the role of labor market policies?

Methodology

To answer these questions, LABFLEX will for the first time link register data to large-scale experimental evidence on workers’ stated preferences for a wide array of work and pay arrangements, and an exhaustive full-text corpus of vacancies with information on job attributes.

This will allow drawing a very detailed picture of both the supply and the demand side of the labor market, facilitating a study of flexibility in job contracts. Combining these data with experimental and structural methods, LABFLEX will provide new evidence on the causes and consequences of labor market flexibility.