The labor market reforms are crucial in the face of the changing job market scenario across the world. The recession in the US economy and its wide-spread impacts have made the issue of job security highly vulnerable. Here comes the importance of the labor market reforms. These reform measures are aimed to provide job security to both the skilled and unskilled workforce. Rigidities in labor market contributed significantly in increasing the rates of unemployment in the OECD countries. The worsening job market scenario prompted a number of European nations to go for labor market reforms during 1980s.
Objectives of Labor Market Reforms
The labor market reforms initiated by different economies of the world primarily focus on the labor market deregulation. These reform measures also try to improve the employment scenario of any country, which undertakes such reform policies. The labor market reform policies also put stress on the following issues:
To remove the restrictions associated with temporary contracts
To promotion policies regarding integration of labor market
To initiate gainful employment programs to ensure greater participation of the available labor force
To bring about positive changes in the laws dealing with workplace relations
To introduce the minimum wage laws so as to protect the interests of the unorganized workers
To bring about greater diversity in the job sector
Labor Market Reforms and Unemployment: the Global Trend
Studies have revealed that labor market reform policies have been instrumental in reducing the problem of unemployment both for the developed and less developed economies. The economies with relatively higher rates of unemployment have taken up more extensive reform measures to bring about favorable changes in the labor market scenario.
The European Economic and Monetary Union, popularly known as EMU, has played a crucial role in helping the European nations to implement effective measures for labor market reform. EMU member countries have tried to introduce flexibility in the wage level. The EMU member countries have also initiated labor market reform measures to cut back the utility cost arising out of enhanced variability in the macroeconomic domain. It has been observed that the countries under EMU have played a stellar role in guiding the other economies to face the challenge of unemployment through effective labor market reforms.
However, when it comes to impacts of labor market reforms on unemployment, the experiences have been varied for different countries. The ultimate success of the labor market reforms crucially depends on the structural changes that need to be taken beforehand.