Labor Policy Essay ⋆ Political Science Essay Examples ⋆ EssayEmpire

Government involvement and scholarly interest in labor policy have been consistently strong for several decades. The post–oil shock unemployment crisis of the 1970s, combined with the growing importance of the service versus the manufacturing sector in the industrialized world that followed, created conditions of economic hardship that, for most governments, were serious enough to mandate substantive policy responses. These responses, which have included a broad assortment of policy instruments, have been divergent—in both scope and level of effectiveness. Scholarly interest in labor policy, then, has focused not only on identifying and explaining specific policy responses to the aforementioned developments, but on comparatively evaluating government labor policy programs.

Another substantive area of political science research related to labor policy is the issue of industrial democracy. With the ascension of social democratic and labor parties in western Europe during the 1950s and 1960s came significant government efforts to democratize capitalism at the point of production. Such efforts have included codetermination laws designed to enhance worker participation in company boardroom decision-making processes and so-called quality of work life initiatives targeted at promoting greater participatory rights for workers on the shop floor and other places of employment.

Active And Passive Labor Market Policies

Government involvement in matters concerning the labor market has been most substantial in the advanced industrial democracies, particularly in western Europe. Such involvement has been characterized by the use of both passive and active labor market policies. Passive labor market policies include such instruments as unemployment benefits, severance pay policies, and various disability benefits. These traditional policies are called passive because they are designed simply to provide financial assistance to workers during unemployment or disability. As such, they do little if anything to enhance workers’ employability, skill levels, or technical competence. Such objectives are more commonly associated with active labor market policies, which were first instituted in western Europe in the 1960s. As active labor market policies have been associated with such ambitious objectives as promoting economic growth and transforming labor market characteristics, such initiatives, despite receiving slightly less government financial support than their passive counterparts, have received the bulk of attention from the policy analysis community.

Active labor market policies (ALMP) were initially developed in response to certain labor market conditions that were created by the sustained period of rapid economic growth following World War II (1939–1945).ALMP, it was thought, could be employed (on a limited and temporary basis) to prevent labor market bottlenecks and other demand-side labor market problems that might prove detrimental to existing growth patterns. In contrast, during the 1970s and 1980s, as mentioned above, ALMP were used much more comprehensively in an effort to counter problems caused by the slow growth and high unemployment that had come to plague the industrial democracies. This comprehensive approach to ALMP persists today in many countries, as governments seem to have reached the conclusion that permanent, active involvement in labor markets is vital to long-term economic stability.

Active labor market policies have been designed to achieve a number of objectives. For instance, governments in many countries typically employ such ALMP as direct job creation programs, wage subsidies, job-training subsidies or grants, and subsidies and other financial supports for self-employment initiatives to counter economic downturns. They also utilize wage subsidies, job search assistance, and worker retraining programs to reduce problems caused by decline in the manufacturing sector and other structural economic changes. Governments seeking to enhance labor force skills and productivity also frequently use job training and retraining programs. Finally, some ALMP are aimed at supporting specific societal groups, such as women or the disabled. Here, governments have employed such policy instruments as employment counseling, job search assistance programs, training or retraining grants, wage subsidies, antidiscrimination regulations, and informal or formal quotas.

Scholars such as Richard Layard (and colleagues) and Peter Katzenstein have suggested that in countries such as Austria and the Scandinavian democracies, where industrial and active labor market policies have been most comprehensively and systematically implemented, governments have demonstrated an ability to successfully sustain satisfactory economic performance levels during difficult periods of structural economic change, most notably the decline in the manufacturing sector in the 1980s. While acknowledging that dramatic reductions in manufacturing employment levels similar to those experienced in other advanced capitalist countries were eventually realized in these smaller European democracies, these authors suggest that through systematic ALMP programs, their governments could effectively manage processes of economic adjustment while avoiding the kinds of structural unemployment problems and other hardships experienced by workers in countries like Britain and the United States, where governmental use of ALMP has been much less extensive. These conclusions have been tempered somewhat by the work of authors such as John Martin and Robert Flanagan, who argue that, in general, ALMP have thus far been only marginally successful in addressing such labor market challenges as structural unemployment and the need for greater labor mobility. Comprehensive Organization for Economic Cooperation and Development (OECD) studies of the macro impact of labor policies have reached few definitive conclusions.

Industrial Democracy Initiatives

Another topic associated with labor policy is industrial democracy. Related primarily to the established democracies of western Europe, industrial democracy policies are designed to enhance worker participation in the capitalist economy at the level of the individual business fir m. Such policies have mandated expansions in employee information concerning changes in company policy, consultative rights for workers, and participation by workers in management decision-making practices—both at the company boardroom and on shop floor levels. In Germany, for example, the government has promoted industrial democracy through various postwar codetermination and works constitution acts. The Codetermination Act of 1976, for instance, mandated that supervisory boards composed of equal numbers of employee and employer representatives be created for firms with at least two thousand employees. These boards have either consultation or codetermination (with management) rights in areas such as work time scheduling, overtime policies, vacation time planning, occupational safety issues, wage scales, rules for hiring or dismissal of workers, and job classification policies.

While generally popular among employees and their respective trade unions, the practice of codetermination has of late been viewed by employer associations in a more critical light. In Germany, for instance, recent modifications to codetermination laws seem to have been driven by the demands of industrial firms to reduce the consultative authority of advisory boards to allow for greater managerial decision-making flexibility, which is seen by capital as being essential in today’s increasingly competitive global economy. Furthermore, German employers, concerned with remaining competitive within the single European market, have articulated the need to further adjust Germany’s codetermination practices to bring them more in line with the less extensive codetermination laws in the European Union’s other member countries.

Besides enhancing labor’s decision-making powers at the company boardroom level, industrial democracy initiatives have been directed also toward the shop floor. In Sweden, among other countries, quality of work life (QWL) programs were established by public law to promote substantive rank-and-file participation on matters directly related to the production process. Through regularly scheduled consultative meetings, worker input is encouraged in a number of areas, such as production methods, technology usage, and product refinement. Here, the goal is not only to increase workplace democracy, but to enhance worker productivity and overall product quality as well. The elimination of assembly-line production techniques in many Swedish industries, which has been linked to both greater worker job satisfaction levels and enhanced labor productivity, has been attributed in part to QWL dialogue sessions.

Research related to industrial and workplace democracy has centered around three general topics of interest. First, some scholars have been concerned about determining the extent to which industrial democracy efforts have actually promoted greater, more meaningful labor force participation in the capitalist economy. Second, scholars interested in determining the effects of corporate governance laws on the economic competitiveness of business firms have attempted to examine the impacts that industrial democracy initiatives, most notably codetermination laws, have had on such issues as managerial flexibility and company responses to global economic challenges. Finally, some research has focused on labor productivity levels and how they have been impacted by codetermination laws and QWL measures. Regarding the first two areas of scholarship, conclusions vary depending on the country being analyzed, as the various case studies contained in a volume edited by M. Donald Hancock and colleagues indicate. As for the issue of labor productivity, much more consensus prevails, with the bulk of scholarly analysis suggesting notably positive relationships between the extent of industrial democracy (particularly shop floor initiatives) and labor productivity levels.

Bibliography:

Bluestone, Barry, and Bennett Harrison. The Deindustrialization of America: Plant Closings, Community Abandonment, and the Dismantling of Private Industry. New York: Basic Books, 1982.
Ehrenberg, Ronald G. Labor Markets and Integrating National Economies. Washington, D.C.: Brookings Institution, 1994.
Flanagan, Robert. “Efficiency and Equality in the Swedish Labor Markets.” In The Swedish Economy, edited by Barry Bosworth and Alice Rivlin, 125–186.Washington, D.C.: Brookings Institution, 1987.
Hancock, M. Donald, John Logue, and Bernt Schiller, eds. Managing Modern Capitalism: Industrial Renewal and Workplace Democracy in the United States and Western Europe. New York: Praeger, 1991.
Katzenstein, Peter. Small States in World Markets: Industrial Policy in Europe. Ithaca, N.Y.: Cornell University Press, 1985.
Layard, Richard, Stephen Nickell, and Richard Jackman. Unemployment: Macroeconomic Performance and the Labour Market. Oxford: Oxford University Press, 1991.
Martin, John. “What Works among Active Labor Market Policies: Evidence from OECD Countries’ Experiences.” In Policies toward Full Employment. Paris: OECD, 2000.
“Active Labor Market Policies: Assessing Macroeconomic and Microeconomic Effects.” OECD Employment Outlook. Paris: OECD, 1993.

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