Going mobile? Jobs in the new economy

To what extent does the new economy change the rules of the game in the labour market? Perhaps not as much as some think
OECD Directorate for Employment, Labour and Social Affairs

It is all over the media: the “new economy” is changing the rules of the game, with potential major implications for workers and labour markets. Indeed, an editorial in The Economist from as long ago as 1993 (20 July) hit directly upon the theme with a catchy phrase: “Your company needs you, for the time being”.

In a more recent article on “The Future of Work” (29 January 2000), the same newspaper even claimed that “the old social contract between employers and workers is being shredded”. The implication is that many, if not most, workers will have to change their jobs and occupations many times throughout their working lives, and certainly change them more frequently than in the heyday of “lifetime employment”. The debate about job insecurity and company loyalty has become headline news again, but to what extent does the new economy make a difference? The arguments are widely touted, but what about the facts?

First, let’s see what the workers think. According to survey data in the 1997 OECD Employment Outlook, workers were concerned about their job security in the 1990s, as they were about the loss of fringe benefits, such as health insurance and pensions. These concerns are still widespread and not simply confined to countries with high and persistent unemployment. They are also noticeable in countries, such as the United States and the United Kingdom, where unemployment has fallen to historic lows in recent years.

But while there is no doubt that workers feel their jobs are less secure nowadays, what about actual job tenures – how long, on average, have workers spent with the same firm? In the following table, two facts stand out. First, it is only in Spain and the United States that one can clearly see a decline in average tenures. Second, average tenures have in fact increased in a number of countries, such as France, Germany, Japan and the Netherlands.

These averages could conceal as much as they reveal. An ageing workforce, typical in most OECD countries, would normally be expected to show higher average tenures compared with a more youthful workforce. And rising levels of education might be expected to lead to better job matches in early career, thereby reducing turnover rate and increasing average tenures. However, more sophisticated analysis, which takes such arguments into account (see references), does not alter the basic conclusion: at worst, average job tenure has remained rather stable in recent years; at best, it has increased in far more countries than it has declined. This suggests that the supposition about entering a new age in which the bonds between workers and their firms are breaking down rapidly may be out of kilter with reality.

How does one reconcile these facts with the anecdotal evidence in the press suggesting that job changes have become much more frequent, at least for certain groups of highly skilled workers, such as star engineers and high-level programmers – the “Silicon Valley” set? The answer is simple. One cannot generalise from such small instances of genuine increases in job mobility to conclude that there is a broad trend towards job instability among upper-level workers. In fact, OECD analysis shows that problems with job instability, along with higher perceptions of job insecurity, are much more pronounced among less-educated workers than among the highly-skilled. This dichotomy in perceptions and job stability between less-educated and highly-skilled workers is hardly a new phenomenon. Furthermore, while the new economy may have had some influence on the labour market, the effect is unlikely to have been that great, given the still relatively small scale of investments in information and communications technology.

While there may be no general trend towards increased labour and job turnover, it is true that large numbers of workers move in and out of jobs every year. Both the 1994 and the 1996 Employment Outlooks show that roughly 10% of all jobs are newly created each year and about 10% are destroyed. Many firms adjust employment levels even in good times: some firms go bust and new firms are started up. This turbulence generates both costs and benefits. From an employer’s perspective, high turnover can enhance flexibility of staffing levels in an uncertain world. However, it also directly increases such costs as, for instance, the (repetitive) recruitment procedures that high turnover makes inevitable. It can also lower productivity and product quality by, for example, undermining staff morale, especially among those workers who have mastered the specific skills and knowledge required to function efficiently in the firm. A labour market with a high degree of turnover may make it somewhat easier for workers who quit or are fired to find another job, though there will be uncertainty as to the quality of the new job and its likely duration.

This gives rise to a fundamental question: could an excessively high job turnover rate hinder the development of those skills and competencies that are needed for success as much in the new economy as in the old? As countries profess to be taking seriously the policy implications of life-long learning, this issue is timely. A number of countries have expressed concern about the need to compete effectively in the international market-place while protecting the living standards of the workforce. A focus of this debate has been on inadequacies in the efforts made by firms to invest in skill formation, training and work organisation. How to promote institutions that support rapid and good job matches and longer tenures, as well as other institutions – that can ensure adequate worker participation or “voice” in the firm – has been a key point of discussion.

Another way of asking the question about turnover and skills is this: can firms have it both ways, as some of them appear to desire, and retain a highly skilled and flexible workforce while insisting on the freedom to hire and fire as they wish? It seems unlikely. Worried about their next job switch, workers, not surprisingly, may not care much about the fortunes of their firm unless given an incentive to do so. Businesses fear losing valuably-trained workers to competitors and this can lead to less investment in skills than is socially desirable, or indeed economically necessary to compete. This, in turn, may lead to even higher labour turnover, further discouraging training.

FLEXIBLE SECURITY

Firms play a critical role in human capital investment. On average in OECD countries, employers support about three-quarters of continuing vocational training received by adult workers. Thus, workers are most likely systematically to update and enhance their job skills if their employer views training them as a sound business investment. This is more likely to occur if the worker is expected or encouraged by personnel practices to remain with the firm for an extended period of time. Stability of employment can enhance skill training; this is demonstrated by the tendency of firms in industries with above-average job tenures and lower labour turnover to offer more training. Moreover, firms are more likely to implement flexible forms of work organisation successfully if these initiatives are combined with intensive training and improved job security.

In sum, both firms and workers have to become more adaptable and flexible – the onus is on both partners in the employment marriage. Many workers would accept changes in pay practices and working conditions so long as they had a voice in these decisions. They already often accept the routine and not-so-routine pressures employers ask of them so that the firm can compete and grow. Employers, in turn, need to deal with specific problems that workers have, such as child-care and other family-related issues. In short, the rule goes for the new economy as much as it did for the old: to get on, firms need to win the hearts and (increasingly skilled) minds of their workers.

*********************************************************************

REFERENCES:

Burchell, J.B., Day, D., Hudson, M., Lapido, D., Mankelow, R., Nolan, J.P., Reed, H., Wichert, I.C. and Wilkenson, F., Job insecurity and work intensification: Flexibility and the changing boundaries of work, Joseph Rowntree Foundation and YPS Press, London, 1999

OECD, Employment Outlook, Paris, July 1993, 1994, 1996, 1997

OECD, Employment Outlook, Paris, June 1999.

Soskice, D., “Reinterpreting Corporatism and Explaining Unemployment: Co-ordinated and Non-co-ordinated Market Economies,” in Brunetta, R. and Dell’Aringa, C. (eds.), Labour Relations and Economic Performance, MacMillan Press, London, 1990.

*********************************************************************

©OECD Observer No 221-222, Summer 2000




Economic data

E-Newsletter

Stay up-to-date with the latest news from the OECD by signing up for our e-newsletter :

Twitter feed

Editor's choice

  • Composite leading indicators
  • 2015, a year full of dangers? Laurent Bossard, director of the Sahel and West Africa Club, acknowledges that the situation in the region is complex and unstable but refuses to give in to fatalism.
  • The 5th Anti-corruption conference for G20 governments and business in Istanbul on 6 March will address how all businesses can play their part in contributing to growth and investment, and can operate with clean hands in a safe environment.
  • Success story. Discover the story of this young Ethiopian woman who launched a successful business in the footwear industry and became a UN Goodwill Ambassador for Entrepreneurship.
  • Transports in Asia. The Asian Development Bank advocates sustainable transport in a continent where vehicle ownership is perceived as a sign of social success.
  • Vote for your favourite photograph! This World Bank #EachDayISee photo contest aims to display visual stories from all over the world through which people express what they would like to see changed and improved.
  • Why is investment so low in the euro area? This short IMF blog post gives you an insight into the causes of the euro-zone's drastic decline in investment.
  • Have your say! The UN wants to know what matters most to you: pick six global issues in the list and send it to the United Nations.
  • Clear air and healthy lungs: how to better tackle air pollution. From New Delhi to Accra, millions of people breathe polluted air. A new report examines the World Bank’s experience working to improve air quality.
  • The boring secret of great cities. Plenty of things make a city great but what really makes a difference originates in the structure of municipal government according to the OECD's report "The Metropolitan Century".
  • Guinea gets $37.7 million in extra IMF financing to help combat Ebola
  • Towards an international carbon pricing framework? Designing a unified international carbon pricing system could help to move towards a fully functional low-carbon global economy.
  • Putting the global economy on a more virtuous path. Current potential growth rates are well below pre-crisis levels. To avoid stagnation, governments have to put in place robust structural reforms.
  • World Water Day: 22 March 2015 For World Water Day, UN-Water identifies upcoming challenges and sets the theme for the years to come. In 2015, the theme for World Water Day is Water and Sustainable Development.
  • What drives street-based child labour?The ILO, UNICEF, Save the Children and the Lebanese Ministry of Labour launch a first-ever study assessing the scope and characteristics of the increasingly visible phenomenon of one of the worst forms of child labour.
  • No “Grexit”. Speaking to CNBC, OECD Secretary-General Angel Gurría says he would do everything to make sure Greece does not leave the euro. "Everybody wants Greece to stay in, everybody wants Greece to prosper and to get out of its short-term morass," he told CNBC. Watch the video.
  • engaging citizens
  • Interested in citizen engagement? The World Bank Group offers a four-week online course which aims to teach how citizens can engage in both policymaking and public service delivery.
  • 2.1 million jobs could be created in Europe by 2018 under the three-year investment plan put forward by European Commission President Jean-Claude Juncker, according to the ILO.
  • Become involved in urban flood risk management. This World Bank two-week online forum gives you the opportunity to discuss how to preserve cities from these natural disasters with experts and development leaders.
  • Promoting decent work for migrant workers.This ILO report highlights the need to ensure decent work for migrants, which is part of the global agenda on sustainable development.

Most Popular Articles

Subscribe Now

<b>Subscribe now!</b>

To receive your exclusive print editions delivered to you directly


Online edition
Previous editions

Poll

What issue are you most concerned about in 2015?

Euro crisis
Unemployment
Global warming
International conflict
Other

OECD Insights Blog

NOTE: All signed articles in the OECD Observer express the opinions of the authors
and do not necessarily represent the official views of OECD member countries.

All rights reserved. OECD 2015