Functioning Labor Market & Hire-and-Fire Policies
The idea that well-functioning labor markets ought to include easy hire-and-fire policies seems like a sacred cow that few will contend with.
However it may not be the case if we were to conceive the labor market as embedded within a wider social system.
Restricting hire-and-fire may well lead to ''poorly functioning'' labor markets (if we define function purely in terms of the flexibility for firms to cut costs during downturns), but it implies that social welfare will be less robust to business cycles.
There are claims that mass layoffs are like the economy's automatic immuno-responses to its ailing health, leading to needed economic restructuring and falling real wage which restores full employment.
At least that is how the neo-classical narrative goes. But fundamentally it lies in the assumption that the economy follows a demand & supply model of labor market.
Any discerning person will realize how ridiculous it is that two intersecting curves are sufficient justifications to the socioeconomic issue of unemployment.
Even more complex models such as Real Business Cycles, limited participation and MIU are not sufficient to describe the entire issue.
However it may not be the case if we were to conceive the labor market as embedded within a wider social system.
Restricting hire-and-fire may well lead to ''poorly functioning'' labor markets (if we define function purely in terms of the flexibility for firms to cut costs during downturns), but it implies that social welfare will be less robust to business cycles.
There are claims that mass layoffs are like the economy's automatic immuno-responses to its ailing health, leading to needed economic restructuring and falling real wage which restores full employment.
At least that is how the neo-classical narrative goes. But fundamentally it lies in the assumption that the economy follows a demand & supply model of labor market.
Any discerning person will realize how ridiculous it is that two intersecting curves are sufficient justifications to the socioeconomic issue of unemployment.
Even more complex models such as Real Business Cycles, limited participation and MIU are not sufficient to describe the entire issue.
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