Job Security and Flexibility: Exploring Labour Market Dynamics 3031285085, 9783031285080

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Emil Dinga · Monica Florica Dutcas · Gabriela-Mariana Ionescu

Job Security and Flexibility Exploring Labour Market Dynamics

Job Security and Flexibility

Emil Dinga • Monica Florica Dutcas Gabriela-Mariana Ionescu

Job Security and Flexibility Exploring Labour Market Dynamics

Emil Dinga ‘Victor Sla˘vescu’ Centre for Financial and Monetary Research Romanian Academy Bucharest, Romania

Monica Florica Dutcas ‘Victor Sla˘vescu’ Centre for Financial and Monetary Research Romanian Academy Bucharest, Romania

Gabriela-Mariana Ionescu Doctoral School of Economic Sciences at the School of Advanced Studies of the Romanian Academy (SCOSAAR) Bucharest, Romania

ISBN 978-3-031-28508-0    ISBN 978-3-031-28509-7 (eBook) https://doi.org/10.1007/978-3-031-28509-7 © The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Nature Switzerland AG 2023 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG. The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Contents

1 Introduction  1 1.1 Codified Rigidities—Law, Contracts and Jobs  2 1.1.1 Preliminaries  2 1.1.2 Laws  3 1.1.3 Contracts  5 1.1.4 Jobs  7 1.2 Economic Rigidities: Rigidities of the Labour Market  7 1.2.1 Preliminaries  7 1.2.2 The Concept of Rigidity in the Economy Field  8 1.2.3 Nominal Rigidity and Real Rigidity 11 1.2.4 A Qualitative Analysis of Rigidity 13 1.2.5 Impact of Rigidities on Economic Markets 16 1.2.6 Some Concluding Remarks on Rigidity 18 1.3 Psychological Rigidities: Cognitive/Rational Versus Affective/Emotional Rigidities 19 1.4 Labour Market: Imperfections and Rigidities 20 2 The  Concepts of Job Security and Job Flexibility 25 2.1 Job Security 25 2.1.1 What Job Security Is Not, and What It Actually Is? 25 2.1.2 From Labour Market Rigidity to Job Security 27 2.1.3 What Contractual Rigidities Could Secure the Job? 28

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2.1.4 What Institutional/Economic Rigidities Could Secure the Job? 31 2.1.5 What Psychological Rigidities Could Secure the Job? 32 2.2 Job Flexibility 33 2.2.1 Preamble 33 2.2.2 The Concept of Flexibility 34 2.2.3 Typologies of Flexibility 37 2.3 The Criteria of Classification 37 2.3.1 Flexibility on the Labour Market 42 2.4 Mechanisms of Flexibility on the Labour Market 50 2.4.1 Preliminaries 50 2.4.2 Basic Parameters of the State on the Labour Market 51 2.5 Causalities in the Flexibility on the Labour Market 56 2.5.1 About Causalities Towards Flexibility 56 2.5.2 About Ways to Get Flexibility 59 2.5.3 The Concept of “Dead Zone” in the Flexibility Matter 60 2.6 The Wage Package and the Flexibility of Job 62 2.6.1 The Concept of Wage Package 62 2.6.2 A Short Theoretical Discussion on the Wage Package 62 2.6.3 Some Proposals to Make the System of Autonomous Components of Earning More Efficient 66 2.6.4 Optimization Based on Wage Package 70 2.6.5 Flexibility Induced by Wage Package 75 3 Job Flexicurity 79 3.1 Contemporary Features of Job 79 3.1.1 Changes in Labour Nature 80 3.1.2 Changes in Labour Prestation (Work) 82 3.1.3 Changes in Labour Contract 83 3.2 Job Flexicurity—A Mix Between Security and Flexibility 84 3.2.1 Concept of the Mix 84 3.2.2 About a Mix Between Trade-off and Trade-on 88 3.3 The Function of Job Flexicurity 90 3.3.1 The Hypotheses 90 3.3.2 The Separate General Formalism 96 3.3.3 The Integrated General Formalism 97 3.3.4 Qualitative Analysis 98

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3.3.5 Quantitative Analysis103 3.4 A Graph of the Integrated Job Flexicurity107 4 A  Macroeconomic View on the Job Flexicurity111 4.1 Preamble111 4.1.1 On the Qualitative Predicates of the Job Flexicurity Functional112 4.1.2 On the Polynomial Order of the Job Flexicurity Functional112 4.1.3 The Flexicurity of Flexicurity: Flexicurity of Order 2114 4.2 JFF as Saddle Surface115 4.2.1 Brief Reminder of Exemplary Mathematical Issues115 4.2.2 Construction of the Formal Expression of JFF118 4.2.3 Some Qualitative Evaluations120 4.3 Job Flexicurity Indicators: The General Conceptual Framework126 4.3.1 The Quadrilateral Rigidity: Security–Flexibility– Plasticity126 4.4 List of Job Flexicurity Indicators145 4.4.1 Preliminaries145 4.4.2 Defining the Job Flexicurity Indicators147 4.4.3 Criteria to Identify the Job Flexicurity Indicators155 4.4.4 Classes of Job Flexicurity Indicators156 4.4.5 Qualitative Analysis of the Job Flexicurity Indicators158 4.4.6 On the Automatic Working of the Job Flexicurity Indicators160 References166 5 A  (Stylized) Formal Modelling of Job Flexicurity169 5.1 Preamble169 5.2 Some Methodological Highlighting171 5.2.1 The Phenomenology of Positional Job Flexicurity Changing171 5.2.2 Notations and Significations172 5.2.3 Qualitative Assessment176 5.2.4 Quantitative Assessment182 References188

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6 An  (Illustrative) Case Study on Romania189 6.1 Preamble189 6.2 The Procedure Applied to the Empirical Analysis192 6.2.1 Job Flexicurity Clauses in Romanian Labour Code193 6.2.2 Distribution of Job Flexicurity Normative Clauses on the Qualitative Criteria193 6.2.3 The Job Flexicurity Positional Vectors193 6.3 Analysis and Interpretation203 6.4 Conclusions210 6.5 Authors’ Recommendations213 6.6 Other Final Mentions214 Annexe 1: Clauses Regarding the Job Flexicurity219  Annexe 2: Distribution of Clauses Regarding the Job Flexicurity by Criteria225  Annexe 3: The Logic of Equilibrium Price Formation in a Free Market229 References247 Index249

List of Figures

Fig. 1.1 Fig. 1.2 Fig. 1.3 Fig. 1.4 Fig. 1.5 Fig. 1.6 Fig. 1.7 Fig. 1.8 Fig. 2.1 Fig. 2.2 Fig. 2.3 Fig. 2.4 Fig. 2.5 Fig. 2.6 Fig. 2.7

The general phenomenology of labour. (Source: Authors) The two kinds of working (for himself/herself or for other). (Source: Authors) The logic order of introducing rigidities on the labour market. (Source: Authors) Rigidity arising of a macroeconomic variable. (Source: Authors) Flexibility (orthodox and adverse), respectively, orthodox rigidity. (Source: Authors) Impact of minimum nominal wage rigidity on employment (quantity supplied of labour). (Source: Authors) The impact of the minimum minimal price rigidity on the quantity demanded. (Source: Authors) The rigidities on the labour market generated by the institutional individuals bargaining. (Source: Authors) The path of forming job security based on (a triadic) relationality. (Source: Authors) Labour market rigidities do not become job security. (Source: Authors) Labour market rigidities do become job security. (Source: Authors) Principled relationships among contractual rigidity, flexibility and security on the labour market. (Source: Authors) The general phenomenology of the flexibility. (Source: Authors) The specific phenomenology of the flexibility. (Source: Authors) Working of the sufficient predicates of flexibility. (Source: Authors)

2 4 6 10 12 17 18 24 26 28 29 30 34 35 37

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List of Figures

Fig. 2.8 Fig. 2.9 Fig. 2.10 Fig. 2.11 Fig. 2.12 Fig. 2.13 Fig. 2.14 Fig. 2.15 Fig. 2.16 Fig. 2.17 Fig. 2.18 Fig. 2.19 Fig. 2.20 Fig. 2.21 Fig. 3.1 Fig. 3.2 Fig. 3.3 Fig. 3.4 Fig. 3.5 Fig. 3.6 Fig. 3.7 Fig. 3.8

Indifference curve of flexibility, based on elasticity versus plasticity. (Source: Authors) Probability of substitution values related to external duration of observing. (Source: Authors) Substitution only must arrive inside the complementarity area. (Source: Authors) The basic parameters of the state on the labour market (institutional individual of employee). (Source: Authors) A generic indifference curve “actual wage—actual daily work duration” (case of personal individual employee). (Source: Authors) The margin in which the employer’s rationality model accepts flexibility (I). (Source: Authors) The margin in which the employer’s rationality model accepts flexibility (II). (Source: Authors) The impact directions of the autonomous components on the sustainability. (Source: Authors) The ratio between the monetary/non-monetary character and the restricted/non-restricted character of the autonomous components of earning. (Source: Authors) Harmonization of the tripartite system in the matter of the autonomous components of the gain. (Source: Authors) The tripartite negotiation process regarding the introduction of autonomous components in the earning. (Source: Authors) The reciprocal effects of introducing autonomous components of earning. (Source: Authors) The flexibility induced by the wage package from the perspective of the employer. (Source: Authors) The flexibility induced by the wage package from the perspective of the negotiation employer-employee. (Source: Authors) Relationships based on which arise the features of job. (Source: Authors) Classical (standard) trade-off versus synergistic trade-off. (Source: Authors) Classical (standard) trade-on versus synergistic trade-on. (Source: Authors) The trade-off mechanism. (Source: Authors) The hr(sr) function. (Source: Authors) The hr(pr) function. (Source: Authors) The hr(sr, pr) function. (Source: Authors) The he(se) function. (Source: Authors)

41 48 52 54 56 59 61 64 67 68 69 70 76 77 80 86 87 89 92 92 93 94

  List of Figures 

Fig. 3.9 Fig. 3.10 Fig. 3.11 Fig. 3.12 Fig. 3.13 Fig. 3.14 Fig. 3.15 Fig. 3.16 Fig. 4.1 Fig. 4.2 Fig. 4.3 Fig. 4.4 Fig. 4.5

Fig. 4.6 Fig. 4.7 Fig. 4.8 Fig. 4.9 Fig. 4.10 Fig. 4.11 Fig. 4.12

The he(pe) function. (Source: Authors) The he(se, pe) function. (Source: Authors) The h(s, p) function (the first period). (Source: Authors) The general polynomial function (of order 3) of the job flexicurity (both for employer and employee). (Source: Authors) The linear combination of the order 3 polynomial functions of the employer’s and employee’s flexicurity functions. (Source: Authors) Surface of linear functional f (for a = 0.8 and b = 0.2). (Source: Authors) Surface of linear functional (f for a = 0.2 and b = 0.8). (Source: Authors) Surface of linear functional (f for a = 0.5 and b = 0.5). (Source: Authors) The graph of JJF, with the saddle point at M(0, 0). (Source: Authors) The graph of JJF in the uni-variable version. (Source: Authors) Filtering of the symmetrical rigidities (which do not become security for the other part). (Source: Authors) Filtering of the non-compensated flexibility (which does become plasticity for the other part). (Source: Authors) The k diagram. (Rigorously, the combination between s and f must verify the condition of unity of their sum. Figure 4.6 ignores such a condition (it has an illustration role only), so the minimum of k appears to be zero instead of 0.71, and its maximum appears to be greater than 1, although it should be 1. Source: Authors) The k indifference curve. (Source: Authors) The logical mechanism through which job security and job flexibility cohabitate. (Source: Authors) The quadrilateral rigidity–security–plasticity–flexibility. (Source: Authors) The matrix analysis of the job’s flexicurity, based on the “job’s area of meaning”. (Source: Authors) The entropy curves of employer and employee, respectively, based on their specific criteria of behaviour. (Source: Authors) The process of co-evolution between flexicurities of employer and of employee, respectively. (Source: Authors) The equilibrium dynamic model of job flexicurity based on the co-­evolution process. (Source: Authors)

xi 95 95 98 105 106 107 108 108 123 125 130 135

137 138 141 142 145 154 161 166

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List of Figures

Fig. 5.1 Fig. 5.2 Fig. 5.3 Fig. 6.1 Fig. 6.2 Fig. 6.3 Fig. 6.4 Fig. 6.5 Fig. 6.6 Fig. 6.7 Fig. 6.8 Fig. 6.9 Fig. 1

The downward straight line of possible paired values regarding job flexibility and job security. (Source: Authors) The quadrilateral of possible paired values of the normalized density of job flexicurity. (Source: Authors) Positional job flexicurity, and (non-normalized) density of job flexicurity—a single job case. (Source: Authors) Positional vector—“aim” criterion of job flexicurity (I). (Source: authors) Positional vector—“aim” criterion of job flexicurity (II). (Source: Authors) Positional vector—“trend” criterion of job flexicurity (I). (Source: Authors) Positional vector—“trend” criterion of job flexicurity (II). (Source: Authors) Positional vector—“connectivity” criterion of job flexicurity (I). (Source: Authors) Positional vector—“connectivity” criterion of job flexicurity (II). (Source: Authors) A (possible) area-based measure of the job flexicurity. (Source: Authors) A (possible) vectorial-based measure of the job flexicurity. (Source: Authors) The (suggested) European triad of the job phenomenology: fleximocurity. (Source: Authors) Equilibrium price formation in a generic free market. (Source: authors)

170 177 181 204 205 206 207 209 209 215 216 217 232

List of Tables

Table 1.1 Table 2.1 Table 2.2 Table 4.1 Table 6.1 Table 6.2 Table 1 Table 2

The cases of nominal/real rigidity/flexibility, in orthodox/ adverse ways 15 The relationships between flexibility and other related concepts 36 The sub-typology of the flexibility based on the agent criterion 39 The mutual relationships between job rigidity and job flexibility for employer and for employee 116 Numerical values associated to Romanian Labour Code regarding the job flexicurity clauses 194 The components of positional vectors of job flexicurity (numerical values) 202 List of clauses in Romanian Labour Code involving job flexicurity219 Taxonomy of job flexicurity clauses in the Labour Code of Romania226

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CHAPTER 1

Introduction

The labour is a specific human being prestation/activity in order to produce the goods or services needed for biological surviving and for other goals achieving, according, for example, to Maslow’s pyramid of human needs. In its essence, the labour is a physical and psychological consumption of energy oriented towards getting a pre-established purpose. Such activity could be made either for itself or for others, either individually or collectively, either occasionally or permanently. Generally, the labour is delivered in the presence of other two production factors: capital and raw materials. In such a triadic model of labour objectifying, the labour is the active factor—without labour, both capital and raw materials remain passive, and they lack the potential to produce something. Historically, the labour has specialized, so the social whole activity is currently based on the activities (specialized labours) exchange. It must be mentioned there are two inter-related concepts here: the labour and the labour force. The labour force is the human being ready to provide the labour. In this paragraph, we are interested in the labour characterized by the followings: –– the labour is objectified for others, that is, it manifests as a waged labour; –– the labour is a specialized one, that is, it exhibits a certain rigidity regarding its substitutability;

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 E. Dinga et al., Job Security and Flexibility, https://doi.org/10.1007/978-3-031-28509-7_1

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Fig. 1.1  The general phenomenology of labour. (Source: Authors)

–– the labour is provided based on contracts between the worker (the owner of the labour force, or the employee) and the employer (the owner of the capital and raw materials); –– the contracts between employer and employee are based on constitutional and legal provisions, that is, they are not completely at the latitude of the contractors. Figure 1.1 shows some logical properties of the labour functioning in our societies.

1.1   Codified Rigidities—Law, Contracts and Jobs 1.1.1  Preliminaries Labour is a conscious activity, directed towards getting a purpose. The source (or potential energy) of the labour is the labour force. Labour force is a human capacity, consisting in physical and mental (intellectual) energy to be spent in the labour process. Spending of the labour force in the process of labour is labelled work, and the individual implied in this process is called worker. The work can happen in two distinct ways: (a) work for himself/herself; (b) work for other. (a) working for himself/herself (NB: by using a unitary terminology, we can say, alternatively, working as self-employed) means using of own physical capital and financial resources in order to produce the needed goods and services. Generally, these products are aimed at to be consumed by the involved worker and its family. Such an economic activity is known as subsistence economy or as autarchic

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economy. The economic exchange is not incompatible with such a type of working1; (b) working for other (i.e. as employee) implies cumulatively verifying of some conditions: (1) the lack of production factors (physical capital, and financial resources) as economic property of that individual; (2) the presence of certain labour specialization of that individual; (3) the economic necessity of that individual to use its labour force and specialization to get economic means (e.g. income) in order to satisfy his/her biological needs. For the present paper the second hypostasis is of interest.2 Below, some considerations on the way in which contractual rigidities could appear linked to the labour force, labour and jobs are provided. In Fig.  1.2, a general scheme regarding the mentioned generic relationships is shown. 1.1.2  Laws Although the law and contract are two very different things, since the law (including the Constitution) are, in turn, the result of the social contract, we treat the laws as sui generis contracts. The first (and strongest) bearer of rigidities on the labour market is the law, including the supreme law (the Constitution) as well as the ordinary laws regarding the institutionalizing and functioning of the labour market. By laws are stipulated mandatory conditions, restrictions and liberties which must govern the labour market, including the inter-relations between employers and employees in the processes of hiring, firing and working. The rigidities the laws contain have a general/universal character, being applied no matter the economic sector, branch or other specific

1  More than that, the fundamental criterion of activity specialization—both the absolute and comparative advantage—works and generates the economic exchange from which everybody gains. To be observed that the economic exchange is a logical necessary consequence of the economic specialization. 2  The case of charitable or of benevolence activities cannot be considered as being species of work because these kinds of objectifying the capacity of delivering services for others do not aspire to get income aimed at to support the biological surviving (the standard of life) for ones delivering charitable or of benevolence activities.

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Fig. 1.2  The two kinds of working (for himself/herself or for other). (Source: Authors)

features of the employer or employee. The main characteristics of the legal rigidities can be summarized as follows: • generality—the rigidities address the labour market as a whole3; • permanency—the rigidities are in force so long as the law is not changed; if the law changes, the new rigidities have the same permanency until the new modification of law, etc. We can name such rigidities on the labour market as legal rigidities. A useful typology of the legal rigidities of the labour market (LRLM) could be the following: (a) regarding the “addressee” of the rigidities: • employer LRLM (R-LRLM)—addresses the owners of production means—physical capital, financial resources and raw materials—either as individuals or aggregated into trade unions of employers; 3  Although some differences could be stipulated even in laws regarding very specific kinds of labour market, we can assume that the legal rigidities are of general applicability.

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• employee LRLM (E-LRLM)—addresses the owners of labour force, either as individuals or aggregated into trade unions of employees. (b) regarding the legal force of the rigidities: • constitutional LRLM (C-LRLM)—the rigidities are stipulated by Constitution, that is, by the supreme law in society. Consequently, the constitutional provisions guide any law provisions in the matter. These rigidities are of the largest permanency and generality. The constitutional rigidities could be named as rigidities of order 0; • ordinary LRLM (L-LRLM)—the rigidities are stipulated by ordinary laws, also of a large generality as any law must be.4 The ordinary rigidities could be named as rigidities of order 1, because they cannot violate the constitutional provisions, neither by widening nor narrowing them5; • methodological LRLM (M-LRLM)—the rigidities are stipulated by methodologies enacted in implementing of the ordinary laws. In an analogous way, the methodological rigidities cannot violate the law provisions; they must be done exclusively in homogeneously applying of the law provisions. 1.1.3  Contracts The second bearer (in a decreasing order of juridical force) of rigidities on the labour market is the contract. By contract it must be understood an agreement between the interested parts (no matter if that agreement has or has not a written form6) regarding a common goal, whatever it be. We do not discuss specific issues regarding the concept of contract, because they are not of necessary interest for the theme of current paragraph. However, it must be shown at least the following considerations which

4  As shown in the debates regarding the social inter-actions, the impersonality is the fundamental feature of the law. 5  It is well known that Constitution is considered as primary legislation, the ordinary laws are considered as secondary legislation, and the methodological provisions are considered as tertiary legislation. 6  The written form of an agreement is neither a sufficiency nor a necessary condition for exist a contract. The written form only has significance of evidence, in order to prove the existence of that contract.

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connect the concept of contract with the concept of rigidity on the labour market: (a) the contract is “the law of parts”. This means the contract has, for the specific case of inter-actions between (or among) private individuals, the same force of binding as the law; (b) the contract is valid if and only if it is coherent and consistent with the law which it arises under. This means the contract cannot exceed the law provisions neither by extending nor by narrowing the rights and duties to be included into the contract; (c) the contract has a private character, unlike the law which holds a public one. This means the contract limits its provisions from three points of view: (1) the object—a particular object of the exclusively interest of the individuals involved; (2) the subject—the individuals only which the contract arises between; (3) the duration—the time interval stipulated in the contract regarding its validity. To be mentioned that, by implying of the institutional individuals, medium- and long-term contracts can be signed, which introduce rigidities (implying security) on the labour market. The contracts on long term stiffen the contract on medium term, which, in turn, stiffen the contracts on short term. Introducing the law in this logic, we can illustrate a stiffening in cascade (Fig. 1.3).

Fig. 1.3  The logic order of introducing rigidities on the labour market. (Source: Authors)

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1.1.4  Jobs By job it must be understood an institutional arrangement (public, private or a public-private mix) to put together the labour force and the productions means (physical capital, financial capital, raw materials and other required means), in order to get pre-established products, generally aimed at to be sold on the specific market.7 By itself, the job does not constitute a rigidity which could generate some security elements on the labour market, but by association between job, contracts and laws, the jobs generally lead to rigidities. For example, the contracts on the labour market do not exist without a job (or many) involved.8

1.2  Economic Rigidities: Rigidities of the Labour Market 1.2.1  Preliminaries The economic world has become increasingly complex, especially as a result of the sophistication of the nominal economy. Consequently, both Keynesian theory followers and adherents of neo-classicism strive to “give” as much evidence as possible to their explanatory model, in order to impose their own theories, many times with the prefix “neo”. The rigours that characterize some economic variables are among the most commonly used “candidates” for both the accumulation of evidence and the attempt to produce a counter-evidence in the aforementioned polemic. In this paragraph, our goal is to specify, logically (not empirically), the concept of rigidity in the economy. On this basis, we will try to propose a general typology of rigidities in economy, as well as outline the causal mechanisms that we suppose to explain the emergence and impact of these rigidities. 7  To be mentioned that, if the jobs are publicly arranged, the obtained products are distributed outside the market (because they are public goods). 8  The underground economy avoids, generally, the contracts, although it makes arrangements to supply jobs for the labour force, to the end of avoiding to pay the taxes assigned to labour force (but, also, assigned to the entire economic activity—e.g. the VAT—value added tax).

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The methodology we will use is based on logical, completeness and consistency assessments. We will also rely heavily on the classification method in order to achieve, as much as possible, a “complete” map of the rigidities operating in the economy at an abstract level. 1.2.2   The Concept of Rigidity in the Economy Field We will first discuss the nominal rigidity in the economy, that is, the rigidity of the measurable numerical value of macroeconomic variables. By rigidity, in the strong sense of the term, is meant the property of being constant, not to undergo changes. In a narrow sense, rigidity means a certain “resistance” to changes, to evolution. In the economy, the property of being rigid can be associated with both economic systems and economic variables. When associated with economic systems, rigidity can be called inertia, or conservative capacity, or resilience in relation to the environment. In this case, the rigidity is generated by the structure of that system, being therefore a structural rigidity. Economic systems have no rigidity other than structural, because their “output” is a function that is dependent on the structure. In this paragraph we will not be interested in the rigidity associated with economic systems, but in the rigidity associated with the economic variables. The rigidity associated with economic variables is a rigidity of a different nature. It refers to a certain “mismatch” between the expectations of the economic observer (who is, in most cases, also an actor or economic agent) about the dynamics of a certain macroeconomic variable and the effective dynamics of that variable. If we note with an V an observable macroeconomic variable, with t a time point that is significant for an economic observer, with e what is expected with respect to the value of the variable V, and with a what is actually about the value of the variable V at the time t, then, noting with RVt the rigidity of the variable V at time t for t t t t the economic observer concerned, it can be written: RV  V  Ve  Va . Let us examine this relationship from a qualitative point of view. We note the followings:

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• rigidity exists if ∆V t ≠ 0. Therefore, the non-coincidence between the expected value and the actual value of the macroeconomic variable V generates the economic observer’s assessment that there is rigidity of the variable in question (at the time considered9); • in all cases where ∆V t = 0, we will say that V is non-rigid in the sense that it behaves as expected10; • the qualification of a variable V as non-rigid is not satisfactory because the deviation of the actual value from the expected value may be higher or lower, and this absolute value of the deviation may be significant for the economic observer concerned and for his decision of economic behaviour. Let’s make some considerations. First of all, we assume that the economic observer is a competent observer. Consequently, its expectations regarding the variation of the V variable are based on an accepted economic theory. As a result, the deviation of the actual (or effective) value of the variable V from its expected value is a deviation (or non-deviation) indicated by the accepted economic theory, so it is somewhat objective. The expectation of the economic observer in relation to the deviation of V is a quote based on the mechanisms of impulse transmission, as assumed by the given theory, and as the economic observer in question presumes in turn. Secondly, the accepted economic theory of rigidities in the economy will presume the rigidity or non-rigidity of the selected macroeconomic variable, saying that there will be or will not be a variation in the value of

9  It is worth mentioning the extremely important fact of the “dating” of the economic observer’s assessment. Thus, in the presented case, his/her evaluation of the rigidity of the variable V is valid only for the time t selected for observation. Even if there are many such selected moments, where ∆V  t = 0, it is still not possible to say that the variable V in question is generally rigid. The impossibility of generalizing the rigidity behaviour of a macroeconomic variable is due to the fact that verification of rigidity is, in principle, impossible (it seems like we have to deal with a particular case of the impossibility of verifying a hypothesis, from Popper’s falsifiability theory). 10  We will see below that these expectations are generated by a theory, so they are theory-­ laden. So, we do not have to face a subjective expectation, for example, with a hope or desire that satisfies the individual economic objectives of the economic observer concerned.

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the macroeconomic variable11 under certain conditions of the economic process described by the theory in question. However, no economic theory will be able (by the very fact that it is a … theory) to “compute”, that is, to accurately predict the value of the variation of a macroeconomic variable, that is, it will not be able to deliver a numerical value of the expected value of that variable. Here is a certain imprecision that is specific to the entire economic science (and even to all social sciences), namely a very large variability of the macroeconomic variables at very small variations of the initial conditions12 (those conditions considered by the theory when it stated its theorems, i.e., when describing the transmission mechanisms). Thirdly, as a consequence of the previous mentions, the absolute magnitude of the deviation of the actual value from the expected value of the V macroeconomic variable is, in turn, variable. Therefore, a rigid observer will consider that any ∆V t  ≠  0 signifies a rigidity of the macroeconomic variable concerned, but a more … flexible observer will consider that only a deviation that exceeds a certain threshold, considered acceptable/tolerable, will mean that the macroeconomic variable is rigid. Figure 1.4 exhibits a graphical representation of the rigidity concept of a macroeconomic variable.

Fig. 1.4  Rigidity arising of a macroeconomic variable. (Source: Authors)

11  Again, we assume that we are dealing with an authentic economic theory (like we have assumed a competent economic observer), that is, with a solid, articulated economic theory that makes fundamental judgements on all transmission mechanisms in the economic process (to be noticed that an economic theory is nothing but a complete description of transmission mechanisms in the economic process, of course on the basis of accepted axioms or principles without demonstration). 12  This makes economic science a part of the complex science class.

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1.2.3   Nominal Rigidity and Real Rigidity Let us examine in more detail the economic observer’s assessment of the rigidity of the macroeconomic variable (i.e. in the case of ∆V t ≠ 0). As it results from the above, the rigidity of a variable occurs when its actual variation is different from its expected (potential) variation. Here two questions arise: (a) if the deviation of variance is orthodox (i.e. it is produced in the same way as the “predictions” provided by the theory); (b) if the accounting deviation (i.e. the nominal calculating deviation) has an effect on the economic behaviour. Solving the first question will lead to the concept of an adverse effect (if the case), while solving the second question will lead to the concepts of nominal rigidity versus real rigidity. (a) it is possible that the actual deviation of the selected macroeconomic variable as a “witness” occurs in the sense that the theory presumes (and then we have an orthodox effect), or it is produced in the opposite direction than assumed (and then we have an adverse effect). For example, let’s say we have a demand-type shock (e.g. the marginal propensity for consumption, at the same disposable income, suddenly increased). Orthodox expectation, according to Keynesian theory, is that price rises (given that the supply cannot change with the same speed and amplitude simultaneously). If this price increase actually occurs, then we can say the macroeconomic variable called price behaved flexibly. If the price does not grow, we have a price rigidity, while if they are diminished, we have an adverse effect. In the latter case, should prices be considered rigid or flexible? If we apply the reasoning presented above, ∆V t = 0, that is, prices are non-rigid. Instead, if we look at the meaning of variation, it might be said that expectations were, however, deceived (expectations not only relate to the fact of change but to its meaning too), so prices should be considered rigid. Here the current theory makes no distinction, considering only cases of rigidity/ orthodox flexibility. We consider that, in the case of the non-­ orthodox, variation of the price variable in the above example, we are dealing with an adverse flexibility (Fig. 1.5). (b) the second issue raised by the concept of rigidity is more complex. It refers to the causality of economic behaviour (i.e. implicitly, to the substantiation of the economic decision) generated by the production of rigidities in the economy. In fact, the Keynesian phe-

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Fig. 1.5  Flexibility (orthodox and adverse), respectively, orthodox rigidity. (Source: Authors)

nomenology is based on rigidities in the economy. Economic process analysts have identified two classes of economic rigidities: nominal rigidities and real rigidities. Some analysts consider the real rigidities as the gaps with which nominal rigidities are not achieved, while others apply the nominal-real dichotomy generated by the non-deflationary situation, respectively d ­eflationary one of the nominal values of the macroeconomic variables with inflation.13 The version of real rigidity as the difference between the expected value of a macroeconomic variable and its actual value overlaps, ultimately, the nominal rigidity over the real one. For example, consider a variation in consumer demand that should lead, according to the theorems (transmission mechanisms) of the economic theory accepted, to a short-term increase in prices of 5%, in fact being measured (measured) only an increase of 3%. This would 13  Although inflation is the most common deflator, it is not the most complete. Probable deflators should be calculated for each macroeconomic variable susceptible to rigid behaviour. However, the preference for inflation as a deflator has a good foundation: inflation is the deflator that is closest to the current perception of economic actors, and economic behaviour will be influenced by the most acute perception.

1 INTRODUCTION 

13

mean that we have a real rigidity of 2%. It is obvious that such a point of view brings nothing new to the concept of nominal rigidity discussed previously. Instead, if we consider deflating nominal variations, we will get something completely different. In this chapter we will address this latter position on the concept of real rigidity.14 The most common macroeconomic variables taken into account in the literature to assess the rigidity of the economy are commodity prices, and, respectively wages. Both variables are eligible for deflation; both of them result in values that are of the nature of purchasing power: thus, price deflation with inflation indicates the share of nominal price variation that has not yet occurred, although transmission mechanisms require this, while wage deflation with inflation rate indicates also the purchasing power of the nominal wage. If, in the case of wage, the deflation of the nominal wage leads to the real wage concept, in the case of prices, deflation leads simply to the calculation of the difference of variance (orthodox or adverse, as the case may be) that has not occurred as expected. We observe that in the case of prices, the deflation and the calculation of the non-updated difference from the expected price variation lead to the same result, that is why we can say that the first position of the economic process analysts on the concept of real rigidity in the economy can be retained a particular case, while deflation is a general one. 1.2.4   A Qualitative Analysis of Rigidity Therefore, switching from nominal rigidity to real rigidity is done by deflating (e.g. by inflation), the value with which the macroeconomic variable considered varies. Consideration of real rigidities is important because economic actors behave on the basis of real values of macroeconomic variables rather than on the basis of their nominal values. We will therefore say the following: • nominal rigidity quantifies the non-realization of the expected change in the nominal value of a macroeconomic variable;

14  In fact, we can see that the first position mentioned above can be “recovered”, but from the point of view of the real rigidity, not of the nominal rigidity.

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• areal rigidity quantifies the non-realization of the expected change in the nominal value of a macroeconomic variable after the deflation of the effective nominal value variation. Let’s formalize these conclusions. We will note with dt the deflator at the moment15 t, and with R tV the magnitude of the real rigidity of the macroeconomic variable V at time t. Then we can write the following:

R tV  R Vt  d t



We can have the following distinct cases (we will remove the module from the calculation of nominal rigidity in order to capture both the orthodox and the adverse cases, so R tV  Vat  Vet ).16 They are presented in Table 1.1: So, there may be 12 distinct cases of combination between nominal rigidity and real rigidity: 1. (orthodox nominal rigidity—orthodox real over-flexibility) 2. (orthodox nominal rigidity—real orthodox flexibility) 3. (orthodox nominal rigidity—real orthodox rigidity) 4. (orthodox nominal flexibility—orthodox real over-flexibility) 5. (orthodox nominal flexibility—real orthodox flexibility) 6. (orthodox nominal flexibility—real orthodox rigidity) 7. (orthodox nominal over-flexibility—real orthodox rigidity) 8. (orthodox nominal over-flexibility—real orthodox over-flexibility) 9. (adverse nominal flexibility—real adverse flexibility) 10. (adverse nominal flexibility—real adverse flexibility) 11. (adverse nominal flexibility—adverse real rigidity) 12. (adverse nominal flexibility—real orthodox rigidity)

15  For both the V macroeconomic variable and the d deflator, the t moment is measured from the same (t − 1) default momentum in order to have methodological comparability. 16  The “decreases-decreases” and “decreases-increases” cases for V are not treated anymore, because they are perfectly symmetrical images of the cases already treated.

Increases

Increases

Decreases

Increases

Vat

Orthodox flexibility

Null

Positive

Adverse flexibility

Negative Over orthodox flexibility

Orthodox rigidity

Null Positive

Null Positive Negative

Negative Null Positive Negative

Null Positive

Negativea

 t Nominal meaning d

Positive

RVt

< R tV = R tV > R tV < R tV < R tV = R tV > R tV dt dt dt dt dt dt dt

Negative

Positive

Null Positive

Null Negative Positive Null Negative

=R >R R

d dt dt dt dt dt dt dt dt dt dt dt dt

t

t V t V t V t V t V t V t V t V t V t V t V t V t V

Positive

d t < R tV

R Vt

V

R tV R tV R tV R tV R tV R tV R t

> R tV = R tV < R tV = R tV < R tV = R tV < R tV

R tV = R tV 0 < R tV < R tV 0  R tV  R tV R tV < 0 < RVt R tV > R tV t = 0 R= R tV V R tV  0  RVt R tV < R tV 0  R tV  R tV R tV < 0 < R tV

R tV > R tV

Over adverse flexibility Adverse flexibility Adverse rigidity Adverse flexibility Adverse rigidity Adverse flexibility Orthodox rigidity

Over orthodox flexibility

Over orthodox flexibility Orthodox flexibility Orthodox rigidity

Orthodox flexibility Orthodox rigidity

Over orthodox flexibility

Real meaning

a

We will consider the negative value associated with deflation, and the positive value associated with inflation. So, at negative value, we have a reflation process, and at positive value we have a deflation process

Source: Authors

2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22.

1.

Vet

Table 1.1  The cases of nominal/real rigidity/flexibility, in orthodox/adverse ways

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1.2.5   Impact of Rigidities on Economic Markets Labour market, in the most abstract sense of the term, is an economic space for communication between demand for labour (equivalently: supply of jobs) and supply of labour (equivalently: demand for jobs). It is similar to the goods and services market, with the exception that while goods and services are traded on the goods and services market in exchange for money, the labour market is dealing with labour in exchange for money. The coin is therefore involved in both mentioned economic markets. Thus, in the labour market the monetary value of the labour force is called nominal wage, while on the goods and services market the monetary value of a good or service is called price or tariff, respectively. Essentially, from a conceptual point of view, both the wage and the price or tariff are the nature of the price, that is, the currency equivalent of an object traded on a market. Although the classical concept of the labour market shows that the balance of this market is formed only by successive groping of labour supply and labour demand, with the well-known market clearing effect, the trade unions of employees (and of employers) introduced what we call barriers to wage flexibility. What we call rigidities (nominal or real) are actually generated by these syndications that generate a so-called viscous environment in the way of wage variation.17 Thus, the labour market can be represented as in Fig. 1.6 (DL means demand for labour, SL means supply of labour, CM means clearing market, qL means quantity of labour, E equilibrium of the labour market under the rigidity of the minimal wage18): We note (Fig. 1.1) that the labour supply curve becomes horizontal at the intersection with the minimal (rigid) wage curve, so imposing this rigidity generates employment reduction (unemployment). Apart from the minimal wage, a similar effect can also produce the efficient wage (which, of course, must be higher than the minimal one). Efficient wage is also considered in many specialty studies as a strong source of wage rigidity.

17  We do not discuss for the moment the asymmetry of this viscosity (rigidity is higher in decreasing than in increasing), it will be considered, however, below. 18  There is a conceptual difference between the minimal wage and the minimum wage: while the minimal wage is established by law, the minimum one is “established” by the labour market (of course, the minimum wage is always greater than the minimal one).

1 INTRODUCTION 

17

wage SL

Srigid

efficient wage

E

minimal wage CM

DL

qL

unemployment

Fig. 1.6  Impact of minimum nominal wage rigidity on employment (quantity supplied of labour). (Source: Authors)

A similar effect can also occur on the goods and services market when the price is rigid (Fig. 1.7): Goods and services prices, respectively wages (labour prices19), are the most common and most known macroeconomic variables capable to capture the rigidities. However, other nominal variables may have rigid behaviours. We exemplify here the exchange rate (e.g. the central bank’s monetary policy may generate rigidities, whether nominal or real, of the exchange rate through its interventions in the foreign exchange market), or the bank (active or passive) interest rate that may “follow” or not the variations in the monetary policy rate. In principle, any nominal variable may exhibit rigid behaviours under certain economic and regulatory circumstances.

19  The distinction (very important) between labour and labour force, mentioned above, will be ignored in the economy of the chapter. To be mentioned, however, that the contract between employer and employee has as object the labour force, not the labour per se (as already explained, the labour force is “transformed” into labour through working).

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price S

Drigid

E

minimal price

CM

D

q

excess

Fig. 1.7  The impact of the minimum minimal price rigidity on the quantity demanded. (Source: Authors)

1.2.6   Some Concluding Remarks on Rigidity The main conclusions we have reached on the labour market rigidities can be systematized as follows: (a) the rigidity of a macroeconomic variable should be understood as the situation where the effective (actual) variation of that variable is different from the expected variation (“predicted” by the accepted economic theory); (b) rigidity is the consequence, on the one hand, of the functioning of the mechanisms for transmitting the economic impulse and, on the other hand, of the deliberative decision of the economic actors involved in the functioning of the macroeconomic variable concerned; (c) it is important to identify not only the nominal rigidities, but also the real ones, because the economic behaviour (the substantiation of the economic decision) rather takes into account these last rigidities;

1 INTRODUCTION 

19

(d) the shift from nominal to real rigidity is “mediated” by nominal deflators (the most common, though not the most appropriate, is inflation); (e) there are 12 distinct cases of “nominal rigidity—real rigidity” pairs that could be considered in economic analyses for each macroeconomic variable susceptible of rigid behaviour in part; (f) apart from the situations of flexibility and rigidity in the accepted standards, a situation of over-flexibility or over-rigidity (at both nominal and real levels) can also be identified; (g) in addition to the flexibility and the orthodox rigidity, the cases of flexibility and adverse rigidity must also be considered; (h) the theoretical treatment of the rigidity problem in the economy has led us to take into consideration the case where the deflation is replaced by the reimbursement (i.e. the case not of inflation, but of deflation).

1.3   Psychological Rigidities: Cognitive/Rational Versus Affective/Emotional Rigidities Many rigidities on the labour market could arise from the psychological point of view. Many results in the matter have been provided by recent research in cognitive psychology, neuroscience and behavioural economics. Generally, such rigidities on the labour market could be of the following categories: (a) by the criterion of origin: • cognitive/rational rigidities: rigidities enacted by reasons, judgements, and like considerations, based on rational allocation of actions to pre-established ends (purposes); so, an action affecting the labour market will be decided if and only if that action seems to get the end (or, it seems to have a great probability to do so).20 Such rigidities have, usually, a utility function which capture the end (purpose) in which view the action is assessed, so that utility function be extremized (maximized or minimized);  Ones could associate this origin of rigidities with system 2 in Kahneman and Tversky theory of prospect, that is, with the deliberative device of reasoning. 20

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• affective/emotional rigidities: rigidities generated by unconscious “reasons”, based on personal characteristics generated by experience, expectations, positioning towards risks, uncertainty and so on. These rigidities form, in fact, what is called the personal idiosyncrasy of the individual in case.21 (b) by the criterion of actors/agents: • employer’s rigidities: rigidities which the employer is concerned on. These rigidities could address changing the wage/salary, the work conditions, the locations of economic affairs and so on. The employer’s rigidities are based on rational calculus/choice rather than on feelings or emotions; • employee’s rigidities: rigidities which the employee is concerned on. These rigidities could address almost the same targets as employer does, but by combining the rational calculus/reasons with expectations, emotions and other unconscious factors. (c) by the criterion of aggregation: • individual rigidities: rigidities addressing the individual interest, either it is of employer or of employee. These rigidities must not be of a very idiosyncratic kind—they remain of categorial one— but they act on the individual level; • collective/class rigidities: rigidities addressing the collective (group, community or the society as a whole). These rigidities affect not the individual, but a social or professional or organizational group of individuals. For example, related to the organizational structures on labour force, such rigidities could address the employee’s trade unions or the employer’s trade unions.22

1.4   Labour Market: Imperfections and Rigidities The pure and perfect competition of economic markets is, of course, a too simplified and un-realistic model of any economic market, including the labour market. Consequently, in examining of the labour market rigidities, we must take into account the imperfect labour market. Theoretically, the imperfection of labour market could arise from the following perspectives: 21  Ones could associate this origin of rigidities with system 1 in Kahneman and Tversky theory of prospect, that is, with the automatic device of reasoning. 22  No matter if the involved provisions are stipulated into law or into contract.

1 INTRODUCTION 

21

• regarding the atomicity of economic agents/actors: on the labour market there are agglutinations (generally institutionally) both of the employees (on the one hand) and of the employers (on the other hand). The institutional agglutinations are the trade unions. Consequently, the bargaining between the two parts—employee and employer, respectively—take place not at all between individuals, but between the corresponding representatives, that is, between the assigned trade unions. In fact, from economic point of view, on the labour market there are a monopoly and a monopsony: (a) a monopoly—of the employees, which sells labour force; (b) a monopsony— of the employers, which buys labour force.23 As a result, on the labour market bargain what are called representative agents, not individuals in the personal understanding, so we have a situation of imperfect competition named bi-lateral monopoly (or, equivalently, as said, bi-lateral monopsony). In such conditions, neither the employer, nor the employee are price taker.24 So, from the personal individual perspective25 (either be s/he as employer or employee), there are rigidities of the labour market, because the representative employer, and the representative employee, respectively, must aggregate the bargaining conditions, so the result of the bargaining will be approximatively an… average of the personal individual preferences. The non-atomicity of the agents/actors introduces rigidities in the demand and supply of labour force (or of jobs, respectively26), so any labour contract must be negotiated in its own, not by applying a generic scheme of such bargaining;

23  Or, of course, equivalently: a monopoly of employers (selling jobs) and a monopsony of employees (buying jobs). 24  To be mentioned that on the labour market by price must be understood wage (or salary, after the case). 25  To be mentioned that, on the imperfect labour market, there are two categories of individuals: (a) personal individual—that is, the physical individual; (b) representative individual—that is, the institutional individual. 26  To be observed the mirror image of the supply and demand on the labour market: the supply of jobs is equivalent with the demand for labour force, while the supply of labour force is equivalent with the demand for jobs.

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regarding the homogeneity of the products: on the labour market the products exchanged are the labour force and the job.27 No matter which of them is examined, it is obvious that we cannot find homogeneity—the labour force is assigned to different personal individuals, with different personalities captured in education, specialization, age, family features, motivations, desires, preferences, experience, etc. It is of a great probability that even sharing a great part of specificities, any two personal individuals will differ by a sufficient other number of such specificities, so they be considered non-homogenous. The same about jobs: depending on the location, the management, the organizational culture, the technological endowment and so on, the same nominal job (according to, e.g., the national official nomenclator of professions or occupations) will differ by sufficient characteristics so be perceived as non-homogeneous. Consequently, on the labour market there are not the homogeneity of products; • free circulation of the production factors inside the labour market: regarding this axiom of the pure and perfect competition, and from the perspective of the labour market, it must be noticed that it addresses the labour force only, that is, the potential employee.28 Regarding the employer, this axiom should be discussed related to the market of goods and services implied, not related to the labour market.29 Although some restrictions regarding the free movement 27  Like other any markets, the labour market has only two products which are mutually price for the other. So, the labour force is the price for the job or, alternatively, the job is the price for the labour force. In order to reduce (or, at limits, to avoid) the transactions costs) the two products are expressed into money—on the labour market the monetary expression is called wage (or salary, after the case). Although economists talk about the market of goods and services, in fact any good or service has its own market, because on a given market cannot be exchanged than two products which are related by intermediation of the monetary price. 28  Generally, this axiom regards also the financial capital, but, from the scientific interest of the current paragraph, this factor of production will be not discussed here. 29  The employer is not considered as a factor of production in standard Economics. However, the profit is a species of income which, in such a view, has not a recipient. Therefore, new approaches in economic modelling consider the entrepreneur (which could be assimilated, in certain conditions, as equivalent with the employer) being also a production factor, since s/he has its own income—the profit. The other species of economic income are, as known: (a) wage/salary—for employee; (b) rent—for owner of physical capital; (c) interest—for owner of financial capital.

1 INTRODUCTION 

23

of the labour force among member states within the European Union (but also, within other geographical areas) are stipulated, if we restrain the discussion inside a national economic system, we could accept this axiom is generally verified. So, from this point of view, the labour market does not maintain rigidities. • free access (entering/leaving) of subjects on the labour market: this axiom addresses also the employee only, because, as said above, the employer is associated rather with the market of goods and services, than with the labour market. It can be said that, generally, there is the freedom to enter (or leave) the labour market for every interested personal individual.30 Of course, regarding the institutional individual, some questions arise: (a) the trade unions of employees can restrict, for their members, either entering or leaving the labour market. For example, if the common interests regarding the wage/salary level, the work conditions, and so on require such decisions/actions. Since, the real labour market is “captured” by the institutional individuals (regarding both the employees and the employers), we will concede that on the labour market acts rigidities from the perspective of this criterion of analysing the structure of the labour market. Figure 1.8 tries to summarize the concept of these rigidities; • the perfect transparency31 of the labour market: like regarding other economic markets, on the labour market there is not instantaneously access to information regarding the demand and supply of labour force (or, equivalently, of jobs), including the specific conditions associated.32 In addition, capturing the information implies ­transactions costs, without taking into consideration the difference of capacity of information processing among the individuals. So, on 30  Of course, by verifying the legal (including constitutional) provisions on the labour market—for example, the minimum (or maximum) age, the psychological responsibility or the capacity of exercise. 31  We would bring in memory the two cumulative conditions regarding the transparency of a generic market: (a) instantaneously access of anybody to any information of interest; (b) free charge access of anybody to any information of interest (i.e. lack of the transactions costs). 32  Consequently, for example, on the labour market there is not the so-called informational efficiency of the market, claimed by Eugene Fama (a 2013 Nobel laureate) and others. We remember that by informational efficiency of the market is understood the change of the behaviour according to the new information produced/arisen in that market (in other words, it is understood as an immediate integration of the new information in the decision-­ making “machine”).

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Fig. 1.8  The rigidities on the labour market generated by the institutional individuals bargaining. (Source: Authors)

the labour market there are rigidities based on the informational asymmetry. Like in the banking system, it seems on the labour market could appear adverse effects generated by the information asymmetry.33 As a result, the spontaneous allocation of labour force to jobs (or, equivalently, of jobs to labour force) is, generally, sub-optimal.34 In conclusion, we can say that, on the labour market, the imperfections constitute a significant cause of rigidities which, in turn (as we’ll see below), generate the basic elements of security (or, in mirror, un-security) on such a market. The imperfections of the labour market could be, viewed, also, as effects of the public or private measures to ensure some a degree of the labour market. Consequently, we have, in fact, a circular causation between labour market imperfections and labour market ­rigidities/security. 33  For example, the potential employees hold more information about the potential employers than vice versa. 34  Probably, a certain phenomenon like Pareto improvement (or, larger, Kaldor-Hicks improvement) happened on the labour market as a result of the adverse effects caused by the information asymmetry.

CHAPTER 2

The Concepts of Job Security and Job Flexibility

2.1   Job Security 2.1.1   What Job Security Is Not, and What It Actually Is? In the most appropriate way, when talking about the security on the labour market, we must understand the security of the jobs.1 So, the following issues shouldn’t be associated with the concept of security on the labour market: • respecting/violating the human rights, generally considered: these issues regarding the human rights are imposed by norms of highest juridical force (like Constitution or organic laws), but they are nothing to do with the security of job from the perspective of labour market functioning; • existing of dangerous (e.g. chemically toxic) conditions of working: these issues are, of course, important and significant for the quality of jobs2 (e.g. they address the medical security), but they are not at

1  Be aware the security of job is of interest both for employer and employee, although the current usage of syntagma is assigned to employee only. 2  For example, they are very important in the decision-making when a job is rationally chosen.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 E. Dinga et al., Job Security and Flexibility, https://doi.org/10.1007/978-3-031-28509-7_2

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all related to the concept of security of jobs from the perspective of labour market functioning; • other sectoral types of security, which are not causal correlated with the labour market: food security, energetic security, climate security, informational security or military security. By eliminating the cases which do not account for job security, we turn now to identify the sufficiency predicates of the concept of job security, in order to find its logical definition. Firstly, the job security must be a property not related to the job in its own, but to the relationships which engage the job in case. We’ll name this sufficiency predicate as the relationality (or the relational nature) (R). The relational nature of the job security is just the logical negation of the rejected cases of false job security mentioned above. Of course, the relational nature concerns both the employer and employee, and such a way it generates job security from the two perspectives (not always consistent between them3). Figure  2.1 reveals the sufficiency predicate named relationality.

Fig. 2.1  The path of forming job security based on (a triadic) relationality. (Source: Authors)

3  In fact, we’ll show that the two perspectives are logically related by intermediation of the logic constant named negation.

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27

So, the job security is a triadic relationship: the normative framework (law and/or contracts), the job, the economic actors on the labour market (employer and employee, respectively). Secondly, from the perspective of both employer and employee, job security means the maintaining of the relationship between job and employee. We’ll name this sufficiency predicate as the preservability (P). In contrast to the relationality, the preservability is a dyadic relationship— job and employee. Thirdly, the job security means keeping the state of the subject on the labour market in a stationary way.4 We’ll name this sufficiency predicate as the stationarity (S). Based on the three sufficiency predicates, we can now define logically the job security as: a property of the triadic relationship job-employer-­ employee to punctually preserve the state of the subject on the labour market. If it is noted the job security with JS, we can write:

JS   R, P, S 



or, using the constant logic of conjunction:

JS  RP S 2.1.2   From Labour Market Rigidity to Job Security

A question now arises regarding the relationship between rigidities on the labour market and the job security. Generally, we think the following characteristics are held by such a relationship: • any job security is a labour market rigidity, but the reciprocal is not true. This means there are labour market rigidities which do not generate job security, that is, those rigidities which does not verify at least one of the three sufficiency predicates; 4  By the stationarity of an entity must be understood the keeping of that entity in a given point. Algebraically, this means the invariance of the state-vector describing that entity. As we’ll in the next paragraph (aimed at the job flexibility), the flexibility means an invariance too, but an interval-invariance, not a point-invariance as the job security is.

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Fig. 2.2  Labour market rigidities do not become job security. (Source: Authors)

• relationships between rigidities on labour market and job security is dynamic: some rigidities which act in the past as job security could lose this position in the future, while some rigidities which were not act in the past as job security now begin to act as such. A question can be arisen here: really job security is nothing else than a rigidity verifying the three sufficiency predicates? In our opinion this question must be answered affirmative: the stationarity, which is one of the crucial features of job security cannot be provided by some rigidity only, namely even by some punctual rigidity. So, whenever we observe something which seems to be associated with the job security, we must search behind the corresponding rigidity.5 Figure 2.2 captures the way in which rigidities do not become job security, while Fig.  2.3 captures the way in which rigidities do become job security. 2.1.3   What Contractual6 Rigidities Could Secure the Job? The security of job is not seen as being the same from the perspective of employer and from the perspective of employee. Such a distinction is useful to be done from the perspective of the contractual relationships on the labour market too, more exactly, from the perspective of the labour contract. 5  Like in Sherlock Holmes procedures, when a job security happened, the appropriate action should be: “cherchez la rigidité”. 6  Since it is mandatory to capture into labour contract the law provisions, it is not wrong to treat the law rigidities and the contract rigidities as being, actually, contract rigidities.

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Fig. 2.3  Labour market rigidities do become job security. (Source: Authors)

It is now the time to clarify a logic issue. Any contractual rigidity which the employer faces constitutes a security issue for the employee and vice versa—any rigidity which the employee faces with constitutes a security issue for the employer.7 In fact, the logical relationship among contractual rigidity, security and flexibility could be synoptically shown as in Fig. 2.4. • from the employer’s side –– (CRR-UPE) undetermined period of employment; this rigidity prevents the employer to fire the employee although s/he could have interest to do it (e.g. to hire a more qualified worker, or because of profit marge decreasing); –– (CRR-mWS) minimal wage/salary; it is the minimal level of the wage/salary, established by law and captured mandatorily into labour contracts. The economic signification is the level of actual wage/salary cannot be established below the minimal level; –– (CRR-JDP) job description provisions; any labour position (job) has established the maximum list of competences and tasks which have to be done within the contractual relationships. No other task cannot be required to worker to be accomplished. 7  We’ll see later, that the same happens for the concept of flexibility: any flexibility for the benefit of employer constitutes a rigidity for employee and vice versa—any flexibility for the benefit of employee constitutes a rigidity for employer.

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Fig. 2.4  Principled relationships among contractual rigidity, flexibility and security on the labour market. (Source: Authors)

• from the employee’s side –– (CER-FSW) fixed schedule of working day; when the economic activity is predominantly of flow nature,8 then the schedule of working day (the beginning time, and, respectively, the ending time of working day duration) is fixed and cannot anymore be modified, although by its modification the working day durations is preserved9;

8  Generally, the economic activity can be of two distinct and pure kinds (with many mixed/ hybrid combinations): (a) flow economic activity (FEA)—that economic activity where the economic results are flows, which are predominant and must be managed by contiguity, because their factual continuity; (b) stock economic activity (SEA)—that economic activity where the economic results are stocks, which are predominant and must not be managed by contiguity, because they are discontinued. 9  In other words, the schedule of working day is not sliding.

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–– (CER-PNR) preceding notice of resignation; any decision to resign from a contracted job must be notified previously within a ­specified period, in order to allow to employer to find another worker to substitute him/her; –– (CER-AWS) actual wage/salary; once the wage/salary has been stipulated into the labour contract, its level cannot be changed without a new negotiation, that is, it is necessary to agree on a new labour contract. 2.1.4   What Institutional/Economic10 Rigidities Could Secure the Job? The economic rigidities are “provided” by the economic mechanism itself, either at micro level or at macro level. This mechanism is, of course, induced by the general institutional framework of the society, on the one hand, and by the impersonal forces of the economic game, on the other hand. It could be established that the following rigidities liable to become factors of job security: • from the employer’s side –– (ERR-PED) price-elasticity of demand11: the employer cannot increase or decrease the employment size without taking into account the price-elasticity of demand (e.g. if the demand is elastic, then any increase of the employment leads to an increase of the cost with wages/salaries, which in turn leads to an increase of the price of products, given the profit marge as invariable), so, leads to a decrease of demand for those products; –– (ERR-ETU) employees trade unions: the employer is rigidized in his/her decision and action regarding the jobs by the trade unions of employees, which impose limits, ceilings or floors addressing different institutional clauses or economic mechanism involved in the job “world”. 10  Like the  case in  which the  legal rigidities are captured within the  contractual ones, the institutional rigidities are considered been captured within the economic ones. 11  We remember the price-elasticity of demand gives the number of per cent with which the quantity demanded for a given good or service changes as response of changing with a per cent of the price (to be mentioned that, given the negative slope of the demand curve related to price, ceteris paribus, the price-elasticity of demand is algebraically negative).

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• from the employee’s side –– (EER-PBW) productivity-based wage/salary: in order to verify the fundamental economic dynamic correlations, any increase of wage/salary must follow at most the increase of the productivity of labour (more exactly, the marginal productivity of labour) –– (EER-RTU) employers trade unions: the employee is rigidized in his/her decision and action regarding the jobs by the trade unions of employers, which impose limits, ceilings or floors addressing different institutional clauses or economic mechanism involved in the job “world”.12 2.1.5   What Psychological13 Rigidities Could Secure the Job? • from the employer’s side –– (ERR-DLP) decelerated ability to increase labour proficiency: increasing of labour force training generates an increase of labour productivity with two basic features: (a) with a lag, depending on contextual conditions; (b) in a decreasing kinematic (i.e. the curve of productivity increasing related to training increasing is ascending and concave towards the origin); –– (ERR-EP) employment preference against paid wage: the employer is pressed by the demand for the products (good or/and services), so s/he will generally prefer to employ the needed workers against to minimize the paid wages/salaries.14 Although this rigidity seems to be at intersection between the economic rigidity and the psychological rigidity, we think it is rather of psychological signification, that is, beyond the rational calculus of efficiency (e.g. in order to maximize the marge of profit15); 12  In fact, the trade unions of employees are acting “in mirror” with the trade unions of employers (see Fig.  2.4, where the negotiations on the framework of labour contract are done by the two categories of trade unions). 13  To be mentioned that the psychological rigidities are not under any rationality calculus, they are simply feelings which drive the employee’s behaviour related to the job in an unconscious way. 14  The situation is slightly different in the case of public sector (budgetary sector), because of the lack of efficiency signification (in the public sector there is rather an efficacy signification). 15  This means that the employer’s preference for the employment against the paid wage/salary could lead to paying more than the marginal productivity. Rationally, such a payment is equivalent with paying an efficient wage.

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• from the employee’s side –– (EER-ALJ) risk aversion for losing of the job: the employee has an aversion related to the risk to lose the job. In this context, s/he has a certain propensity to make compromises regarding the wage/salary or other work constraints, in order to preserve his/ her job. –– (EER-HJP) high job preference against wage/salary preference: in the alternative job–wage/salary, the employee we rather prefer to keep the job than to keep the wage/salary level. Although this psychological rigidity seems to be derived from the previous one, it is to be mentioned that it is a more particular feeling regarding only the alternative job–wage/salary, while the risk aversion for losing of the job is a more general feeling (i.e. regarding any substitute for the job).

2.2   Job Flexibility 2.2.1  Preamble The flexibility is a general principle of economy functioning. More than that, the flexibility is a principle of ensuring stability and even the sustainability of an economic system or process. So, the flexibility could be viewed, alternatively, as: • principle of functioning: sufficiency condition, of different kinds, to guarantee the functioning of an entity (system or process); this alternative leads to the concepts of sufficiency condition for mechanisms; • state of affairs: property (characteristic), of different kinds, to define or describe a state of an entity (system or process), so that it ensures the maintaining of the identity of that given entity; • way of reaction: capacity of an entity (system or process) of performing action(s) as response (reaction) to an external (or internal) perturbation from its stable trajectory, so to come back from the distorted state.16

16  The reaction is built according to the habitus of any individuals (see the concept of habitus of Pierre Bourdieu), confronted with the situational framework (see the concept of situational logic of Popper) within the decision is taken.

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Fig. 2.5  The general phenomenology of the flexibility. (Source: Authors)

The paragraph approaches the issue of flexibility from the perspective of the labour market, so its general description will be particularized to this market structure and functioning. The main aspects to be examined are the followings: –– the purpose of holding a job is not a punctual one, but it is associated to an interval of acceptance; –– the flexibility of a job is the joined result of the employer’s flexibility regarding the job and the employee’s flexibility on the same job; –– tracing of an indifference curve between the employer’s flexibility and the employee’s flexibility could be both possible and useful; –– flexibility could be both a quality and a vulnerability. Figure 2.5 shows some logical properties of the flexibility. However, the flexibility not always act to punctually recover the initial position (trajectory) of a disturbed entity. This is rather an extreme functioning of the flexibility which has already a name: resilience. The flexibility implies an interval within which the identity of the entity is still preserved. In fact, the flexibility property simply blocks the perturbations to remove the entity from the state of its identity, although that entity is moved within the acceptance interval. Figure 2.6 suggests this reasoning: 2.2.2   The Concept of Flexibility So, the general concept of flexibility could be described as that property of an entity to change its identity (no matter the causes which lead to such a changing) so that the entity involved does not suffer net worsening. The

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Fig. 2.6  The specific phenomenology of the flexibility. (Source: Authors)

qualification “net worsening” allows the entity to be flexible in the following two directions: • the bettering from identity changing is greater than the worsening17 from it; • the bettering from identity changing is equal to the worsening from it. The flexibility belongs to a richer conceptual family. Table 2.1 indicates some relationships about it. Based on the provisions in Table 2.1, we can make the following considerations, with a general character, regarding the concept of flexibility: (a) flexibility implies elasticity (E). This means once the entity had been moved from its initial state (location, attributes, competences and so on) it can move (or allows be moved) back.18 We could name this property as recurrence property; (b) flexibility implies plasticity (P). This means once the entity had been moved from its initial state, it can remain in the new state, 17  Of course, here arises the difficult issue of comparing the improvement with the worsening. The difficulty addresses at least two questions: (a) the index-number associated to improvement and to worsening, respectively (e.g. we could use the monetary expression), so the two changes can be compared and even “calculated” to give the net; (b) the utility associated to improvement and to worsening, respectively, so they become relevant for the entity (e.g. if the entity is the person—employee or employer—it seems that the dis-utility assigned to worsening is greater than the utility assigned to improvement). 18  The time interval required to perform the symmetric movement is not of interest here.

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Table 2.1  The relationships between flexibility and other related concepts Concept property

Flexibility

Resilience

Inertia

Stability

Sustainability

Elasticity Plasticity Accumulation of changing tension Thresholds Source: Authors

verifying the condition of “net worsening”, not suffering. This implies a structural modification of the total utility so that the new total utility be the same as the old one. So, an indifference process regarding the total utility of the entity moved from its initial state must work. We could name this property as conservation property; (c) flexibility implies accumulation of changing tension (A). This means a perturbation applied on an entity to move it from its initial state can be resisted but the entity in case accumulate some tension of changing. This tension reduces the future capacity of opposition to perturbation but, for moment, the entity avoids the changing. We could name this property as memory property; (d) flexibility implies thresholds (T). Because the memory property, flexibility can manifest its elasticity until it will accumulate sufficient tension of changing to trigger the conservation property. Passing from recurrence property to conservation property requires to achieve a threshold of accumulation of changing tension. We could name such a threshold as inside threshold, because, although the entity in case is “moved” from its initial state, it still keeps the flexibility feature. But, if the changing tension accumulation continues or passes beyond certain quantity, the entity could lose its flexibility—so, it registers a net worsening. In this last case, we could name the involved threshold as outside threshold. So, from a logical perspective, flexibility (F) convokes four properties, cumulatively:

F  E, P, A, T 



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Fig. 2.7  Working of the sufficient predicates of flexibility. (Source: Authors)

This property can be considered as sufficiency predicates which, from logical point of view, define the concept of flexibility: flexibility is that property of an entity which exhibits four sufficiency predicates simultaneously—recurrence, conservation, memory and threshold. Graphically, the sufficient predicates of flexibility work as shown in Fig. 2.7. 2.2.3   Typologies of Flexibility The flexibility of an entity, as it was described above, has a very general and abstract character. Consequently, it could be of different kinds.19 In the present paragraph, a typology of the flexibility will be delivered, based on seven criteria of classification.

2.3  The Criteria of Classification We propose the following criteria based on which the flexibility can be classified and which deliver dichotomic classes of flexibility:  These kinds are, of course, not of individual signification, but of class signification.

19

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• stability • nature • agent/actor (either employer or employee) • framework • accumulation of changing • coordinates • object 1. The classes of flexibility (a) the criterion of stability a.1. structural flexibility (SF): the property of flexibility is deeply installed, inside the structure of the entity. As it is well known, a structural property has the capability to replicate itself, because the structure of an entity gives the entity’s identity; consequently, the flexibility is, to some extent, assured, so it is rather stable; a.2. f unctional flexibility (FF): the property of flexibility is not inbred, but it is generated simply by the entity working. As the entity working is depending from context and other accidental features, the flexibility is liable to failure, so its stability is, principled, compromised. (b) the criterion of nature b.1. d  iscretionary flexibility (DF): the property of flexibility is induced (triggered) by explicit and formal decisions taken by the involved agent (individual, group or institution, after the case). The discretionary flexibility implies a deliberative process whenever such a decision must be taken; b.2. a  utomatic flexibility (AF): the property of flexibility is “taken” automatically, through an institutional device which is discretionary designed and implemented, but which is triggered without any deliberative process. To be noted that such an automatic device is not a simple stabilizer, since it can lead not only to stabilize (or re-stabilize) the entity in case, but also to de-stabilize it.20 20  We could say, here, that the automatic devices in entity dynamics are of two kinds: (a) automatic stabilizers—which act as negative feedbacks; (b) automatic di-stabilizers—which act as positive feedbacks.

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(c) the criterion of agent c.1. e mployer flexibility (RF): the property of flexibility which originates belong to the employer. This means the action21 which create, maintain or change (inside the limits of previous identity) the flexibility is initiated or hosted by the employer. The employer flexibility could be exerted on the employer his/herself or on the employee. c.2. e mployee flexibility (EF): the property of flexibility which originates belong to the employee. This means the action which create, maintain or change (inside the limits of previous identity) the flexibility is initiated or hosted by the employee. The employee flexibility could be exerted on the employee his/ herself or on the employer. So, related to the criterion of agent, there are nine types of flexibility (Table 2.2): (d) the criterion of framework d.1. law flexibility (LF): the property of flexibility acting under the law. The law (both Constitution and dedicated laws) can stipulate situations in which the phenomenon of flexibility arises, as well as the limits of such arising. The law flexibility is of the largest generality; d.2. c ontract flexibility (CF): the property of flexibility acting under the contract. The contract can rise between individual employee and individual employer, as well as between trade unions of employers and trade unions of employees, respectively. Table 2.2  The sub-typology of the flexibility based on the agent criterion Initiated by Exerted on

Employer

Employee

Employer & employee

Employer Employee Employer & employee

RF-R RF-E RF-(R&E)

EF-R EF-E EF-(R&E)

(R&E)F-R (R&E)F-E (R&E)F-(R&E)

Source: Authors

 An action is either act (to do) or abstention (not to do).

21

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(e) the criterion of tension accumulation of changing e.1. t ensioned flexibility (TF): the property of flexibility which, once happened, accumulates some tension of changing. This means the entity implied maintain its identity by passing into a flexible state but, at the same time, it reduces its capacity to continue maintaining its identity face to a new “attack” of flexibility pressure. In other words, once an episode of flexibilization process is consumed, the next episode will find the entity weaker in resisting to such pressure. We can say, otherwise, the tensioned flexibility reduces the elasticity of the entity in case, and increases, at the same time, the entity plasticity22; The conservative relationship between elasticity and plasticity of an entity sensible to flexibility phenomenon can be analytically modelled through the following differential:

dF  FE 　　dE  FP 　dP



where: E is elasticity, P is plasticity. Based on the differential, by putting the condition of invariance of the flexibility, so dF = 0, we can calculate a marginal rate of substitution between elasticity and plasticity (the continuous case): F dE RmE / P    P dP FE Graphically, the marginal rate between elasticity and plasticity in the flexibility phenomenon is shown in Fig. 2.8. e.2. p ure flexibility (PF): the property of flexibility which, once happened, does not accumulate tension of changing. In this case, the entity keeps its identity although it was “moved” from its initial state. This type of flexibility does not change the 22  Probably, there is a trade-off (i.e. an indifference curve) between elasticity and plasticity, in the hypothesis that their sum equals 1. A deeper analysis could build a “production” function of Cobb-Douglas type so the elasticity and the plasticity are the “factors of production” and the flexibility is the outcome: F = A ∙ Ee ∙ Pp, where: E is elasticity, P is plasticity, e is the elasticity of elasticity, p is the elasticity of plasticity, under the condition of “unitary yield”: e + p = 1.

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E

A

EA

indifference curve of flexibility (F)

dE B

EB E/P

Rm

dP PA

PB

P

Fig. 2.8  Indifference curve of flexibility, based on elasticity versus plasticity. (Source: Authors)

relationship between elasticity and plasticity parameters towards next pressures regarding the flexibility. (f) the criterion of coordinates f.1. t emporal flexibility (tF): the property of flexibility which has only temporal signification—for example, regarding the labour market, it could happen when the daily work programme is reduced from eight hours to six; f.2. spatial flexibility (sF): the property of flexibility which has only spatial signification—for example, regarding the labour market, it could happen when the job is re-located at some distance from the initial location. (g) the criterion of object g.1. p rice flexibility (MF): the property of flexibility which addresses the monetary factor (i.e. the quantitative one) of the entity involved. Particularly for the labour market, this type of flexibility addresses the wage (or salary, after the case)23;

23  The difference between wage and salary is not of importance in current study: wage is referring to the case when the payment is driven by the number of product pieces got, while salary is the payment driven by the work duration.

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g.2. job flexibility (JF): the property of flexibility which addresses the non-monetary factor (that is the qualitative one) of the entity involved. Particularly for the labour market, this type of flexibility addresses the job, more precisely the changes of job, regarding the qualifications required. Of course, in the same case we can register both flexibilities: a change in wage (salary) usually accompanies a change in job, although the reciprocal phenomenon is much rarer. 2.3.1   Flexibility on the Labour Market 1. Two perspectives on flexibility In fact, on the labour market, the flexibility, as it was defined above— the lack of worsening of the given situation of the subject suffering the phenomenon of flexibility, either if we talk about employer or about employee—could be understood and treated from two distinct perspectives: (a) from the rational perspective; (b) from the perceptional perspective. (a) the rational perspective The rational perspective of flexibility implies the rational calculus regarding bettering versus worsening of the given situation (state) of the subject affected by the phenomenon of flexibility. The calculus implies, in turn, to make comparisons between utility of bettering the situation and the dis-utility of worsening that situation. In other words, the rational perspective requires a rational choice based on measuring of the utility. Regarding this rational choice, some features must be put into evidence: • it is talking about an individual choice. Indeed, the assessment of the bettering or worsening of the state caused by the flexibility phenomenon addresses the individual under that phenomenon, not the group or the entire society. So, the individual utility is involved, not the average one (or a total utility at the society level). This very much simplifies the problem of assessing the own state after the flexibility phenomenon has happened;

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• following the previous feature, it is talking about the intra-personal utility (or dis-utility, after the case), not about the inter-personal one. This is also a very important issue, because it is well known the difficulty to compare the utility between two individuals with different habituses24; • so, the rational perspective on the flexibility does not address the ethics, because, generally, it does not concern the inter-personal inter-­ actions, but only an own calculus based on own preferences and expectations.25 (b) the perceptional perspective The perceptional perspective of flexibility appeals the affective (emotional, unconscious) “device” of the individual. The perceptional perspective is shared by employer and employee, but since it convokes especially the subjectivity, it is present rather associated with the employee. According to recent developments in the cognitive psychology and in neuroscience,26 it seems the non-rational (or, more exactly, the unconsciousness) is faster in taking decisions and initiating actions than the rationality. Based on these results,27 the perceptional perspective on the flexibility is of a great importance for understanding the behaviour on the labour market and, consequently, in administering (especially from the public policy side) this market. 2. Flexibility as invariance of utility As discussed previously, the flexibility is during as long the change involved do not generate a net worsening in the given situation. The worsening of a given situation cannot be identified and evaluated without its commensurability.28 The handiest mean to capture that commensurability is to 24  The habitus (concept popularized by Pierre Bourdieu) means all the values, traditions, experiences, preferences and so on an individual possesses and based on which s/he take decisions and performs actions (acts or abstentions). 25  Rigorously, only anticipations are logically valid inferences from rationality models, while the expectations are simply desires, so totally subjective. 26  Some analysts already believe that could be built even a … neuroeconomics! 27  For which two Nobel prizes have already been awarded (Daniel Kahneman, and Richard Thaler). 28  About the “machine” to ensure that commensurability we’ll discuss below.

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associate to any state (situation) of the subject on the labour market (either employer or employee) a utility. Although the problem of cardinal utility is very disputed in the specialty literature, however we would here adopt the version of the cardinal utility.29 So, taking into account that a change in the state of a subject on the labour market can modify many parameters of that subject, the problem of remaining inside the flexibility is to ensure an invariance of the flexibility related to the set of parameters describing the state of that subject on the labour market. Let’s note with F the state of flexibility, and with pik the parameter “i”, where i = 1, nk , of the subject “k” on the labour market. The value pik bears the absolute utility uik. These utilities30 could be ordered, under a quantitative criterion, in, let’s say, a decreasingly order, as:





U k  uik1 , uik2 ,, uikn

k



where: x yz means that xy is placed in position z in the given order. As said above, the utilities can not only be quantitatively ordered, but also can be compared (they are commensurable) among them. However, the preferences among the parameters regarding the position of subject “k” on the labour market should be considered as ordinally. So, the correspondent preferences ( pik ) to the parameters utility will be ordered lexicographically as:





P k  pik1 , pik2 ,, pikn

k



In fact, we have a transformation operator (T) which connect the preferences with the utilities:



 pik1  T    k  ui1 

 pikn  k       uikn  k 

29  Of course, we would choose also the ordinal utility because we do not need to compare the inter-personal utility, but only the intra-personal utility, that is, only hierarchies of utilities. But, when we must compare preferences with utility in order to identify dis-utilities, the preferences will be considered ordinally ordered. 30  We have here in mind the substantive utility, not the evidential or symbolic ones.

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So, the utilities assigned to the parameters regarding the position on the labour market of the subject of analysis are additive, that is they can be summed in a total amount. In the context of the current paragraph, neither maximization nor minimization of that total amount is important, but only its invariance (i.e. its numerical conservation). The conservation of the total amount of the utility means the flexibility works. 3. The case of two parameters For the beginning, we’ll consider the case of two parameters of the position of the subject on the labour market: p1k and p2k , respectively. Let’s consider the preference order is the same as the lower index, so:



P k  p1k , p2k





We must introduce the time of observation in our analysis. To this end, the notations become, for the moments α and β, respectively:

       p    , p   

P k    p1k   , p2k   Pk

k 1

k 2

Based on the transformation operator, we have:





 p1k   p2k      T         u k   u k    2  1   p1k    p2k       T         uk    uk     2  1 





We note the total sum of utility for the two parameters with

kU .   u1k .   u2k . 



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So, for the two moments of time, we can write: kU    u1k    u2k  





kU     u1k     u2k   





To verify the general definition of the flexibility, we have the mathematical condition as:   kU   0 so,

kU    kU     0

so, still,



u1k    u2k    u1k     u2k     0

that is,

 u k  ,     u k  ,    0



1

where,



2

 uk  ,    u1k    u1k   



1

 uk  ,    u2k    u2k   





2



Presupposing that, between α and β,  uk  ,    x . Based on the 1 marginal rate of substitution between the two utilities, keeping the total utility constant requires that y   uk  ,     x  Rmu2 / u1 k



2

u2k / u1k m

where R that is,



k is the marginal utility of substitution between u2 and u1k ,

k

k

Rmu2 / u1 

k

 u k  ,   2

 u k  ,   1



y x



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Of course, the marginal rate of substitution between the two utilities has some important realistic features as follows: • it is not throughout defined: there are limits (floor, and ceiling, respectively) outside from the substitution is not working31; • the marginal rate of substitution is depending not from the rational calculus, but also (and concomitantly, if not previously) from feeling and emotions (generally, from non-monetary calculus)32; • the two modifications in the utility could not appear simultaneously, so the marginal rate of substitution could operate the invariance of the total sum of utility. Consequently, it seems the flexibility should be assessed not punctually, but inside some time interval. Do not confuse this last time interval with the time interval inside which the two observations are made in order to establish the property of flexibility (i.e. the time interval (α, β) as mentioned above). The first interval of time is addressing a structural property of the system involved to transmit the impulse of variation of one utility to variation of the other utility (let’s note this time interval with (γ, δ)). Terminologically, we propose to name the time interval (α, β) as an external time interval (ed), and the time interval (γ, δ) as an internal time interval (id). Of course, there situations in which the external time interval (external duration) overlaps with the internal time interval (internal duration), but this overlapping is not necessary. From the conceptual point of view, we assume the larger is ed the greater is the probability id does not exceed the ed. In a synoptic image, the probability of marginal rate of substitution related to the extension of ed is shown in Fig. 2.9 (it is noted with P(id) the probability that id goes out of range of ed). 4. Generalization to “n” parameters Generalization of the flexibility as invariance inside the non-worsening implies the following hypotheses: 31  For example, there are some hourly wages over which the daily durations of work cannot increase anymore. Reciprocally, there are some daily durations of work under which the wage cannot increase anymore. 32  For example, the dis-location of affairs could not entail the dis-location of the workers too—because of non-economic reasons. In fact, here is one of the sources of the so-called frictional unemployment.

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Fig. 2.9  Probability of substitution values related to external duration of observing. (Source: Authors)

• the “n” cardinal utilities of the “n” parameters describing the state on the labour market have marginal rates of substitution among them. This implies some considerations: –– theoretically, it must be accepted that a utility is substitutable (according to the specific marginal rate of substitution) with any other utility in the list of the “n” utilities under consideration; –– consequently, we have an n-dimensional space, within the substitution operations take place; –– similarly, the indifference curve of the “n” cardinal utilities is formed in the n-dimensional space. • we know and can calculate the respective marginal rates of substitution among the “n” utilities. Based on the above hypotheses, we can write successively:



P k  p1k , p2k ,, pnk



We must introduce the time of observation in our analysis. To this end, the notations become, for the moments α and β, respectively:

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       p    b, p    , , p   

P k    p1k   , p2k   , , pnk  



Pk



k 1

k 2

k n

Based on the transformation operator, we have:  p1k   p2k    pnk      T           u k   u k    u k    n 2  1 



 p1k    p2k     pnk       T           uk    uk     uk     n 2  1 







We note the total sum of utility for the two parameters with n

kU .   uik . 



i 1



So, for the two moments of time, we can write: n

kU    uik  



i 1



k U



n

    u    k i

i 1



To verify the general definition of the flexibility, we have the mathematical condition as:   kU   0 so,

kU    kU     0



so, still, n



n

u    u     0 i 1

k i

i 1

k i



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that is, n

 u  ,    0



i 1

where,

k i



uik  ,    uik    uik   





Presuppose that, between α and β,  uk  ,    xi . Based on the i marginal rate of substitution between the “n” utilities, keeping the total utility constant requires that. uk / uk y j   uk  ,     xi  Rmj i , for any j = 1, n , and j ≠ i. i

uk / uk

where Rmj i is the marginal utility of substitution between u kj and uik, that is,  u k  ,   yj uk / uk Rmj i  j   , with j = 1, n , and j ≠ i  u k  ,   xi i

2.4   Mechanisms of Flexibility on the Labour Market 2.4.1  Preliminaries We turn, now, to identifying, describing and explaining the mechanism (or mechanisms) of flexibility on the labour market. We try to do that based on certain assumptions regarding the behaviour of the agents/actors on the labour market, as followings: • the labour market is not a pure and perfect market (see here the previous chapter); • the behaviour, both of employers and of employees, is conducted by utilitarian rationality33; 33  Of course, we have in mind not only the substantive utility (which has objective—e.g. monetary—so, inter-personally comparable expression), but also the symbolic utility (which has subjective and non-comparable inter-personally evaluation). The most disputable issue here is to ensure the additivity between the substantive and symbolic utility in the choice theory (see, e.g. the book Rethinking Rational Choice. A Companion on Rational and Moral Action, by Jan de Jonge, Palgrave Macmillan, 2012).

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• utilities associated to preferences (which, in turn, are associated to labour market parameters) are of cardinal type; • the flexibility is considered a sui generis manœuvre room, inside which the total utility of the agent/actor involved is conserved (i.e. it is held invariant); • among the utilities associated to parameters describing the state of the subject on the labour market specified (at limits, constant) marginal rates of substitution are working34; • the list of preferences regarding the state on the labour market is considered as being the same for each of the two categorial subjects involved—employers, and employees, respectively—but the orders could be different from those of the personal individuals.35 2.4.2   Basic Parameters of the State on the Labour Market In a relatively simplified way, we’ll try to establish lists of basic parameters which fundamentally characterize the state of a subject on the labour market. We’ll deliver such lists both for the institutional individuals and for personal individuals. (a) institutional individuals36 (a.1) from the employer side • complementarity rate between labour force and physical capital ( clrI/ k ): generally, the trade unions of employers take care to not employ more labour force than the complementarity rate between it and the physical capital37 inside the represented economic branch. The concept of complementarity between the labour force and the physical capital is another “animal” than the substitution rate between the labour force and the physical capital. While the substitution 34  In fact, above, has been proposed just a way to sum different utilities based on such marginal rates of substitution, into a total amount. 35  Of course, at the institutional individuals, the difference between preferences orders could be much lesser. 36  In the current literature on the matter, the expression used is legal person. 37  An attention must be drawn against the frequent confusion between the physical capital and the financial capital. In fact, in the production function (e.g. the Cobb-Douglas production function) the involved capital is the physical capital, not the financial one (it is another matter that the physical capital cannot be expressed in the production function than in monetary way—this does not transform anyway the monetary expressed physical capital into the financial capital.

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Fig. 2.10  Substitution only must arrive inside the complementarity area. (Source: Authors)

rate indicates the paired of relative changes38 in the amount of the two production factors in order to maintain the established output (the so-called indifference curve), the complementarity rate indicates the paired of absolute quantities which must be combined (i.e. put together under a given technology, i.e. under a transformation function) from the two production factors needed for the output be got. So, given this complementarity rate, the employer cannot independently employ labour force, s/he must take into consideration that employment change which still verify the complementarity rate between the production factors. Figure  2.10 delivers a comparison between the substitution rate and the complementarity rate between the labour force and the physical capital. Some concluding remarks regarding the relationships between the substitution and complementarity between labour force and physical capital are of interesting:

38  As already have resulted from the above, any paired relative quantitative changes give marginal values—so the rate of substitution between the labour force and the physical capital, being given an output value, is a marginal coefficient.

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–– while substitution happens at marginal rate, complementarity happens at average rate. So, the substitution rate (RS) can be calculated L as RS  , under the condition the output be conserved as total K amount, while the complementarity rate (RC) can be calculated as: L RC = , under the condition the production process be possible K without losing any production factors quantity39; –– the most significant conclusion concerns the fact that the process of substitution must take place inside the “space” of complementarity only. This implies a crucial property of the complementarity, namely it maintains itself within a variation of the absolute quantities of the two production factors, without registering losses of those production factors. We can name that space (both on horizontal and on vertical axe—see the yellow coloured highlighted in Fig.  2.10) as paired dead area of complementarity.40 (a.2) from the employee side • minimal41 wage/salary ( wmeI ): the trade unions of the employees militate to at least verify, but often to increase the minimal wage, especially from social perspective (e.g. to cover the minimal basket of basic goods and services);

39  So, if is noted with L and K , respectively, the quantity from the two factors of production which are strictly complementary to obtain an output of Y , the situation in which the labour force actually employed is L > L , and the physical capital employed is K > K , then the output obtained is Y too, but losses are registered as: L  L  L , and K  K  K . In fact, here must be put a supplementary condition namely: ∆L and ∆K do not reach the next (higher) level of output, that is, through a new (higher) level of indifference curve between labour force and physical capital. 40  It is easy to observe that such an area constitutes, in fact, a source of flexibility regarding the labour force employment from the perspective of the employer. 41  We make conceptual distinction between the minimal wage/salary and the minimum wage/salary. While the minimal wage/salary is firmly established by the law, the minimum wage/salary is the lowest actually paid wage/salary in a given time period. Of course, the minimum wage/salary is always higher or at least equal with the minimal wage/salary. The same for the pair: maximal versus maximum—the term maximal will be used to refer values established by law, while the term maximum will be used to refer values established by contract (either institutional or individual).

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• compensation for dismissal ( cdeI ): the trade unions of the employees impose, generally at the largest level of contracts (national level, or economic branch level), that a dismissal of workers be covered by monetary compensation, in order to ensure the standard life of involved workers during their search of a new job; • maximum duration of daily work ( dMeI ): the trade unions of the employees impose, generally at the largest level of contracts (national level, or economic branch level), the maximal duration of daily work; in case of exceeding the maximal duration of work a day, the trade unions claim from employers to pay employees with some supplementary amounts of money or, after the case, to be compensated with free working days. Figure 2.11 suggests the way in which the parameters of the state on the labour market from the institutional individuals from the employee perspective is working.

Fig. 2.11  The basic parameters of the state on the labour market (institutional individual of employee). (Source: Authors)

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(b) personal individuals42 (b.1) from the employer side • the monopoly degree on the labour market ( mdRrp ): the employer knows its market positioning regarding its market power.43 Taking into consideration the other employers within the branch, the employer evaluates its place inside the labour market of that branch. So, it can know which it is marge of negotiating the wage/salary and even what is the cohort of employment which ensure its maximizing of the profit marge based on that employment; • the productivity-based actual wage/salary ( wπrp ): the employer must maintain the actual wage/salary paid to employees anchored to the marginal labour productivity, in order to maximize its economic behaviour criterion—the gross profit.44 Of course, the level of this coefficient is specific for any employer. (b.2) from the employee side • actual wage/salary ( waep ): the personal individuals as employees (or “candidates” to statute of employees) are interested by the effective wage to be got in case signing of the contract with the employers; • actual duration of daily work ( daep ): the personal individuals as employees (or “candidate” to statute of employees) are interested by the effective duration of daily work, because this duration affects not only his/her free time (leisure) but also his/her income.

 In the current literature on the matter, the expression used is natural person.  The concept of market power is referring to the capacity to establish or, at least, to significantly influence the market price; from the perspective of the employer, and considering the labour market, it means the capacity of that employer to establish or, at least, to significantly influence the wage/salary to be contracted with the worker. 44  If noted: p—price of product on the good market; L—labour force; K—physical capital; w—wage; i—interest rate (in the case of which the physical capital is covered by banking borrow); π—gross profit, then it can be written: π = f(L, K) ∙ p − L ∙ w − K ∙ i. To maximize π  f  L, K  f  L, K  from the perspective of labour force, it must be: L  0 , so:  p  w . But L L is just the physical marginal labour productivity which, multiplied by the price of product obtained and sold on the goods market, gives the monetary labour marginal productivity. 42 43

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Fig. 2.12  A generic indifference curve “actual wage—actual daily work duration” (case of personal individual employee). (Source: Authors)

In fact, we are here one of the main cases of flexibility on the labour market, form the perspective of personal individuals as employees (Fig. 2.12 tries to synoptically show such flexibility, based on an indifference curve regarding the income).

2.5  Causalities in the Flexibility on the Labour Market What, ultimately, leads to the flexibility on the labour market? And which are the criteria conducting both the employer and the employee to initiate or accept, after the case, such flexibilities? This paragraph tries to get answers to the mentioned questions. 2.5.1   About Causalities Towards Flexibility Both employers and employees (both in their institutional and personal hypostases) must be considered being driven by rationality. This means both of them have rational criteria to decide and consequently act (or to

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abstain, after the case),45 and these criteria must verify their rationality models. We’ll separately examine the two actors on the labour market: • causalities of flexibility from the employer’s side The employer has as rational criterion of economic behaviour, as said before, to maximize the gross profit.46 Consequently, s/he will accept variation of different economic values linked to labour market—like actual wage level compared with the productivity-based one or with the efficient one,47 the working day duration compared with the contractual/legal provisions etc.—in order that, on short or long term the advantages exceed those obtainable without accepting the mentioned variations. So, the employer could accept on short (rarely, on medium) term to lose some gross profit if on medium (rarely, on long) term the gain is relatively bigger. To accept such variations, which are, of course, accepting of flexibility regarding the labour market, some conditions must be accomplished: –– the current rentability is not dis-functionally affected, that is, the obtainable current gross profit still can cover the minimum requirements of its destinations (tax on corporative profit, dividend payments, auto-financing, programmed investment, increasing own social or reserve funds); to be mentioned that the most feasible directions on which could be operated decreasing on short term is the dividend policy and the auto-financing policy; –– the future expected quid pro quo advantage should have a reassuring probability to come into reality; of course, here is the place for some modelling of predictions regarding goals achievement in exchange with accepting the flexibilities. 45  Remember the action as genus has two species: (a) act (i.e. to do); (b) abstention (i.e. not to do). 46  Maximizing of the net profit is, maybe, a more adequate criterion but this implies to take into account the taxation regime. Since the employer cannot control the taxation regime, this acts as an external (and relatively invariant, at least on short and medium term) constraint about the gross profit. In the end, so, the employer is looking at maximizing of its gross profit. 47  The efficient wage/salary is that wage/salary which exceeds the productivity-based wage/salary in order to stimulate the employees to increase their productivity just for still keep the efficient wage/salary already paid.

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The employer could accept flexibilities linked to the labour market in two different and distinct ways: –– from its/her own initiative, based on predictions which assure on much future advantage regarding the gross profit if flexibility is experienced, compared to the case in which the flexibility is not experienced; –– from external pushes, either of legal nature or of economic one; the economic external pushes towards accepting of flexibility could come from the variation of the market structure (e.g. variation of the market power, of the demand for specific products, of the employees’ trade unions requirements, etc.). A question arises here regarding the rationality model of the employer facing the accepting of flexibility on the labour market: Is employer interested in the level of the gross profit or in its stability (or, better, in its sustainability)? In our opinion, the employer will be primarily interested in growing the gross profit, because the employer rationality model is an opportunistic one and because, generally, the real employers are driven by the managerial principle: seeing and doing, which means the solutions should be found just when the problems have arisen. This will be the conceptual and methodological background upon which, in the rest of the book, the employer behaviour related to the flexibility on the labour market will be credited with. The principled way in which the employer behaves face to accepting flexibility on the labour market is schematically shown in Fig. 2.13. • causalities of flexibility from the employee’s side The criterion of employee’s economic behaviour is not so obvious like the employer’s one. Taking into consideration the recent discoveries about the psychological rules of thumb,48 we incline to believe that this criterion is rather the stability of job than the level of income (wage or salary). So, analogously to the employer profit maximation-based behaviour, the employee will accept that flexibility which returns the maintaining the job (of course, inside bearable limits). In such a context, we think the employee will accept (or, after the case, will propose) those variations of economic  See, for example, the results of Kahneman and Tversky or those of Thaler.

48

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Fig. 2.13  The margin in which the employer’s rationality model accepts flexibility (I). (Source: Authors)

variables involved by the labour market which still assure that the job is not lost (i.e. s/he is not yet fired by the employer). 2.5.2   About Ways to Get Flexibility Based on the above mentioned, we can now extract some conclusions regarding the basic ways which the employer and the employee, respectively, experience labour market flexibility in, as followings: • the two actors have criteria to decide regarding the labour market flexibility very different: the employer focuses on the quantitative criterion—maximizing the gross profit49—while the employee focuses on a qualitative one—maintaining the job, at least on short or medium term; • consequently, given the variables which are “non-touchable”, each from them will propose/accept changes in the related variables: for example, the employer could propose/accept flexibilities regarding the efficient wage/salary, while the employee could propose/accept 49  Depending on the context, the gross profit maximizing can be viewed either in an absolute manner (the total gross profit) or in a relative one (the rate of gross profit, related to a significant microeconomic variable of the effort: total cost, turnover, etc.)

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flexibilities regarding the actual wage/salary; of course, lists of the variables passible to record changes from the point of view of labour market flexibility are of importance and, for an empirical approach they must be elaborated, in a logical and complete way; • taking into account the two different criteria of rational behaviour to face labour market flexibility, this issue could be logically modelled as a cooperative game, with specific matrix of decision and payments; in addition, such a cooperative game should take for granted the two actors mutually know the strategy (including the criterion of behaviour) of the partner. 2.5.3   The Concept of “Dead Zone” in the Flexibility Matter The labour market flexibility is a functional property characterized by marge, that is, by intervals of variation of the independent variable which do not yet lead to variation of the dependent variable. In fact, the essence of the concept of flexibility is rightly the following: How much could we stretch the rope before its breaking? To be mentioned this is valid both for the employer behaviour and for employee behaviour faced to the labour market flexibility. Here arises the concept of“dead zone” regarding the flexibility mechanism. By “dead zone” of the flexibility we understand the interval of variation of the independent variable (e.g. of the actual wage/salary from the perspective of the employee) which does not yet lead to the employee’s resignation. So, for following the example, the employee endures the decreasing of the wage/salary, in a pre-accepted interval of such decreasing, in order to maintain his/her job. The same could be exemplified from the perspective of the employer: the employer could accept an increase of the actual wage/salary, although this way its gross profit will decrease on short term, hoping that the wage/salary increasing will act as an efficient wage/salary, so increasing the labour productivity and, as result, obtaining a bigger gross profit on medium term. The marge inside which the employer accepts (or proposes, after the case) is his/her “dead zone” of flexibility. Figure 2.14 provides a synoptic view of the concept of “dead zone” of flexibility. The significations of the four boxes (I–IV) in Fig. 2.14 are: • Box I: case in which, related to the benchmark of the variable of command (the desirable value of it), it is proposed/accepted an

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Fig. 2.14  The margin in which the employer’s rationality model accepts flexibility (II). (Source: Authors)

increasing inside the “dead zone” of flexibility, and this could lead to an increasing of the target variable also inside its “dead zone” of flexibility; • Box II: case in which, related to the benchmark of the variable of command (the desirable value of it), it is proposed/accepted a decreasing inside the “dead zone” of flexibility, and this could lead to an increasing of the target variable also inside its “dead zone” of flexibility; • Box III: case in which, related to the benchmark of the variable of command (the desirable value of it), it is proposed/accepted a decreasing inside the “dead zone” of flexibility, and this could lead to a decreasing of the target variable also inside its “dead zone” of flexibility; • Box IV: case in which, related to the benchmark of the variable of command (the desirable value of it), it is proposed/accepted an increasing inside the “dead zone” of flexibility, and this could lead to a decreasing of the target variable also inside its “dead zone” of flexibility.

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To be observed that Boxes III and IV taken together signify an acceptable decreasing of the target variable as a result of all acceptable command variable changes (either decreasing or increasing), while Boxes I and II taken together signify an acceptable increasing of the target variable as a result of all acceptable command variable changes (either decreasing or increasing).

2.6  The Wage Package and the Flexibility of Job 2.6.1   The Concept of Wage Package The income the employee receives from his/her employer is not in a monetary form only. We could name the wage (or salary, after the case) as being the monetary component of a larger entity which could be called, in turn, as wage package (or salary package).50 So, the wage package consists in all remuneration, of any kind, the employee receives from the employer. The components of the wage package can be (a) monetary (cash) remuneration—ordinarily, the main component; (b) in kind remuneration— depending from the specific of branch or activity in case (e.g. working equipment); (c) participation to the profit of organization51; (d) other at hand value certificates (e.g. vacation tickets, food tickets, school tickets and other of the same). 2.6.2   A Short Theoretical Discussion on the Wage Package • Autonomous components of earning By autonomous components of earning we understand those components that, whether they have monetary expression or not, are characterized by the fact that they do not depend on the basic wage (therefore, nor on the marginal productivity of labour), but are introduced for other reasons, be they economic, social or even political. However, regardless of the reason why they increase the employee’s earnings, they have an impact on the consumption or saving behaviour of the employees, as well as on 50  In what follows, will be used the syntagma wage package, by which we understand also salary package. 51  Do not include here the dividends from profit, because they are not related to the quality of employee.

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the economic dynamics at the macro level. Let’s first identify the main impact classes of these components: –– increase in labour force costs (LFC); –– increasing the disposable income of the employee (and his family) and, consequently, increasing their standard of living; –– increase in turnover; –– reducing the negative GDP gap by increasing actual GDP; –– increasing the average and marginal propensity towards saving; –– increasing corporate social responsibility; –– increasing labour productivity as a result of the functioning of these components as an “efficient wage”52; –– recording economies of scale as a result of increased production following increased labour productivity. –– relationship autonomous components of earning—sustainability • Based on the impact categories mentioned in the previous paragraph, it is now possible to evaluate the functional and logical relationship between these autonomous components of earning and economic and social sustainability. A synoptic suggestion in this regard is shown in Fig. 2.15 Some effects are positive (marked with the "+” sign) from the point of view of sustainability (or sustainabilizing, as the case may be), others are negative effects (marked with the "−” sign). There are also ambiguous effects, so they can have both positive and negative effects, depending on the context or their intensity (these are marked with the "±” sign). • Identification of possible classes of autonomous components of earning A first dichotomy regarding the autonomous components of earnings is that between autonomous monetary components and non-monetary 52  The concept of efficient wage refers to the case where the employee receives an increase in earnings (e.g. through these autonomous components) which is not justified by his marginal productivity level. Wishing, however, to keep these components in earning, the employee will tend to increase his/her labour productivity so that this increase will ultimately justify the increase in earnings.

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Fig. 2.15  The impact directions of the autonomous components on the sustainability. (Source: Authors)

autonomous components. It should be noted that this classification is made only from the perspective of the materialization of these components, and not of their nature. From the perspective of their nature, both types of autonomous components have a monetary issue behind them, so they do not constitute monetary issues (especially non-monetary components). In other words, both the monetary and non-monetary components have behind them the currency already issued by the central bank.53 However, from the point of view of the behaviour of the holders of the two categories of autonomous components of the earnings, a number of notable differences can be distinguished. –– First of all, in the case of autonomous monetary components (AMC) there is no normative restriction on their use. They can be used at the sole and exclusive decision of the holder: for consumption (and in this case, the holder can opt for any legal product or service, either

53  We ignore here the monetization aspects of bank credit (through which the banking money is created) and we limit our analysis only to the central currency (the one issued by the central bank) that forms, as it is known, the monetary basis.

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from the domestic or from external supply54) or for saving (either “on the mattress” or in commercial banks). From the saving side, then, the owner can choose either direct investments (investments in real assets) or portfolio investments (investments in financial assets— bonds, shares). On the contrary, in the case of the non-monetary autonomous components ( AMC ) the freedom of disposition of the holder is normatively restricted: so, such a component could be used only for a certain use (e.g. only for consumption). Moreover, even the range of its use for consumption can still be restricted to a given, exclusive range of consumer goods or services (this is the standard case of meal vouchers, respectively holiday vouchers), at the moment. It is also possible to restrict the freedom of use of this component for the purchase of imported goods and services; –– Secondly, the autonomous monetary components (AMC) are subject to the general rules of mandatory levies on public budgets: social contributions, respectively wage tax, while the non-­monetary autonomous components ( AMC ) can be exempted from some of these constraints. For example, they can be exempted from paying social contributions (the case of meal vouchers, at present55), to support employers (thus reducing the increase in labour force costs) or they may be subject to reductions in direct wage tax rate. Based on these conceptual distinctions between autonomous monetary components and non-monetary autonomous components of earnings, the possible classes of such components can be established.

1. autonomous monetary components (AMC) (a) with restricted destination (i) are not possible (b) with unrestricted destination (i) food allowances (ii) clothing allowances (iii) allowances for professional instruments (iv) awards (v) social aids (vi) scholarships  By external supply is meant the import (so such consumption enters the trade deficit).  Here, in Romanian case.

54 55

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2. autonomous non-monetary components ( AMC ) (a) with restricted destination (i) meal vouchers (ii) gift vouchers (iii) holiday vouchers (iv) nursery vouchers (v) kindergarten vouchers (vi) home/boarding passes (b) with non-restricted destination (i) are not possible

Therefore, autonomous monetary components (e.g. food allowances) cannot function restrictively, which allow adverse (i.e. unintended) effects to occur from the perspective of the legislator or those offering such components, while autonomous non-monetary components may not operate in a non-restrictive manner, which allow adverse effects from the perspective of the holder of such components. Of course, depending on the context, on the arising of concrete problems, one can imagine, norm and implement other autonomous components of the wage gain, either of monetary type or of non-monetary one. A synoptic image of the above considerations is given in Fig. 2.16. 2.6.3   Some Proposals to Make the System of Autonomous Components of Earning More Efficient In the matter of the decision regarding the structure of the earnings, three actors are involved, whose economic interests must be harmonized: • the state (from the perspective of the consolidated general budget— revenues, respectively budgetary expenses); • the employer (from the perspective of the cost with the labour force, respectively of the economic competitiveness); • the employee (from the perspective of the income from the work, respectively of the standard of living—the purchasing power). A synoptic image of how the interests of the three parties intersect is shown in Figs. 2.17 and 2.18, respectively.

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Fig. 2.16  The ratio between the monetary/non-monetary character and the restricted/non-restricted character of the autonomous components of earning. (Source: Authors)

We consider that the following directions may be of interest to be examined in detail (by future researches), in order to determine which autonomous components (either monetary or non-monetary but, rather, which should be the mix between monetary components and non-­ monetary ones) have the potential to harmonize the three categories of interests and, consequently, to represent institutional support for generating and maintaining economic and social sustainability: (a) the increase in the cost of labour force to the employer must be covered by the increase in the effective demand at the level of the

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Fig. 2.17  Harmonization of the tripartite system in the matter of the autonomous components of the gain. (Source: Authors)

employee; in this way, the eventual increase in supply prices so as to maintain the profit margin for the employer may be supported by the increase of the employee’s net disposable income for consumption at these higher prices; of course, here comes the decision to choose the right mix between the monetary and non-monetary components, considering that the former have no restrictions on use, while the others are subject to such restrictions; (b) the increase of the net disposable income at the level of the employee must be harmonized with the non-reduction of the budgetary revenues (either fiscal or para-fiscal), so that the increase of

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supply of autonomous components

69

demand of autonomous components autonomous components

impact tunnel

autonomous components quantitative tunnel

Fig. 2.18  The tripartite negotiation process regarding the introduction of autonomous components in the earning. (Source: Authors)

the capacity of consumption of private goods and services does not affect the capacity of the state to offer public goods; this ­harmonization must be done by harmonizing the tax revenues (direct and indirect) with the para-fiscal ones (social contributions), so that the optimization of the relationship between the state and the employee is done at the level of the fiscal/parafiscal mix; (c) the increase in labour costs, within the limits of maintaining economic competitiveness by price, must be harmonized with the interest of the state to collect the revenues from indirect and direct taxes generated by the employer (indirect—by selling VAT-bearing goods and services, and direct—through the profit tax); the increase of the labour cost reduces the tax base of the profit, having two proportional effects between themselves, therefore it is necessary to establish the optimal “threshold” at which the increase of the labour cost minimizes the effect of reducing the income tax collected by the state. Figure 2.19 details these directions from a more analytical point of view.

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ployer em

ployee em

x ta it it of ies of pr ilit pr e r m ac th fo al f of e s is c se nu -f ba ve r a re pa ax - t AT al or - V fisc cal - fi s -

- tax - s soc on - s oc ial w oc ia co ag ia l p nt e ( l a ro ri sa id tec bu la tio tio ry) n ns be ne fi t s

- labour cost - gross disposable income - competitiveness - labour productivity

Fig. 2.19  The reciprocal effects of introducing autonomous components of earning. (Source: Authors)

2.6.4   Optimization Based on Wage Package Taking into account the generic structure of the wage package, the problem of optimizing such a structure comes naturally. To get the optimal wage package implies the two standard conditions: (a) the function-­ objective—that is, the criterion which must be extremized (either minimized or maximized); (b) the system of restrictions. Generally, the function-objective is done under an algebraic function (or functional56), 56  In mathematics, a functional is a function which has as arguments not simple variables, but functions that, in turn, have variables as arguments.

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while the criterion to be extremized is established somewhat externally, based on an analysis of the behavioural judgements. The system of restrictions consists, regularly, in a set of equations or inequations aimed at to impose limits/thresholds regarding the resources or other constraints which are conditioning the “tunnel” of variation for the function-­objective. Applying these considerations to the case of wage package, the issue of its optimization could be formalized as follows: • notations: –– WP: the a a wagewpackage –– w1a , w2 , …, na : the monetary non-autonomous components of wage package ( na components) –– w1a , w2a , …, wnaa : the monetary autonomous components of wage package (na components) –– ω1b , ω2b , …, ωnbb : the non-monetary autonomous components of wage package (nb components) –– F(WP): function-objective of the wage package a –– R1w : restriction57 on the monetary non-autonomous components of wage package a –– R2w : restriction on the monetary autonomous components of wage package –– R3ω : restriction on the non-monetary autonomous components of wage package • formalization: a a a a a a b b b –– WP  w1 , w2 ,, wna ; w1 , w2 ,, wna ; 1 , 2 ,,nb –– F  WP   F w a , w a ,, w a ; w a ; w a ,,w a ; b ,  b ,, b







1

2

na

1

2

na

1

2

nb



a

–– R1w ≤ A , where with A is noted the maximum possible (or acceptable by the employer) amount of the monetary non-­ autonomous components of the wage package a –– R2w ≤ A , where with A is noted the maximum possible (or acceptable by the employer) amount of the monetary autonomous components of the wage package

57  We refer here to the generic case, but, of course, it can be more restrictions (i.e. a set of restrictions) for every of the three types of components of the wage package.

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–– R3   , where with Ω is noted the maximum possible (or acceptable by the employer) amount of the non-monetary autonomous components of the wage package • solving: The solving of the model of wage package optimization could be made simplest by using the Lagrange function. If we note with  the Lagrange function, and with λk (k = 1, 2, 3) the Lagrange multipliers corresponding to every of the three restrictions (more exactly, of the three types of restriction) of the model, then the mathematical model of wage package optimization is the followings:



  F w ;w ; 

a i

a j

b q





   



 

 　 A  R wa w a   　 A  R wa w a i j 1 1 2 2    　   R  b 3 q  3



 

 opt

To solve the model, it must be put the first order differential conditions, that is:    a 0  wi     a 0  w j    b 0  q



To simplify writings, let’s note:

    R w   g w  R    h   a



R1w wia  f w a a

a j

 3

b q

w 2

Then, the optimization model becomes:

a

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   opt

1  A  f w a  2  A  g w a   F w ,w ,    3     h     a

a



73

 



with the restrictions:



   w a  0     a 0  w    0  

Applying of the first order differential conditions get the following system of equations:  Fw a  1  fw a     Fwa  2  gwa     F  3  h from where:



 F a  1  w fwa   Fw a  2   gw a       F 3  h 

One can immediately observe that the Lagrange multipliers are, in fact, marginal coefficients, showing what is the variation of the Lagrangian  when the budget (i.e. the restriction) of any variable change with a unit. The Lagrange multipliers are very useful when is examined the threshold under which the employer accept increase of the wage package in different of its components, or, reciprocal, when is examined the threshold under which the employee accept some substitutions among the wage package components which continue verify his/her wage objective.

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To be mentioned that the Lagrangian  is a functional of three variables, so it is working into a four-dimensional Euclidian space (so, its graph representation is a hyper-surface). In a concrete case, the following issues are still to be clarified: (a) for opt ≡ maximum, it must that the second order differential conditions be all negative, that is:  2 0  2 a  w  2    0  2   wa  2      2  0 

   





(a) for opt ≡ minimum, it must that the second order differential conditions be all positive, that is:  2 0  2 a  w  2    0  2   wa  2      2  0 

   





NB: of course, we can have intermediate situations, when the second order differential condition is negative for one variable and negative for other/s. Such situations give more complicated cases,58 and for the objective of the present book, they will be not approached. 58  For example, if there are only two variables (so the Lagrangian works into a three-­ dimensional Euclidian space), for the extreme values appear the so-called saddle-points (a negative value for the second order differential condition for a variable, and a positive value for the second differential condition for the other variable). In this case the graphical image of the Lagrangian will be a simple surface (surface of order 1. NB: generally, the order of the surface is k = n − 1, where n is the number of variables—any surface with its order bigger than 1 is called hyper-surface; generally, the order of the Euclidian space is e = n + 1).

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2.6.5   Flexibility Induced by Wage Package Related to the wage package concept, a question arises: How the structure of the wage package could (if does) have an impact on the flexibility regarding the job? Before examining more detailed such an issue, some preliminary considerations are required: • the wage package induces flexibility regarding the job both for employer and for employee; in fact, the negotiations on the labour contract will get an optimum of the wage package from the two perspectives; • different components (among the three identified above) of the wage package have different utility for the two parts (employer and employee, respectively), so the negotiation process has, somewhat, an asymmetry regarding the preferences of the two parts; • analysis of the flexibility induced by the wage package should be done on two directions: (a) for every from the two parts involved— employer and employee, respectively—inside the structure of the wage package; (b) between the two parts, taking into account the difference of preferences for a certain structure of the wage package. (I) Analysis of flexibility induced to employer Let’s consider, for simplicity, we have only three components of the wage package, every of them incorporating all the components of the same nature: (a) monetary non-autonomous component (a); (b) monetary autonomous component (b); (c) non-monetary autonomous component (c). Let’s also assign a lexicographical order of preference for the employer59 being:

a b c

where the logical constant “≻” signifies “is preferred to”. This order has, of course, is grounding as followings: the component a is completely linked to the marginal labour productivity, so the employer prefers the most of this component, because its paying is completely recovered by 59  The employer has such an order of preference for the components of the wage package under his/her position of payer of the wage.

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c b monetary value of marginal labour productivity

a

a

c

b

wage package structure wage package amount

M N M

aM

aN

bM

N

bN

M N cM cN

wage package structure

Fig. 2.20  The flexibility induced by the wage package from the perspective of the employer. (Source: Authors)

selling the products. Moreover, by selling products, the price of them is cashed in a monetary means, so this justifies the preference relationship (a ≻ b). Because b is, like c, non-founded on the work, but, in the same time, b is of monetary nature, while c is of non-monetary nature (i.e. the goods and services assigned to c must be acquired by the employer with cash), it results the order of preference a ≻ b ≻ c, based on the relation of transitivity. In such a context, we could graphically express the flexibility induced to the employer by the wage package hypothesis as in Fig. 2.20. (II) Analysis of flexibility induced to employee Mutatis mutandis, the above analysis can be applied also to the employee. This, in turn, however, changes the order of preferences for the three components of the wage package. The employee, rationally, will

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prefer first the component b (monetary nature, but non-linked causally to its marginal productivity), then he/she prefers the component a and thirdly the component c. So, his/her preference order of the structure of wage package will be: b a c



where the transitivity relation also works.60 (III) Analysis of flexibility induced to the “duopoly” employer-employee

em pl oy e

a

e’ s

fl e

xi bi li

ty

’s er oy l p em

y lit bi i x fle

b

negotiation room

b

a

c

c

wage package from the perspective of employee

wage package from the perspective of employer

This time we have to examine the “collision” between the two identified preferences orders regarding the structure of the wage package. A suggestive (although somewhat simplistic) way to do such an examination is presented in Fig. 2.21.

Fig. 2.21  The flexibility induced by the wage package from the perspective of the negotiation employer-employee. (Source: Authors) 60  It is easy to show the binary relation “≻” generates, on the set of the three components of the wage package, an algebraic relation of order (even a relation of a total order). We let such a simple verification to the reader.

CHAPTER 3

Job Flexicurity

3.1   Contemporary Features of Job In fact, both job security and job flexibility should be integrated in a larger logical model, so the inter-actions between them be put into evidence and, if possible, quantified, that is, the logical model of job flexicurity. So, our main goal here focuses an integration of the two concepts in trying to get the complex way in which the job contract is finally established between employer and employee. We are not interested, in our study, by the history of the concept of job flexicurity.1 Since Chap. 3 is totally aimed at quantitatively modelling of the job flexicurity, here we’ll proceed to a conceptual approach only. Both job security (JS) and job flexibility (JF) have their own kinematics, caused by the real changes in labour market (e.g. technological innovations or managerial innovations or, even, changes in the organizational culture), as well as, by the institutional changes (which come from norms and institutions) “governing” the labour market. Further, some considerations in this line will be done, in a generic 1  Although the historical path of the job flexicurity could be, to some extent, of relevance from the point of view of “permissiveness” of labour market regarding the job flexicurity, we think such a relevance is rather of sociological or of social psychology nature than of an economic one. The purpose of the research is focused on the economic and, to a reasonable degree, on the institutional issues only.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 E. Dinga et al., Job Security and Flexibility, https://doi.org/10.1007/978-3-031-28509-7_3

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flexicurity

labour contract

JOB

LABOUR

wage/salary

WORK

Fig. 3.1  Relationships based on which arise the features of job. (Source: Authors)

way, regarding three issues: (a) changes in labour nature; (b) changes in labour prestation (objectifying); (c) changes in labour contract. The assessments will address the general and abstract significations, not empirical or historical ones. The contemporary (and anticipative) features of job and of labour can be examined based on the suggestions provided in Fig. 3.1. 3.1.1   Changes in Labour Nature What could mean changes in labour nature? In fact, historically, the nature of labour has continuously changed—simple gathering of food which has belonged to no one, then harvesting from cultivating of plants or from breeding of animals, then (based on labour specialization) producing products which are not entirely necessary for him/herself and exchanging them with each other. If we want to discuss about the nature of labour, it must be said there are only two kinds of labour: (a) physical labour (or work) and (b) intellectual labour (or work). Of course, no work is purely physical or purely intellectual, but based on the predominance of a side or other, we could accept those two kinds of labour. In such a context, a change in the labour nature could be viewed as a continuous increasing of

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the share of the intellectual part of the labour, as much as the technological components of the mankind civilization increase. Or, secondly, maybe, there is another point of view from which we could examine the changes in labour nature, namely the mandatory or non-­ mandatory character of the labour (working). Principled, the survival of the human being requires, because his/her own nature and condition, to work in order to acquire the goods and services aimed at to satisfy, at a reasonable level and quality, the biological, cultural and social needs.2 Consequently, some of an amount of work is indispensably, that is, is inalienable from the individual. So, the question which can be put is: To what extent the individual is obliged to work beyond the level for which his/her all necessities of living are satisfied? It seems that the consumerism3 leads to a general tendency, in the most part by imitation, to work more than the reasonable level for a good life.4 Or, thirdly, maybe there is still another perspective to analyse the changing in labour nature: specialized labour (work) or universalized labour (work). Historically, the social efficiency required the specialization of work, which logically caused the economic exchange, with the economic markets. The mankind didn’t yet reach the state where the material (i.e. substantive) utility of individuals generated by the specialized work be sufficient for all. Although there are small islands of prosperity (or even, unfortunately, of over-prosperity), the world as a whole is, substantively, unsatisfied. It seems, however, this asymmetry in benefiting from the industrial (ones would say already, the fourth industrial revolution5) development and, implicitly, form the work specialization, is not of technical nature, but of an institutional one. The social justice, extended to the  That is, the complete Maslow’s pyramid.  It seems the consumerism is a culture “secreted” by the capitalism economic order. To be mentioned that the consumerism is that pattern of social (primarily, economic) behaviour where the supply causes the demand. Such a pattern is a non-natural one; it is induced artificially based on the fundamental purpose of capitalist economy—profit-maximizing—and is functioning by intermediation of the generalized unethical marketing. 4  We would remind the reader there is a theory of justice, proposed by the Austrian School (inter alia, by Hayek) according to which the economic inequality in the society must be maintained and encouraged, since it ensures the social progress just by the phenomenon of imitation—that is, the disfavoured individuals will be stimulated to get the economic and social standard of the favoured individuals and this way the society progresses. Of course, such a position is of positivist fundamentalism one. Of course, what is a “good life” is a separate (and difficult) issue which will be, by the way, ignored here. 5  See Davos Economic Forum “decree” in the matter, on 2019. 2 3

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entire world could, probably, better solve such a problem. So, concomitantly with the global social justice implementation, the work specialization will leave arena for gradually passing to its re-universalization.6 3.1.2   Changes in Labour Prestation (Work) Conceptually, by labour should be understood the potential (capacity) of the employee, and, generally, of an individual, to spend physical and psychological energy to get a purpose (most often, of economic nature),7 while by work should be understood the effective spending of that potential. Such effectiveness of spending the labour potential we’ll call labour prestation or, of course, work. In our opinion, the changes in labour prestation, based on the present possibilities of anticipations, could be the followings: • the repetitive work of human being is (almost) completely replaced by the mechanical working.8 This process seems to be (almost) permanent and irreversible. So, the labour prestation of the human being becomes more and more narrow as direct work and, correlatively, more and more large as indirect one9; • alongside the reducing of its direct objectifying, the labour prestation suffers another process which seems also to be permanent and irreversible: the digitalization (which leads to a kind of digital working). Essentially, by digitalization must be understood that process  Of course, such a re-universalization of the work nature could not, probably, be put under the Marxian utopia of the communism theory. 7  Most often, the labour is referred as labour force. 8  It is not necessary to distinguish among different types of mechanical attribute: from the pure mechanical tools, until the most sophisticated electronic ones (e.g. computers and all automatic instruments and systems), all of them are of mechanical kind, that is, they do not directly imply the human being work (of course, any of these mechanical tools do indirectly involve the human being, because all of them are produced by him/her). 9  To be mentioned that the repetitive work has two complementary significations: (a) as an algorithmically repetitiveness of a process (e.g. a Fordian organization of the work); (b) as a repetitiveness required by the entropic phenomenon assigned to a given work (e.g. to clean the house—the non-cleaned state of the house will re-establish soon —or to make food in the kitchen—that food will be eaten, so it must be prepared again). Such kind of work is called entropic work (some economists claim the wage levels should be established based on the entropic degree of the work in case). 6

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through which the physical manipulation of object in the process of working is replaced by virtual manipulation of it. Of course, at the end of “chain”, the mechanical worker will have to do the required physical manipulation, but the human beings have not to know about it at all10; • an indirect (but massive) result of digitalization in the working process is the teleworking. Large networks of employees cooperate in getting the specific products and services by telecommunication; • because a causal mixture, more and more the concentrated work is replaced by the diffused one—the so-called homeworking is an increasingly phenomenon in labour prestation across the world. In such a context, the employee is working at home and transmitting by any means the “products” towards the employer, • very recently a new perspective of getting the necessary products and services emerges—the autarchical working,11 that is, the production of products and services at home (e.g. based on 3D printers but not only) which are aimed at to be consumed directly12 by the producer. Such a work seems to be not a proper work anymore, it being rather a new autarchy in the economic evolution (of course, such a trend, just at its beginning, must be conformed and consolidated). 3.1.3   Changes in Labour Contract Strongly linked to the previous considerations are also the changes which could arise regarding the labour contract. Probably the followings trends will manifest on medium and long term in this matter:  The subject of present paragraph doesn’t encourage the examination of a very interesting process (of psychological, anthropological, philosophical and sociological perspectives) of a post-modern alienation of the human being caused by digitalization of work and, generally, of the way of living and inter-acting in the society. 11  Do not confuse with the self-employment, where the work is still “classical” but it doesn’t involve an explicit labour contract (although there is an implicit such a contract—by the way, from this emerges the concept of implicit cost or of the opportunity cost in the financial micro analysis). 12  The question if such a production could be exchanged on the market, based on a sui generis new specialization of labour, is not yet taken into debates, as we know. 10

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• passing from the UDP-based13 labour contract to the BP-based14 labour contract.15 This means the labour contract could be done focused on the result envisaged (a product, a service, research, an action and so on)16; • disappearing of the labour contract hierarchy; taking into account the changes in the labour nature, and in the labour prestation, it seems almost sure that the current hierarchy of the labour contracts—national level, branch level, organization level, individual level—will become irrelevant (of course, such a probable tendency will impact on both the job security and the job flexibility and, consequently, on the job flexicurity). Such a phenomenon could be named as flattening of the labour contract.

3.2   Job Flexicurity—A Mix Between Security and Flexibility 3.2.1   Concept of the Mix By mix is generally understood a structural combination of two (or more) entities, for example, economic variables, which works better than any of the given entities taken separately.17 The reason for which that mixed combination has a better output than the “sum” of the combined elements is called synergy. So, the synergy “produces” somewhat a surplus of output caused by the combination between the involved elements. Such “output from nothing” is a very curios phenomenon and it is present massively in the nature. The social (especially, economic) activity uses also the synergy in order to improve its results either quantitatively or qualitatively.

 UDP means un-determined period.  BP means by piece. 15  Some rudiments of such a tendency could be found, inter alia, in the grants awarded in exchange with specified scientific research, or in the case of ordered handmade products. 16  Such tendency implies, however, many questions regarding the social justice, the human rights and other of the same, but the debates in the matter are not yet significant. In the field of interest of the present research, such a tendency massively affects the job security but, probably, the concept of job itself must be seriously revisited here. 17  One of the most known such a mix is the fiscal-monetary one, where a fiscal variable is combined with a monetary one. More generally, we often talk about the fiscal-monetary policy mix. 13 14

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The synergy acts in two categorial ways: (a) as synergistic trade-off and (b) as synergistic trade-on. (a) the synergistic trade-off18 The synergistic trade-off refers to the case in which the synergistic effect is done in an inversely relationship among the elements convened in that synergy panel. This means the kinematics of some variables of the panel move into a direction (or with a given amplitude), and the kinematics of the remained variables move into an opposite direction (or with an opposite algebraic sign amplitude), so the total output of the synergistic combination move to a better level than in the case of classical (standard) trade-off. The phenomenon seems to generate an indifference (hyper) surface,19 that is, the combined kinematics of the variables move so that the total output of the synergistic panel constitutes an invariance, but at a higher (more general, better20) level. Figure 3.2 indicates graphically the trade-off kind of the synergy (notation IC means indifference curve; x and y signify two variables combined in a synergistic way). Two comments we think are of interest here: • the dominant feedback is of negative type. We talk about a dominant negative feedback, but not about the exclusivity of the negative feedback because, in the last case, the final output could not move on a higher (better) indifference curve. So, some positive feedbacks move the final output on a higher indifference curve, but the dominant negative feedbacks preserve the new level of the output on a similar indifference curve. • the relationship between variables is quantified by marginal rates of substitution. Such a marginal rate of substitution is “without rest” in the case of the classical (standard) trade-off, while, in the case of the

18  The standard concept of trade-off acts always in a non-synergistic way, that is, maintain the invariance (i.e. preserves the indifference curve) at the given level. 19  If the synergistic panel has two variables, then we’ll have a (simple) surface, that is, a surface in a two-dimensional Euclidian space. 20  Better is more general than higher because lower also could be better than higher (e.g. in the case on inflation).

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y

synergistic trade-off

y1 y2s y2

c

IC1

x1

x2

IC2 x

classical trade-off Fig. 3.2  Classical (standard) trade-off versus synergistic trade-off. (Source: Authors)

synergistic trade-off, the marginal rate of substitution is “with rest”.21 Let’s briefly formalize such a result: –– be x and y two variables which a synergistic trade-off coming between; –– be S xc / y the marginal rate of substitution between x and y in the  classical case of trade-off; so, S c  dy   Fx , where F = F(x, y) is x/y dx Fy the output of x and y combination; –– be S xs / y the marginal rate of substitution between x and y in the synergistic case of trade-off; –– we can further successively write as follows: –– G(x, y) = F(x, y) + g(x, y), where it is verified that g(x, y) > 0 –– Fx  dx  gx  dx  Fy  dy  gy  dy  0 –– dx Fx  gx  dy Fy  gy  0









21  Of course, the “cause” for which, in the synergistic trade-off, the indifference curve moves to a better state is just this “rest” from the marginal rate of substitution.

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F   gx dy   x dx Fy  gy   1 g s c –– if g x   , and y   , then S x / y  S x / y   1 Fy Fx –– S xs / y 

c s –– if α  >  β, then S x / y > S x / y , so the indifference curve moves up (better means higher, see Fig. 3.2); –– if α   ∆x, then C xs / y > C xc / y , so the synergistic trade-on moves the indifference curve upward (better means higher, see Fig. 3.3); –– if ∆y  0

f  s 1

A>0

B>0

A B 1 (b) Resuming the quantitative model Let us remind the (matrix of) positional normalized job flexicurity established above for the general case of n jobs:



 y1k  k y  yk PNF k   1 k 2  y  k 2 k y y  1 2

y1k  y1   y1  y1  y2k  y2   y2  y2 

where: k counts the job concerned; y1 means the weight (as coefficient) of the flexibility clauses in total clauses in Labour Code regarding the job

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functioning; y2 means the weight (as coefficient) of the flexibility clauses in total clauses in Labour Code regarding the job functioning; y is the minimum of y, with the corresponding low index; y is maximum of y with the corresponding low index. For the case in which two generic jobs (e.g. for two different countries: A and B) follow to be compared with each other, the matrix in case can be specified as two comparable matrices:



 y1A  A y  yA PNF A   1 A 2  y  A 2 A y y  1 2

y1A  y1   y1  y1  y2A  y2   y2  y2 



 y1B  B y  yB PNF B   1 B 2  y  B 2 B y y  1 2

y1B  y1   y1  y1  y2B  y2   y2  y2 

If further simplified notations are introduced, as follows:



y1A  f A y1A  y2A



y2A  s A y1A  y2A



y1B  f B y  y2B



y2B  s B y1B  y2B



y1A  y1  df A y1  y1



y1B  y1  df B y1  y1

B 1





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y2A  y2  ds A y2  y2



y2B  y2  ds B y2  y2

where: df  k is the normalized density of flexibility for the country k, and dsk is the normalized density of security for the country k, then the two matrices can be re-written as:



fA PNF A   A s

df A   ds A 



f PNF B   B s

df   ds B 

B

B

Thus, a gap between the two countries, regarding the job flexicurity A: B property of job (noted as: G PNF ) can be calculated as: A: B G PNF  PNF A  PNF B

Or,

 g Af :B A: B G PNF   A: B g  s

gdfA:B   gdsA:B 

where: g Af :B  f A  f B

gsA:B  s A  s B

gdfA:B  df A  df B



g

A: B ds



 ds  ds A

B



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(c) Time indexing in the model In order to evaluate the dynamics of either the matrices of the two countries or the dynamics of gap between them, a time indexing is, of course, necessary. Thus, the new expressions of the above formalism must be the following:



 f A  i  df A  i   PNF A  i    A  s  i  ds A  i    



 f B  i  df B  i   PNF B  i    B  s  i  ds B  i    

A: B G PNF  i   PNF A  i   PNF B  i 



 g i  g i   A: B G PNF   A: B   g  i  g A: B  i   ds  s 

A: B f

g Af :B  i   f A  i   f B  i 





i   s i   s i  g  i   df A  i   df B  i  gdsA:B  i   ds A  i   ds B  i  g





A: B df

A: B s

A

B





A: B df

Based on the time indexed notations, some derived (or secondary) indicators can be calculated, as follows: i ,i  1. speed of gap ( g .  ):

 g f

i , i  

 g s

i , i  

 g df

i , i  

 g ds

i , i  

   

g Af :B i, i   

 g

A: B s

g

A: B df

g

A: B ds

 i, i    

 i, i    

 i, i    

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i ,i  2. acceleration of gap (  . ):

i  , i  t 

g

f

  g

i  , i  t  s

i  , i  t 

g

df

  g

i  , i  t  ds

 g f

i  , i  t 



i, i t 



t  i  , i  t 

 gs



i  , i  t 

 gdf



i  , i  t 

 gds



i , i  

  g s

i , i  

t 

 gdf

  g df

i , i  

t  i , i  t 



t 

 gs

i , i  t 



t 

  g f

t  i , i  t 



t 

 g f

 gds

i , i    g ds 

t 

0,n 3. trajectory of gap ( g.  ):

The trajectories of the four gaps of interest can be written as follows:

     g ,g ,,g      g ,g ,,g       g , g , , g  g f    g 0f , g1f ,,g nf 0, n



0, n g s 



0 s

1 s

n s

0 ,n g df 

0 df

1 df

n df

0 ,n g ds 

0 ds

1 ds

n ds

Moreover, more subtle analysis could use the theory of complexity (or chaos theory) in order to get some points of attractors on the gap trajectory of job flexicurity or, if needed, on the trajectory of the job flexicurity for each of any two countries which could be taken into empirical analysis.

References Auer, P., & Cazes, S. (2006). Employment stability in an age of flexibility. Bonoli, G. (2017). Labour market and social protection reforms in international perspective: Parallel or converging tracks? (H.  Sarfati, Ed.; 1st edition). Routledge.

CHAPTER 6

An (Illustrative) Case Study on Romania

6.1   Preamble This chapter of the research is aimed at applying the conceptual and methodological findings in the previous two chapters to Romania’s labour market. To this end, the Labour Code has been examined, in order to identify the clauses that address the job flexicurity, with regard to either flexibility or security or both. The following methodological and instrumental mentions must be provided based on which the empirical study has been conducted: (i). the criterion α has not been anymore used, since the empirical study is restraint to the legal norms (i.e. Romanian Labour Code); (ii). the other three classes of criteria (β, γ, δ) seemed to us be too aggregated, so they have been analytically unfolded, each of them into two sub-classes, as follows: (1) according to (β) criterion—aim • (βr) employer’s strengthening job flexicurity indicators, that is, an increasing of the security weight in the job flexicurity vector of the employer, taking into account that as higher is the security component of the job flexicurity, so lower is the employer’s entropy and, consequently, so higher is his/ her bargaining power;

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 E. Dinga et al., Job Security and Flexibility, https://doi.org/10.1007/978-3-031-28509-7_6

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–– ( β rs ) employer’s strengthening of job security –– ( β rf ) employer’s strengthening of job flexibility • (βe) employee’s strengthening job flexicurity indicators, that is, an increasing of the flexibility weight in the job flexicurity vector of the employee, taking into account that as higher is the flexibility component of the job flexicurity, so lower is the employee’s entropy and, consequently, so higher is his/her bargaining power; –– ( β es ) employee’s strengthening of job security –– ( β ef ) employee’s strengthening of job flexibility • (βre) balanced-strengthening job flexicurity indicators, that is, an approach of the weights of security in the employer’s flexicurity vector and of flexibility in the employee’s flexicurity vector, so approaching the bargaining powers of the two parts of the labour markets; –– ( β res ) employer’s security and employee’s flexibility –– ( β ref ) employer’s flexibility and employee’s security

(2) according to (γ) criterion—trend • (γ s) security-sloped job flexicurity indicators, that is, a potential of the job flexicurity indicators to express an increasing of the k numerical value as a result of the increasing of the weight of the security component of the job flexicurity vector, either for the employer or for employee; –– ( γ rs ) regarding the employer’s security increasing s –– ( γ e ) regarding the employee’s security increasing • (γ f) flexibility-sloped job flexicurity indicators, that is, a potential of the job flexicurity indicators to express an increasing of the k numerical value as a result of the increasing of the weight of the job flexibility component of the job flexicurity vector, either for the employer or for employee; f –– ( γ r ) regarding the employer’s flexibility increasing –– ( γ ef ) regarding the employee’s flexibility increasing sf • ( γ re ) neutral-sloped job flexicurity indicators, that is, a potential of the job flexicurity indicators to express a decreasing of the k numerical value as a result of the

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approaching of the weight of the two components of the job flexicurity vector, either for the employer or for the employee; f –– ( γ re ) regarding the flexibility approaching s –– ( γ re ) regarding the security approaching

(3) according to (δ) criterion—connectivity • (δsf) autonomous job flexicurity indicators—those job flexicurity indicators which do not initiate causal relationships neither between job security and job flexibility (inside the job flexicurity of each of two parts) nor between employer’s job flexicurity and employee’s job flexicurity; –– ( δ rsf ) autonomization regarding the employer’s flexicurity –– ( δ esf ) autonomization regarding the employee’s flexicurity • (δsf) single-causal job flexicurity indicators—those job flexicurity indicators which do initiate only once (i.e. it is unrepeatable) a causal impulse (either inside any part—from security to flexibility or inversely—or between the job flexicurity of the two parts); –– ( δ rsf ) regarding the employer –– ( δ esf ) regarding the employee • (δre) co-evolving job flexicurity indicators—those job flexicurity indicators which are able to hold repeatable causal relationships (either inside any part—from security to flexibility or inversely—or between the job flexicurity of the two parts), so that, in fact, the job flexicurity state (of both parts) is a co-evolutive process. –– ( δ res ) co-evolution of security between employer and employee –– ( δ ref ) co-evolution of flexibility between employer and employee (iii). as repeatedly mentioned in the previous chapters, the main objective of the book (both theoretical and empirical) is concerned with the job flexicurity (namely, flexibility and security) of the job only. Consequently, from the Labour Code, have not been

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retained those clauses that did not check this target—for example, clauses regulating of the labour conditions, or different special cases—except, however, in cases where the job flexicurity effect was explicit; (iv). likewise, our analysis is focused on those clauses that have a generic, permanent and principled nature—so, those clauses that regulate part-time work or labour contract for limited period were ignored; (v). according to the methodological indications provided in Chap. 2, the empirical analysis will be developed for a single job—Nota bene: by expression “a single job” we understand, in fact, the generic job (no matter the branch, the sector and the like) which is normed in Romanian Labour Code; (vi). the time indexing of job flexicurity positional vector is not used in the empirical analysis, since we have not at disposition two sufficiently radically different versions of the Labour Code, although, starting with the 2003 edition, some (negligible)1 modifications happen, however.

6.2   The Procedure Applied to the Empirical Analysis The empirical analysis for Romania case has been conducted according to the following schema: • step 1: analytical examination of the Romanian Labour Code, in order to identify those normative clauses which are (rather directly) linked to the issues of the job flexicurity from both employer and employee perspective; • step 2: distribution of the identified clauses at step 1, on the 18 classes of the criteria established to describe the main impacts of the normative framework on the job flexicurity; • step 3: calculus of the positional vectors of job flexicurity, based on the clauses distribution got at step 2;

1  Of course, such a negligibility is assessed from the perspective of the present study’s objectives only.

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• step 4: evaluation and interpretation of the constructed positions vectors of job flexicurity; • step 5: formulation of the recommendations which the authors consider necessary, useful or (if the case) urgent, in attention of the decision makers. 6.2.1   Job Flexicurity Clauses in Romanian Labour Code The documentation source for identifying the main clauses in Romanian Labour Code that address the issue of job flexicurity is Law 53/2003. As a result of such examination, 44 clauses (which verify the “conditions” put in Preamble) have been retained (in Annex B, the clauses concerned are systematized). 6.2.2   Distribution of Job Flexicurity Normative Clauses on the Qualitative Criteria Using the analytical unfolding of the three basic criteria established above, the normative clauses involved in regulating the job flexicurity in Romania have been distributed on the qualitative criteria as follows (Annex B). 6.2.3   The Job Flexicurity Positional Vectors In this paragraph and based on the methodological findings of the study, the job flexicurity (positional) vectors are built. To this end, the following phases are completed: (a) Construction of the (spatial)2 series of job flexibility series Since we analytically rebuilt the three relevant criteria to classify the job flexicurity clauses (we have now 18 classes of such criteria), the positional vectors of job flexicurity will change correspondingly. Such an analysis will be conducted based on the information gathered in Table 6.1. 2  We have used time series of variables/indicators, but there are, too, spatial series of variables/indicators, namely, those series in which the time is fixed (so, it does not exist, in fact), instead the space, that is, the extension/sphere of the variables/indicators changes.

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Table 6.1  Numerical values associated to Romanian Labour Code regarding the job flexicurity clauses Employer Crβ / f

9

Crβ / s

10

Employee

C βj / f

26

C βj / s

32

Ceβ / f

17

Ceβ / s

22

Creβ / f

8

8

Creβ / s

6

6

C βj C

γ/f r

28 11

Ceγ / f Crγ

16 20

Ceγ C

γ /s r

41 9

Ceγ / s

25

Creγ / f

3

3

Creγ / s

4

4

γ re

7

Crδ / a

6

C

Ceδ / a

7 15

C δj / a C

δ /1 r

21 2

Ceδ /1 Crδ

8 20

Ceδ C

δ / mf re

Creδ / ms Creδ / m Source: Authors

Job

41 13 15 28

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Consequently, we have: (a1) the positional vectors according to aim criterion (β) (a1.1) the positional vector for the employer • notations: –– frβ : the share of number of clauses regarding the employer and aimed at strengthening the job flexibility –– srβ : the share of number of clauses regarding the employer and aimed at strengthening the job security –– Crβ / f : the number of clauses in Romanian Labour Code regarding the strengthening of employer’s job flexibility –– Crβ / s : the number of clauses in Romanian Labour Code regarding the strengthening of employer’s job security –– C βj / f : the number of clauses in Romanian Labour Code regarding the job flexibility strengthening either for employer or for employee –– C βj / s : the number of clauses in Romanian Labour Code regarding the job security strengthening either for employer or for employee • calculus C / f –– fr  r / f Cj C  /s –– sr  r / s Cj • vectors

 f   –– vr   r   sr 

(a1.2) the positional vector for the employee • notations: –– feβ : the share of number of clauses regarding the employee and aimed at strengthening the job flexibility β –– se : the share of number of clauses regarding the employee and aimed at strengthening the job security –– Ceβ / f : the number of clauses in Romanian Labour Code regarding the strengthening of employee’s job flexibility –– Ceβ / s : the number of clauses in Romanian Labour Code regarding the strengthening of employee’s job security

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• calculus –– fe 

Ce / f C j / f

–– se 

Ce / s C j / s

• vectors  f  –– ve   e   se  (a1.3) the positional vector for the balance between employer and employee • notations: –– freβ : the share of number of clauses regarding the balance between employer’s job flexibility and employee’s job security –– sreβ : the share of number of clauses regarding the balance between employer’s job security and employee’s job flexibility –– Creβ / f : the number of clauses in Romanian Labour Code expressing the balance between employer’s job flexibility and employee’s job security –– Creβ / s : the number of clauses in Romanian Labour Code expressing the balance between employer’s job security and employee’s job security –– C βj : the total number of clauses in Romanian Labour Code regarding job flexicurity • calculus –– C j  C j / f  C j / s /f –– fre  Cre C j  –– sre 

Cre / s C j

–– fre  sre  1 (by definition)

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• vectors  fre   –– vre      sre  (a2) the positional vectors according to trend criterion (γ) (a2.1) the positional vector for the flexibility • notations: –– frγ : the share of number of clauses regarding the employer and aimed at increasing employer’s job flexibility –– feγ : the share of number of clauses regarding the employer and aimed at increasing employee’s job flexibility –– Crγ / f : the number of clauses in Romanian Labour Code regarding the employer and aimed at increasing job flexibility (as trend) –– Ceγ / f : the number of clauses in Romanian Labour Code regarding the employee and aimed at increasing job flexibility (as trend) –– Crγ : the number of (trend) clauses in Romanian Labour Code regarding the employer –– Ceγ : the number of (trend) clauses in Romanian Labour Code regarding the employee • calculus  –– fr 

Cr / f Cr /f

–– f   Ce e Ce • vectors

 f  –– vf   r   fe  (a2.2) the positional vector for the security • notations: –– srγ : the share of number of clauses regarding the employer and aimed at increasing employer’s job security –– seγ : the share of number of clauses regarding the employer and aimed at increasing employee’s job security

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γ /s –– Cr : the number of clauses in Romanian Labour Code regarding the employer and aimed at increasing job security (as trend) –– Ceγ / s : the number of clauses in Romanian Labour Code regarding the employee and aimed at increasing job security (as trend) • calculus Cr / s  –– sr   Cr

–– se 

Ce / s Ce

• vectors  s  –– vs   r   se  (a2.3) the positional vector for the security • notations: –– freγ : the share of number of clauses regarding the job flexibility shares approaching between employer and employee –– sreγ : the share of number of clauses regarding the job security shares approaching between employer and employee –– Creγ / f : the number of clauses in Romanian Labour Code regarding the approaching of job flexibility between employer and employee –– Creγ / s : the number of clauses in Romanian Labour Code regarding the approaching of job security between employer and employee –– Creγ : the number of clauses in Romanian Labour Code regarding the approaching of job flexicurity between employer and employee • calculus –– Cre  Cre / f  Cre / s /f –– f   Cre re Cre  –– sre 

Cre / s Cre

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–– fre  sre  1 (by definition) • vectors

 f   –– vre   re   sre 

(a3) the positional vectors according to connectivity criterion (δ) (a3.1) the positional vector for autonomous changes in job flexicurity • notations: –– nrδ / a : the share of number of clauses regarding employer’s job flexibility or job security that does not initiate correspondingly job security or job flexibility changes for employee –– neδ / a : the share of number of clauses regarding employee’s job flexibility or job security that does not initiate correspondingly job security or job flexibility changes for employer –– Crδ / a : the number of clauses in Romanian Labour Code which act autonomously for employer, either for job flexibility or for job security –– Ceδ / a : the number of clauses in Romanian Labour Code which act autonomously for employee, either for job flexibility or for job security –– C δj / a : the number of clauses in Romanian Labour Code which act autonomously either for job flexibility or for job security • calculus  /a  /a  /a –– C j  Cr  Ce  /a –– nr 

Cr / a C j / a

 /a –– ne 

Ce / a C j / a

–– nr / a  ne / a  1 (by definition) • vector  n / a  –– vj / a   r / a   ne  (a3.2) the positional vector for the single case of change of job flexicurity

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• notations: –– nrδ : the share of number of clauses regarding employer’s job flexibility or job security that do not feed replications of the changes in case –– neδ : the share of number of clauses regarding employee’s job flexibility or job security that do not feed replications of the changes in case –– Crδ /1 : the number of clauses in Romanian Labour Code which act once only regarding the employer –– Ceδ /1 : the number of clauses in Romanian Labour Code which act once only regarding the employee –– Crδ : the number of clauses in Romanian Labour Code regarding the employer –– Ceδ : the number of clauses in Romanian Labour Code regarding the employee • calculus C  /1 –– nr /1  r  Cr  /1

–– ne /1  Ce Ce • vector

 nr /1   /1 –– v j   n /1   e  (a3.3) the positional vector for the co-evolutive change of job flexicurity • notations: –– nreδ / m : the share of number of clauses regarding employer’s job flexibility or job security that do feed corresponding replications from the employee part, so generating a co-evolution of employer– employee partnership in the matter of job flexicurity –– nreδ / m : the share of number of clauses regarding employee’s job flexibility or job security that do feed corresponding replications from the employer part, so generating a co-evolution of employee– employer partnership in the matter of job flexicurity δ/ –– Cre m : number of clauses regarding employer’s job flexibility or job security that do feed corresponding replications from the employee part, so generating a co-evolution of employee– employer partnership in the matter of job flexicurity

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–– Creδ / m : the share of number of clauses regarding employee’s job flexibility or job security that do feed corresponding replications from the employer part, so generating a co-evolution of employee– employer partnership in the matter of job flexicurity • calculus  /m –– nre 

Cre / mf Cre

 /m –– nre 

Cre / ms Cre

• vector  nre / mf   /m –– v j    / ms   nre  (b) The job flexicurity matrix By putting together the above-identified vectors we can now construct a so-called job flexicurity matrix (  ):



  vr ve vre vf vs vre vj / a vj /1 vj / m



that is:

 f    r  sr

fe se

fre sre

fr fe

sr se

fre sre

nr / a ne / a

nr /1 ne /1

nre / mf   nre / ms 

So, the empirical job flexicurity matrix can be determined. Firstly, we shall construct the primary data (Table 6.1). Now, the vectors of positional job flexicurity can be calculated, according to the methodology previously proposed. (i) The components of vectors The components of vectors are numerically determined in Table 6.2. (ii) The matrix of positional job flexicurity

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Table 6.2 The components of positional vectors of job flexicurity (numerical values)

Component Numerical value frβ

0.34615

β r β e

s f

0.31250

seβ

0.68750

freβ

0.57143

sreβ

0.42857

γ r

0.55000

feγ

0.39024

srγ

0.45000

seγ

0.60976

f

0.65385

γ re

0.42857

sreγ

0.57143

nrδ / a

0.28571

neδ / a

0.71429

δ /1 r

n

0.10000

neδ /1

0.40000

nreδ / mf nreδ / ms

0.46429

f

0.53571

Source: Authors

Based on Table 6.1, the numerical values of the matrix of job flexicurity in Romania are written below:3  0.34615   0.65385  0.57143   0.55000    0.45000   0.42857  0.28571   0.10000   0.46429 3

 In a transposed form.



0.31250   0.68750  0.42857   0.39024  0.60976   0.57143  0.71429   0.40000   0.53571 

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6.3  Analysis and Interpretation Each of the nine vectors expressing the positional job flexicurity in Romania will be examined and interpreted.  0.34615  (1) vr     0.31250  Both of the components of vrβ are around 1/3 of their “potential”, which means that, regarding the employer, there is still much reserve of improving both job flexibility and job security. Comparatively, the employer’s job flexibility is greater than his/her job security. Such a state of affairs is neither sharply good or sharply bad, because the labour market must move harmoniously inside the job flexibility and job security mechanism. Taking into account the “motorness” role of entrepreneurship in a free market system, probably the two components of the vector in case should approach one another and, concomitantly, increase. The gap between employer’s job flexibility and his/her job security (in this order) is vr  0.03365.  0.65385  (2) ve     0.68750  Since the employer job flexicurity is placed “in mirror against 1” related to the employee job flexicurity, regarding the latter, the potential is exhausted in approximately 2/3. Inversely compared with employer case, the job flexibility of employee is less than his/her job security. From the social justice point of view, such a state of affairs seems to be beneficial, although, from the perspective of the efficiency of the free labour market, some rigidity of employment could be suspected.4 The gap between employee’s job flexibility and his/her job security (in this order) is vr  0.03365 .5 (3) v    0.57143    re  0.42857 

4  Do remember that the study has already evoked the conceptual rapports between job flexicurity and rigidicy (the last term is introduced by authors). 5  Because their “closing to 1”, of course, the gap (between job flexibility and job security) regarding the employer and that regarding the employee has the same absolute value, but opposite algebraic sign.

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Regarding the balance between employer and employee provided by the criterion “aim” of job flexicurity is to be noticed that it is positioned about the average, which means that, however, in Romania, the labour market is functional from that perspective. A graphical image of job flexicurity positioning of labour market, from the perspective of criterion “aim”, is offered in Figs. 6.1 and 6.2. Additional comment The positional vector of job flexicurity from the “aim” criterion indicates that the labour market is closer to employee from the perspective of job flexibility, and closer to employer from the perspective of job security. This means that the employee has more liberty in his/her choices, while the employer has more assurance regarding the maintaining of his/her supply of jobs.  0.55000  (4) vf     0.39024  The trend of job flexibility, as it can be extracted from Labour Code clauses, is more accentuated for the employer than for the employee (the relative coefficient between is over 1.4). So, while the static job flexibility of employer (the criterion β) was smaller than the static job flexibility of 1.6

0.6875

1.4 1.2

0.42857

1 0.8 0.6 0.4

0.3125

0.65385

0.57143

0.34615

0.2 0

employer

employee flexibility

labour market security

Fig. 6.1  Positional vector—“aim” criterion of job flexicurity (I). (Source: authors)

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job flexibility

1 labour market employee

0,65385 0,57143

75 68

1

job security

0,

0,

42

31

5 12

85 7

employer

0,

0,34125

Fig. 6.2  Positional vector—“aim” criterion of job flexicurity (II). (Source: Authors)

the employee, the corresponding trends are of opposite relationship— which means that the job flexibility of employer will become more and more greater. From the labour market general perspective, such a situation is aimed at increasing both the volatility of jobs and the negotiation power of the employer (either as individual or specific trade unions).  0.45000  (5) vs     0.60976  Regarding the job security trend, the state of affairs is inversely compared with the job flexibility one, namely, the employee’s job security seems to have a greater propensity to increase than the employer’s job security (the relative coefficient between is almost 1.36). Therefore the speed with which the flexibility (for employer) and the security (for employee) seem to be approximately the same. Consequently, if the trends will maintain the pace, we can expect that the job flexicurity be “shared” between the two parts of the labour market more and more equally. From

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the perspective of the philosophy of labour, this expectation could provide a propinquity of the negotiation power of the two parts involved.  0.42857   (6) vre     0.57143  The clauses addressing the gradual approaching of the job flexicurity between the employer and the employee indicate relatively the same “distance” against the very average (50%) for the job flexibility (−7.2%)and the job security (+7.1%), respectively. Under the qualitative assessment, however, it must be noticed that there is a “deficit” of job flexibility, and, correspondingly, an “excess” of job security. From the social justice perspective, this state of affairs means the Romanian labour market is inclined rather to security (perhaps, rigidity) than the flexibility (perhaps, volatility). A graphical image of job flexicurity positioning of labour market, from the perspective of criterion “trend”, is offered in Figs. 6.3 and 6.4. Additional comment The positional vector of job flexicurity from the “trend” criterion indicates that the job flexibility of employer is more claimed by the Labour Code clauses than the job flexibility of employee (the coefficient in case is 1.41), while regarding the job security, the clauses “favour” the employee 0.7 0.6

0.55

0.60976 0.57143

0.5 0.4

0.42857

0.45

0.39024

0.3 0.2 0.1 0

employer

employee flexibility

labour market security

Fig. 6.3  Positional vector—“trend” criterion of job flexicurity (I). (Source: Authors)

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employee

1

0,60976 0,57143

labour market

flexibility

1

employer

0,

42

85 7 0, 45 0, 55

0,39024

security

Fig. 6.4  Positional vector—“trend” criterion of job flexicurity (II). (Source: Authors)

(the coefficient is 1.36). This means that the Labour Code intention is to increase the flexibility of employer and the security of employee. In our opinion, such a trend is consistent with the general philosophy of labour market in a free and democratic society, since it ensures both the private initiative (i.e. agency) and freedom of individuals in choosing/replacing their jobs.  0.28571   /a  (7) v j    0.71429  Regarding the autonomous changes in job flexibility or job security, the employer is much less autonomously related to the employee, that is, only about 30% from those changes do not affect the employee, while from the opposite part (from the employee) about 70% of the changes do not affect the employer. This result is quite interesting, since it indicates that, from the “trend” criterion, the employee’s job flexicurity is much more

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independent of the employer’s job flexicurity than the inverse relationship (the coefficient of this independence/autonomy is 2.5  in favour of the employee).  0.10000  (8) vj /1     0.40000  This vector contains the message that, generally, much less unique changes in job flexibility or job security affecting the employer generate correspondingly changes of job security or job flexibility affecting the employee, than the opposite impulse: so much more such unique changes affecting the employee causally are transferred to the (inverse ordered) changes affecting the employer. The ratio of employee over employer is 4. This result is consistent (and convergent as well) with that obtained from vector vδj / a above, namely the activism (agency) of the employer is considerably greater than the activism of employer from the perspective of trend of job flexicurity, as the current Labour Code stipulates.  0.46429  (9) vj / m     0.53571  The signification of this vector is very interesting too. More precisely, it indicates that in a degree relatively comparable (46% for employer, 53% for employee) a change in job flexibility or job security happened to employer or to employee enters a co-evolution process, by generating multiple corresponding replications for the employee or employer, respectively, concerning the job security or job flexibility. Such result is interesting since it says us that the labour market is a “living” system6 that could be principled, modelled, from an evolutionism (including institutionalism) paradigm. A graphical image of job flexicurity positioning of labour market, from the perspective of criterion “connectivity”, is offered in Figs. 6.5 and 6.6. Additional comment The positional vector of job flexicurity from the “connectivity” criterion shows at least three important findings: (a) the smallest connectivity characteristic of job flexicurity, as it is stipulated in Romanian Labour 6  More exactly, it is a logically living system (Dinga, 2021—Logically Living System: A Generative “Machine” for Autopoietic Systems—Chapter 4 in Handbook of Research on Autopoiesis and Self-Sustaining Processes for Organizational Success, published by IGI Global).

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0.8

209

0.71429

0.7 0.6

0.53571

0.5

0.46429

0.4

0.28571

0.3

0.4

0.2 0.1 0

0.1 flexicurity autonomy

flexicurity uniqueness employer

flexicurity co-evolution

employee

Fig. 6.5  Positional vector—“connectivity” criterion of job flexicurity (I). (Source: Authors) employee

1 flexicurity autonomy

0,71429

0,4

flexicurity uniqueness

0,53571

flexicurity co-evolution

1 0,

0,

28

1 57

0,

46

9 42

1

employer

Fig. 6.6  Positional vector—“connectivity” criterion of job flexicurity (II). (Source: Authors)

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Code, is referring to the job flexicurity uniqueness—which means that there are very little number of clauses that are singular as impact between employer and employee regarding either the job flexibility or job security (this result ensures the very large connectivity between the two parts of the labour market in Romania); (b) in accordance with the previous findings, the employer is more willing to the co-evolution with the employee regarding the job flexicurity—a result which is “natural” taking into account that the entrepreneurship is strongly dependent on the labour force; (c) the employee is more willing to the autonomy of its job flexicurity from the employer—probably this is an effect of the larger degree of trade unioness of employees related to the same phenomenon regarding the employers.

6.4  Conclusions (1) Brief statistics





i. the job flexicurity clauses in Romanian Labour Code cover about 16% (44 clauses) from all clauses;7 ii. from the clauses referring the job flexicurity, 25.81% (72 clauses) are focused on the “aim” criterion, 24.37% (68 clauses) are focused on the “trend” criterion, and 21.15% (59 clauses) are focused on the “connectivity” criterion; iii. from the clauses referring the job flexicurity, 23.62% (47 clauses) address the employer, 51.76% (103 clauses) address the employee and 24.62% (49 clauses) address the relationships between employer and employee; iv. from the clauses referring the job flexicurity, 36.15% (77 clauses) concern the job flexibility, 40.85% (87 clauses) concern the job security, 11.27% (24 clauses) concern the relationship between job flexibility and job security as they are initiated by the job flexibility changes, and 11.74% (25 clauses) concern the relationship between job flexibility and job security as they are initiated by the job security changes;

7  For clarity reason, we repeat that the study has taken into consideration only the job flexicurity in its principled view (although other clauses can address the job flexicurity from other perspectives—for example, regarding the conditions of work or contracts with partial time or of fixed duration).

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(2) Main conclusions i. Of conceptual nature i.1.  the job flexicurity is concerned with the fair rapport between the job flexibility and the job security • Nota bene: “fair rapport” must be understood as the efficacy rapport which equally provides the negotiating power for employer and for employee, respectively i.2. the job flexicurity is not a (numerically) punctual value, but a positional one, that is, a vector with two components either: (a) employer and employee, respectively, or (b) job flexibility and job security, respectively; i.3. the job flexicurity has important economic impacts on both employer (e.g. optimizing the structure of labour force hired, according to its qualification and productivity) and employee (e.g. the possibility—without prohibitive costs— to change the job in order to optimize its reward); i.4. the job flexicurity has important non-economic impacts on both employer and employee—the solidarity feeling, the organizational culture and, in last instance, the communization of the purposes and, as a result, the fair sharing of the rewards;8 ii. Of methodological nature ii.1. the present study has taken into consideration only the job flexicurity, from both perspectives of employer and employee, respectively; ii.2. the job flexibility and the job security were viewed as relative shares on the job flexicurity, which allowed to notice the internal structural movement of the job flexicurity. However, this analysis is only a structural one, but not a causal investigation—such an investigation need, instead, other objectives to be committed about; ii.3.  the job flexicurity has considered only the explicit (or quasi-­explicit) clauses in the Labour Code—however, a deeper analysis of the Labour Code, which also considers the implicit clauses regarding the job flexicurity (i.e. which proceed through logical inference if the case) could bring 8  The effect of job flexicurity on the social justice objectification cannot be ignored under the sanction of an incomplete (i.e. irrelevant) analysis of the labour market.

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new insights on this important phenomenon of the labour market; ii.4. the job flexicurity has been modelled as an (algebraic) vector containing the job flexibility and the job security, separately for employer and employee. However, a next step in unfolding this model could be the construction of a squared matrix (with the employer and employee, respectively on rows, and with job flexibility and job security, respectively, on columns); ii.5. the clauses in Labour Code addressing the job flexicurity have been classified from three different criteria, (a) aim, (b) trend and (c) connectivity, in order to identify the most relevant meanings of such clauses. In addition, these criteria have been applied to bothemployer, employee and relationships between the two parts of the labour market;9 iii. Of empirical nature iii.1. based on the “aim” criterion: • the labour market is closer to employee from the perspective of job flexibility, and closer to employer from the perspective of job security; • the employer job flexicurity positioning related to the employee one is twice close to the origin of the coordinate axes (about 30% against about 66%); iii.2. based on the “trend” criterion: • the trend of the employee’s job flexibility is more pronounced than the trend of the employer’s one; • instead (in the mirror), the trend of the employer’s job security is more pronounced than the trend of the employee’s one; • while, from the perspective of the “aim” criterion, the labour market job flexicurity was quite balanced placed between the employer and the employee, based on the “trend” criterion, the labour ­market security is biased towards the employee—what means a prevalence of the social justice on the economic efficacy of the labour market; iii.3. based on the “connectivity” criterion: 9

 Regarding a single job or, if desired, a generic job.

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• the most job flexicurity clauses of the Labour Code regard the job flexicurity uniqueness, which means it does not encourage singular changes in neither job flexibility nor job security, either at employer or at employee; • the clauses which generate the job flexicurity co-evolution on the labour market are almost balanced distributed between employer and employee; • instead, regarding the autonomous job flexicurity, the employee is “favoured”, which means that there are much more job flexicurity clauses in Labour Code aimed to affect the employee only than such clauses addressing the employer or both of the two parts.

6.5  Authors’ Recommendations (1) for Labour Economics i. introducing the concept of labour quality which includes, besides the labour conditions, the job flexicurity indicator;10 ii. introducing, in labour market analyses, of the positional indicators (by replacing the punctual ones), among which the positional job flexicurity—as proposed in this research— should occupy a central place;11 (2) for the policy makers 2.1. Regarding primary legislation (constitutive norms) i. introducing in the Constitution of explicit formulation regarding the job flexicurity, job flexibility and job security; ii. introducing in the Labour Code of explicit formulation regarding the job flexicurity, job flexibility and job security; 2.2. Regarding secondary legislation (procedural norms) i. mandatorily introducing in the labour individual contracts (as well as in the national or sectoral ones) of explicit clauses regarding the rapport between employer and employee on

10  Such an indicator could have a similar signification like its homologous concept of the “quality of life”. 11  The idea of the positional indicators (in fact, of the positional economic variables) is first step in what the authors claim in the background of this work, namely the introduction of the methodology of topological modelling in Economics.

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E. DINGA ET AL.

the job flexicurity issue (like the clauses that are concerned with concurrence in the Labour Code); ii. designing (both at national level and at EUROSTAT level) of specific and relevant indicators aimed at capturing the job flexicurity phenomena; 2.3. Regarding other institutions (organizational norms) i.  creating (within the Ministry of Labour and Social Protection) the Romanian Job Flexicurity Observer (RJFO), in order to analyse, monitor and make proposals regarding the inclusions of job flexicurity clauses in the Labour Code, collective labour contracts and individual labour contracts; ii.  creating (within the Directorate General: Employment, Social Affairs and Inclusion—EMPL) the European Job Flexicurity Observer (EJFO); iii. at the microeconomic level (i.e. at the employer, either in the private or public medium) a strategic component of human resources management aimed at evaluating the job flexicurity from jobs’ perspective, transposed into the organizational chart as a relevant compartment in charge with (e.g. payroll, training). Such an organizational structure would produce arguments for even bringing competitive advantages through more efficient internal norms or through mutual loyalty increasing.

6.6  Other Final Mentions (1) Further research directions: i. it could be of (both theoretical and instrumental) interest to determine the job flexicurity as a double interval: one for the flexibility and one for the security. Such a way could provide a suggestive visual kinematics of the job flexicurity, based on rectangular deformation,12 as in Fig. 6.7 (Nota bene: the suggestion allows using of both the interval mathematics/algebra and the topological modelling of the job flexicurity). 12  In addition, the proposal does possibly introduce a new measure regarding the job flexicurity (this time, a cardinal one, so being very different from the positional measure introduced above), namely an area-based measure.

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215

job security

1

St 1

St 0

IFt 1

IFt 0

f t0

f t1

1

job flexibility

Fig. 6.7  A (possible) area-based measure of the job flexicurity. (Source: Authors)

ii. it could be considered the job flexicurity as a vector in its 13 meaning in physics, so having both quantitative measure  and direction ( F ). Therefore, from the two vectors of job flexibility and job security, the job flexicurity can be inferred by intermediation of the geometric composition/resultant (Fig. 6.8). (2) Relevance of the job flexicurity in the digital era The just coming digital era14 will augment, in the authors’ opinion, the significance, relevance and importance of the job flexicurity. In fact, the job flexicurity should already be redefined from the perspective of the 13  To be noticed that, in the study economy, we have considered the job flexicurity as vector in the algebraic meaning, that is, as a tableau of numerical values. 14  As well-known there are three stages of the digital era: (a) digitization—transforming analogic data in digital ones; (b) digitalization—introducing adequate software able to handle the digitization; (c) digital transforming—putting together the people (and, in fact, the society as a whole) and the digitalized economy and social processes in the new (especially) labour paradigm.

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E. DINGA ET AL.

employee

1

job security

Se

job flexicurity job flexibility

fe

Sr

1

employer

fr

Fig. 6.8  A (possible) vectorial-based measure of the job flexicurity. (Source: Authors)

digital transforming of the entire society, since the labour contracts will register radical changes with new significations and functions. Therefore, we believe that the more the society is digitalized, the more the job flexicurity becomes relevant—perhaps the most significant characteristics on the labour market (Nota bene: but such a development of the research is not included in the committed objectives of the current research). (3) Relevance of the job flexicurity under the climate change impact The climate change impacts not only the general life conditions but also (in a specific way) the jobs and the labour process as a whole. For example, the new technologies required by the challenges of climate change will remove or modify the current jobs and will create new jobs (perhaps very different from the old ones) as well. But these inherent

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217

jo b

se cu rit

y

(y )

job mobility (z)

2

z2 y2 z1

y1

1

x1

x2

job flexibility (x)

Fig. 6.9  The (suggested) European triad of the job phenomenology: fleximocurity. (Source: Authors)

adjustments regarding the jobs require in turn new reflections on the job flexicurity. Probably, the pair flexibility-security should be completed with the mobility (4) Relevance of the job flexicurity in the framework of Future Europe debates The current large debates of the Future Europe (or the Future of Europe) address the labour market issues from a general perspective of its attributes seeming to come. But, also, the job flexicurity topic is of interest in this framework of reflections, taking into account the specifics of the common market (including the common labour market). In our opinion, one of the economic liberties in the European Union—namely the free movement of the labour force—must be addressed just in the context of job flexicurity. Maybe, the job mobility should be added to the job flexibility and job security so delivering a new label, namely: fleximocurity. For example, such a concept could be visualized as follows (Fig. 6.9).



Annexe 1: Clauses Regarding the Job Flexicurity

Table 1  List of clauses in Romanian Labour Code involving job flexicurity No. Article/ para-graph/ letter

Statement/clause

1.

Art.3/2

2.

Art.3/3

3.

Art.5/1

4.

Art.5/2

5.

Art.5/3

6.

Art.6/2

7.

Art.7

Any person is free to choose their job and profession, trade or activity he is going to perform No one can be forced to work or not to work in a particular job or profession, whatever it may be The principle of equal treatment of all employees and employers applies in labour relationships Any direct or indirect discrimination against an employee based on sex, sexual orientation, genetic characteristics, age, nationality, race, colour, ethnicity, religion, political choice, social origin, disability, family status or responsibility, affiliation or trade union activity is prohibited Constitute direct discrimination of the acts and facts of exclusion, distinction, restriction or preference, based on one or more of the criteria provided in par. (2), which have a purpose or effect the non-granting, restriction or removal of the recognition, use or exercise of the rights provided in the labour legislation All employees who perform a work are recognized (…) the right to protection against illegal dismissals Employees and employers can freely associate to defend their rights and promote their professional, economic and social interests (continued)

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 E. Dinga et al., Job Security and Flexibility, https://doi.org/10.1007/978-3-031-28509-7

219

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Table 1 (continued) No. Article/ para-graph/ letter 8. Art. 8/1 9. Art. 8/2

10. Art. 9

11. Art.21/3

12. Art.22/1

13. Art.25/1

14. Art.31/3

15. Art.33 16. Art. 35/1

Statement/clause

Labour relations are based on the principle of consensuality and good faith For the good development of the labour relations, the participants in the employment relations will be informed and will consult each other, in the conditions of the law and of the collective labour contracts Romanian citizens are free to work in the member states of the European Union, as well as in any other state, in compliance with the norms of the international labour law and of the bilateral treaties to which Romania is a party The monthly non-compete allowance due to the employee is not of a wage nature, is negotiated and is at least 50% of the average gross wage income of the employee in the last 6 months prior to the termination of the individual employment contract or if the duration of the individual employment contract was less than 6 months of the average gross monthly wage due to him during the contract The non-compete clause may take effect for a maximum period of 2 years from the date of termination of the individual employment contract Through the mobility clause, the parties in the individual employment contract establish that, considering the specifics of the work, the execution of the service obligations by the employee is not carried out in a stable place of work. In this case, the employee benefits from additional benefits in cash or in kind During or at the end of the probationary period, the individual employment contract may be terminated exclusively by written notice, without notice, at the initiative of either party, without the need to state reasons The period in which successive probationary employments of several persons may be made for the same post is a maximum of 12 months Every employee has the right to work for different employers or for the same employer, based on individual employment contracts, benefiting from the corresponding wage for each of them (continued)

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221

Table 1 (continued) No. Article/ para-graph/ letter

Statement/clause

17. Art. 39/1

The employee has mainly the following rights: a)  the right to pay for the work performed; b)  the right to daily and weekly rest; c)  the right to annual rest leave; d)  the right to equal opportunities and treatment; e)  the right to dignity at work; f)  the right to safety and health at work; g)  the right to access vocational training; h)  the right to information and consultation; i)  the right to take part in determining and improving working conditions and the working environment; j)  the right to protection in case of dismissal; k)  the right to collective and individual bargaining; l)  the right to participate in collective actions; m) the right to form or to join a trade union; n) Other rights provided by law or by applicable collective labour agreements The employee has mainly the following obligations: a) the obligation to carry out the work norm or, as the case may be, to fulfil the attributions incumbent on him according to the job description; b)  the obligation to respect the work discipline; c) the obligation to comply with the provisions contained in the internal regulations, in the applicable collective labour contract, as well as in the individual labour contract; d) the obligation of fidelity towards the employer in the execution of the service attributions; e) the obligation to observe the occupational safety and health measures in the unit; f)  the obligation to respect the professional secrecy; g) Other obligations provided by law or by applicable collective labour agreements The employer has, mainly, the following rights: (a) to establish the organization and operation of the unit; (b) to establish the attributions corresponding to each employee, in accordance with the law; (c) to make mandatory provisions for the employee, subject to their legality; (d) to exercise control over the manner of fulfilling the service tasks; (e) to ascertain the commission of disciplinary offenses and to apply the corresponding sanctions, according to the law, the applicable collective labour contract and the internal regulations; f) to establish the objectives of individual performance, as well as the criteria for evaluating their achievement

18. Art. 39/2

19. Art. 40/1

(continued)

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Table 1 (continued) No. Article/ para-graph/ letter

Statement/clause

20. Art. 41/2

As an exception, unilateral modification of the individual employment contract is possible only in the cases and under the conditions provided by this code The job can be changed unilaterally by the employer by delegating or detaching the employee to another job than the one provided in the individual employment contract During the delegation, respectively during the detachment, the employee retains his position and all the other rights provided in the individual employment contract Detachment is the act by which the temporary change of the job is ordered, from the employer’s disposition to another employer, in order to execute some works in his interest. Exceptionally, the posting may also change the type of work, but only with the written consent of the employee In case there is a divergence between the two employers or neither of them fulfils its obligations according to the provisions of par. (1) and (2), the detached employee has the right to return to his job from the employer who detached him, to go against either of the two employers and to demand the forced execution of the unfulfilled obligations It is forbidden to dismiss employees on the basis of race, nationality, ethnicity, colour, language, religion, social origin, genetic traits, sex, sexual orientation, age, disability, chronic non-communicable disease, HIV infection, political choice, situation or family responsibility, membership or trade union activity, belonging to a disadvantaged category; It is forbidden to dismiss employees for exercising, in accordance with the law, the right to strike and trade union rights The dismissal of employees cannot be ordered:…; (h) during the rest period The employer may order the dismissal for reasons related to the person of the employee in the following situations:…; (d) in case the employee does not professionally correspond to the job in which he/ she is employed If the dismissal is ordered for the reasons provided in art. 61 lit. (c) and (d), as well as in case the individual employment contract has been terminated by law pursuant to art. 56 par. (1) lit. (e), the employer has the obligation to propose to the employee other vacancies in the unit, compatible with the professional training or, as the case may be, with the work capacity established by the occupational medicine doctor

21. Art. 42/1

22. Art. 42/2

23. Art.45

24. Art. 47/5

25. Art.59/-/a

26. Art.59/-/b 27. Art.60/1/h 28. Art.61/-/d

29. Art.64/1

(continued)

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223

Table 1 (continued) No. Article/ para-graph/ letter

Statement/clause

30. Art.64 /2

In the situation where the employer does not have vacancies according to par. (1), he has the obligation to request the support of the territorial employment agency in order to redistribute the employee, corresponding to the professional training and/or, as the case may be, to the work capacity established by the occupational medicine doctor 31. Art. 64/3 The employee has at his disposal a term of 3 working days from the communication of the employer, according to the provisions of par. (1), in order to express in writing the consent regarding the new job offered 32. Art. 69/1/a If the employer intends to make collective redundancies, he has the obligation to initiate, in due time and for the purpose of reaching an agreement, under the conditions provided by law, consultations with the union or, as the case may be, with the employees’ representatives, little to: Methods and means of avoiding collective redundancies or reducing the number of employees to be laid off 33. Art. 69/1/b If the employer intends to make collective redundancies, he has the obligation to initiate, in due time and for the purpose of reaching an agreement, under the conditions provided by law, consultations with the union or, as the case may be, with the employees’ representatives. At least: Mitigating the consequences of dismissal by resorting to social measures aimed, inter alia, at supporting the re-qualification or retraining of dismissed employees 34. Art.71/1 The union or, as the case may be, the employees’ representatives may propose to the employer measures in order to avoid dismissals or to reduce the number of dismissed employees, within 10 calendar days from the date of receipt of the notification 35. Art.71/2 The employer has the obligation to respond in writing and motivated to the proposals formulated according to the provisions of par. (1), within 5 calendar days from their receipt 36. Art. 74/1 Within 45 calendar days from the date of dismissal, the employee dismissed by collective dismissal has the right to be re-employed with priority on the position re-established in the same activity, without examination, competition or probationary period 37. Art. 74/2 In the situation where during the period provided in par. (1) the same activities are resumed, the employer will send to the employees who have been dismissed from the positions whose activity is resumed in the same conditions of professional competence a written communication, by which they are informed on the resumption of the activity (continued)

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Table 1 (continued) No. Article/ para-graph/ letter

Statement/clause

38. Art.74/3

The employees have at their disposal a maximum term of 5 calendar days from the date of communication of the employer, provided in par. (2), in order to express in writing the consent regarding the job offered. In the situation where the employees who have the right to be re-employed according to par. (2) do not express their consent in writing within the term provided in par. (3) or refuse the job offered, the employer may make new positions on the remaining vacancies Persons dismissed pursuant to art. 61 lit. (c) and (d), of art. 65 and 66 benefit from the right to a notice which may not be less than 20 working days Resignation means the unilateral act of will of the employee who, by a written notification, communicates to the employer the termination of the individual employment contract, after the fulfilment of a notice period The employer is obliged to register the employee’s resignation. The employer’s refusal to register the resignation entitles the employee to prove it by any means of proof The employee has the right not to motivate the resignation The notice period is the one agreed by the parties in the individual employment contract or, as the case may be, the one provided in the applicable collective labour agreements and may not exceed 20 working days for employees with executive positions, respectively more than 45 working days. Working days for employees holding management positions

39. Art. 74/4

40. Art.75/1

41. Art.81/1

42. Art.81/2

43. Art.81/3 44. Art.81/4

Source: Romanian Labour Code (53/2003 Law, republished In Official Monitor 345/2011). We used a consolidation form with all subsequent modifications and completions until of May 2022



Annexe 2: Distribution of Clauses Regarding the Job Flexicurity by Criteria

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 E. Dinga et al., Job Security and Flexibility, https://doi.org/10.1007/978-3-031-28509-7

225

Clause

Art.3/2 Art.3/3 Art.5/1 Art.5/2 Art.5/3 Art.6/2 Art.7 Art. 8/1 Art. 8/2 Art. 9 Art.21/3 Art.22/1 Art.25/1 Art.31/3 Art.33 Art. 35/1 Art. 39/1 Art. 39/2 Art. 40/1 Art. 41/2 Art. 42/1 Art. 42/2 Art.45 Art. 47/5 Art.59/-/a Art.59/-/b Art.60/1/h Art.61/-/d Art.64/1 Art.64/2

No.

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30.

Table 2  Taxonomy of job flexicurity clauses in the Labour Code of Romania

226  ANNEXE 2: DISTRIBUTION OF CLAUSES REGARDING THE JOB FLEXICURITY…

Art. 64/3 Art. 69/1/a Art. 69/1/b Art.71/1 Art.71/2 Art. 74/1 Art. 74/2 Art.74/3 Art. 74/4 Art.75/1 Art.81/1 Art.81/2 Art.81/3 Art.81/4 -

31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. TOTAL

Source: Authors’ assessing

Clause

No.

10

9

22

17

6

8

9

25

11

16

3

4

6

15

2

8

15

13

  ANNEXE 2: DISTRIBUTION OF CLAUSES REGARDING THE JOB FLEXICURITY… 

227

Annexe 3: The Logic of Equilibrium Price Formation in a Free Market

The equilibrium price on a free market is generated by the invisible hand based, in its turn, on the rationality (both theoretical and practical) of economic agents—such a rationality is measured, usually, by the substantive utility. Demand and supply are relations between quantity and price (of course, under ceteris paribus conditions), so we can make the following formal reasoning:



• given a time series of quantities and prices: q  =  {q1, q2, …, qn}, p  =  {p1, p2, …, pn}, all quantities and prices are values at which the transaction actually occurs on the market, that is, equilibrium quantities and prices at that time, so that quantity qi is actually traded at the price pi where i = 1, n ; • therefore, the price series has the following (deterministic) distribution: p D p/q   1  q1

p2  pn   q2  q n 

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 E. Dinga et al., Job Security and Flexibility, https://doi.org/10.1007/978-3-031-28509-7

229

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Annexe 3: The Logic of Equilibrium Price Formation in a Free Market

• there were negotiations between buyer and seller until the equilibrium price was achieved, at which the equilibrium amount was sold; let’s formalize the bargaining procedure: • Assumptions: 1. the “initiator” of the transaction will be considered to be the seller; the seller approaches the market with an offer quantity and an offer price; 2. the supply in issue is opposed by a quantity demanded; the bearer of the quantity demanded shall be the buyer who associates a demand price with the quantity demanded; 3. the bargaining variable between the seller (henceforth denoted by V) and the buyer (henceforth denoted by C) is the quantity supplied on the V side and the quantity demanded on the C side; 4. we consider that we are in the case of the normal commodity, which means that demand will be a decreasing price curve ceteris paribus and supply an increasing price curve ceteris paribus; 5. the pressure to vary the bid price in one direction is directly proportional to the absolute value of the quantity gap in the opposite direction; 6. the pressure to vary the quantity of demand in one direction is directly proportional to the absolute value of the price gap in the opposite direction; • Notations: q si : the quantity supplied at the time i; q di : quantity demanded at the time i; psi : the price asked (by offer) at the time i; p di : the price offered (of demand) at the time i; f: the analytical supply function; h: the analytical demand function; φ: composition of the function h with the inverse of the function f; θ: inverse of function φ;  q si , psi : supply point at the time i;

    q , p  : demand point at the time i; d i

d i

iq : the quantity gap at the time i; ip : the price gap at the time i; α: the coefficient of pressure on price change (it is considered constant over time for a given commodity), α ∈ ℝ, 0 ≤ α ≤ 1;

  Annexe 3: The Logic of Equilibrium Price Formation in a Free Market 

231

β: pressure coefficient on quantity change (considered constant over time for a given commodity),1 β ∈ ℝ, 0 ≤ β ≤ 1; ki: the numerical value (measured empirically) of G qi ; πi: the numerical value (measured empirically) of G pi ; ∆ psi : change in the offer price at the time i; ∆ p di : change in the bid price at the time i; ∆ q si : change in the quantity offered at the time i; ∆ q di : change in the quantity of demand at the time i. Definition/calculation relationships:

  p  h q   S q , p   D q , p   S q , p   D q , p  psi  f q si



d i

Giq

Gip

d i

s i

i

d i

i

i

s i

i

d i



 psi  psi  psi 1

 p di  p di  p di 1

 q si  q si  q si 1

 q di  q di  q di 1 psi  0. q si p di p di  h q di , provided that 0 q di

 

psi  f q si , provided that

 



  h 1  f

1  There is no analytical relationship between α and β. As for the numerical values of the two coefficients, they are determined empirically (usually by econometric means) and are specified for each commodity. Only the following qualitative condition can be assumed: α, β ∈ℝ and 0 ≤ α ≤ 1, respectively 0 ≤ β ≤ 1. To be noted that, in fact, the two coefficients are strongly dependent on the idiosyncrasies of the economic actors. However, in the long run, certain patterns of behaviour regarding price and quantity variation in the bargaining/trading process can form, which creates the objective basis for the econometric determination of their numerical values.

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Annexe 3: The Logic of Equilibrium Price Formation in a Free Market

  f 1  h • Mechanism:

In order to formally describe the formation of the equilibrium price, the synoptic representation of a generic market is appropriate (Fig. 1). The upper index /i signifies a magnitude induced by the process in progress, at time i. It should be noted that the points follow the alphabetical order, on the “contour” suggested by the cobweb model of equilibrium price formation (Nota bene: it is obvious that, for the formation of this model, the following condition concerning the relationship between the slope of the demand curve pD and the slope of the supply curve pS must be met: |pD|  0, respectively, b ∈ ℝ, b  |b|. Second, the algebraic conditions mentioned above must be considered satisfied by the invisible hand, otherwise the market would not work, so we do not, in this case, raise the issue of discussing the alternative to checking these conditions. For example, we do not analyse here the case where the transaction price is set administratively, through the regulatory framework (in this case, the equilibrium price is already an exogenous variable). Third, the length of time that the bargaining between quantity demanded and quantity supplied leads to the equilibrium price must be tiny, otherwise, again, the market could not function. In economic reality, the bargaining process described above, through the 12 price and quantity adjustment chains, occurs almost instantaneously, based on information held by both the seller and the buyer. In this sense, we can assume the existence of a permanent (and also permanently updated) pool of information on the functions of f and h used previously, so that the actual meeting of supply and demand will usually give the equilibrium price “on the spot”.2 This economic “calculation” (which is not carried out by either 2  This conclusion is not altered by the well-known problem of information asymmetry between seller and buyer (examined by Stiglitz), because the equilibrium price does not necessarily have to be a fair price, but it only has to allow the economic transaction (i.e. the agreement of the two actors on the mutual exchange of ownership rights in the two traded goods) to be carried out.

240 

Annexe 3: The Logic of Equilibrium Price Formation in a Free Market

system 1 or system 2)3 is a process that could be called contextual noninferential harmonization (Nota bene: a concept that would be worth developing but, of course, we will not do so in this material). Fourth, the criterion that makes that invisible hand move must be accepted: the net benefit of each participant in the economic transaction. This is, in the first instance (which we will use in the analysis of the concept of natural price), the substantive net utility (either at the absolute level or—at least, from a psychological point of view—at the marginal level). So, without necessarily (and fundamentally) appealing to the homo œconomicus model, this is the classic cost-benefit calculation.  alculation of Attraction Forces C This section highlights, in a “mechanistic” manner, the dynamics of the oscillation of the transaction price around the equilibrium price, obviously under the hypothesis of a convergent cobweb generated by the successive variation of the quantities supplied and demanded. • Moment 0: Be given the moment 0, when 0q = k 0 . If k0 > 0, then there will be a pressure, measured by the coefficient β, of decreasing supply quantity,4 thus:

F1   1  k0

Nota bene: the algebraic sign “−” has the same meaning as in the analytical formula for elastic force in Newtonian mechanics, that is to “pull back” the variable that has expanded or has an over-expanded value. 3  See the theory of two systems of thought, popularized by Kahneman, although the concept, as such, does not belong to him as authorship. 4  And conversely, if k0  p d0 / i , there is:



p1s / i  p0s  p1d / i   0  0 p1d / i  p0s  p1s / i

F1  p1s / i  1   0  0



which means that, at time 1, the induced demand price (p1s / i ) will be less s ps / i ps / i than p 0 (see Fig. 1). Therefore, 1   1 and, in general,  n   n . 0 n 1 In principle, the following string of attraction forces apply to: (a) quantities:

  F         q   q   0             q     q    0             q     q    0   F0     q0s   q0s   0  1

F2 F3

1

s 0

s 0

2

s 0

1

s 0

3

s 0

2

s 0

…

      q       q   0

2n 2 n 1 F2n        q0s     q0s   0  





F2n 1       

2 n 1

s 0

2n

s 0

  Annexe 3: The Logic of Equilibrium Price Formation in a Free Market 

243

(b) prices

 

F0     f  h  q0s   0

          h       q    h       q    0           h     q    h     q    0  

0 1 F1     h     q0s  h     q0s   0  

F2 F3

1

s 0

2

s 0

2

s 0

3

s 0

…     q    h       q   0     h       q    h       q    0  

F2n     h    

F2n 1

2 n 1

s 0

2n

2 n2

s 0

2 n 1

s 0

s 0

Both quantity and price forces of attraction are decreasing chains in terms of absolute values. Indeed (we will use linear functions f  =  a  ∙  qs respectively h = b ∙ qd, and we take into account that θ = f−1 ∘ h, as well as that |a| = |pS| > |b| = |pD|, where a ∈ (0, 1), respectively b ∈ ( − 1, 0)): (a) on quantities: Given Fjβ as any term (j is any) of the quantity attraction force string. Then: Fj Fj1

       j   q0s     j 1  q0s          j 1  q0s     j 2  q0s 

as:

  

1

b q a



2

b 2      q a



244 

Annexe 3: The Logic of Equilibrium Price Formation in a Free Market

results:

 Fj  j 1

F

 q   

j

b  q a

j 2

b     1  q  a   b  1, ie: b    1, 0  , so j 2 a a b  b          1  q a  a

   

b b  a  a 

j

b