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In this third of three chapters on the distinctive policy dynamics of particular areas of social provision, Wood looks at labour market regimes in Germany, Britain, and Sweden. The theoretical starting point of the chapter is an examination of path dependence, perhaps the most popular contemporary approach to explaining the persistence of institutions and policies over time. In principle, this offers an enticing explanation of the resilience of national policy trajectories, although the outcomes it explains have a tendency to be overdetermined, and not all mechanisms generating a bias towards the status quo are path‐dependent ones. The theoretical work of this chapter, therefore, lies in deriving alternative (though not mutually exclusive) micro‐level sources of policy continuity over time, and evaluating their relative contributions to the evolution of labour market policy in Germany, Britain, and Sweden. Divided into four substantive sections: Section 1 discusses the theory of path‐dependent institutional and policy trajectories in politics; Sect. 2 presents three distinct sources of policy continuity (employer‐centred, constitutional, and electoral) that are often bundled together as ‘lock‐in mechanisms’ in path‐dependent accounts; Sect. 3 sketches the changing context of labour market policy in Western Europe by looking at national responses to unemployment from 1980 onwards in each of the three country case studies, and providing accounts of labour market policies, employers’ preferences in relation to labour market policies, and constitutional factors and electoral constraints in relation to labour market reform; Sect. 4 is a conclusion and discusses the thesis offered by the chapter — that the trajectory of labour market policy can be accounted for by an employer‐centred theory of preferences.

This chapter compares the patterns of labour market regulation in European countries. The approach followed by most countries was the introduction of selective changes that did not completely overturn the existing social contract. In the 1990s, increasing external pressures and the need to improve the adjustment capacity of labour markets resulted in a regulatory framework with common features, most evident in industrial relations systems and wage-setting. The complete convergence of social policies, however, will be prevented by differences in national preferences, customs, and histories across member states.

This chapter examines labour market reforms in Denmark and Sweden in the 1990s. It focuses on the changes in unemployment benefits, the wage bargaining system, employment protection legislation, earnings, and working hours. It then discusses the impact of reform on unemployment, wage dispersion, and union membership.

This chapter examines the impact of labour market reforms on the structure of employment and unemployment in Britain. It argues that although the British experience is one of growing employment, this does not, in itself, solve the problem of social exclusion. The British labour market does not have a better record on employment or unemployment compared to other EU countries.

This chapter examines labour market reforms in the Netherlands. Deregulation and flexibilisation measures since 1980 have not influenced the degree of employment protection or wage flexibility. However, these have promoted the extensive use of temporary and flexible work, and increased working hour flexibility. The ‘Dutch’ miracle is attributed to a continuous course of wage moderation based on an ‘organized-decentralized’ wage bargaining system in which social partners reach agreements, whereby wage restraint is exchanged for socio-economic goals such as employment creation and working time reduction.

This chapter presents a synthesis of the conclusions of the preceding chapters in this book. It explores how Chinese labour market reform has changed the allocation and renumeration of labour, and contributed to the creation of a functioning labour market. It examines the various labour market characteristics which make this journey incomplete, and describes a vision of China with a functioning labour market.

Labour market reform in France has been very weak. Although measures such as the easing of fixed-term contracts and elimination of administrative authorisation for dismissals in 1986 were followed by a period of employment creation, it cannot be said that these were instrumental in employment recovery. Proponents of deregulation can use the French case to argue that more is required to solve unemployment. Critics can also use the French case to argue that institutional changes in the labour market do not improve employment and unemployment conditions.

This chapter analyzes how the small proportion of the workforce covered by employment protection—as well as decentralized industrial relations based on large chaebŏl unions—have shaped the political dynamics of Korea's labor market reform over the past two decades. Under the conditions of less institutional practices of employment protection covering a small segment of the workforce, Korea's employers and policy makers promoted comprehensive labor market reform for all workers in times of economic crisis—contrary to their Japanese counterparts. Meanwhile, insiders endeavored to secure their high level of employment protection in the face of labor market reform, but with no political allies to support them. This comprehensive labor market reform resulted in the reinforcement of inequality and dualism between insiders.

This introductory chapter provides an overview of labor market reform. In times of economic crisis, policy makers undertake labor market reform in order to bring forth rapid economic turnarounds, yet reform is constrained by the existing institutional structure of the labor market that shapes the incentives and strategies of key actors in decision making and policy implementation. In a system where a majority of the workforce is covered by the institutionalized practices of employment protection, it is more likely that insiders, employers, and policy makers form a political coalition for selective labor market reform for outsiders with the persistence of protection for insiders. By contrast, where the less institutionalized practices of employment protection are only relevant for a small proportion of the workforce, while leaving a majority of the workforce unprotected, employers and policy makers are more likely to promote comprehensive labor market reform for all workers.

This chapter examines the political processes and outcomes of Japan's labor market reform over the past two decades. During this time, Japan has adopted more market-oriented principles in the labor market than before, such as the increase of labor market flexibility and the diversification of employment and working conditions. However, it did not conform to the neoliberal model of the labor market, represented by easy hiring and firing practices in response to the fluctuations of the business cycle. The institutional arrangements of employment protection systems and decentralized industrial relations affected the trajectory of Japan's reform by shaping the incentives and strategies of employers, workers, and policy makers; and leading to the formation of a political coalition in support of reform for outsiders, while retaining insider-favored social protections. Such institutional configurations transferred the costs of labor adjustments to an increasing number of outsiders, exacerbating inequality and dualism in the Japanese labor market.

This chapter examines wage inequality in urban China. Increased wage discrimination against women and minorities was observed in favour of Communist Party members. The market forces operating in the growing private sector and the relative immunity of the state sector from those forces increased wage segmentation among types of ownership. Provincial differences in the pace of reform and economic growth created spatial segmentation in wages that could not be removed by the equilibrating movement of labour.

The German case study confirms the trend of integration. Benefit homogenization occurred as a three-tier support system was replaced by a two-tier system, covering the vast majority of jobless benefit claimants by the newly created, tax-financed, and flat-rate unemployment benefit II. A process of risk re-categorization can be identified as the new benefit which includes all those people in working age being considered as ‘capable to work’ – and not covered by the insurance system. Within both benefit systems the link between entitlement, job search requirement, and other activation conditions has been reinforced. However, major differences between the two tiers of unemployment protection have been maintained with respect to benefit levels, work requirements, and activation options. Alongside an increasing casualization of employment relationships, this has resulted in an even more pronounced segmentation within the German labour market.

This chapter examines the impact of dollarization on the pace of fiscal, financial, and labour market reform. It argues that despite the existence of theoretical models, and evidence from countries with pegged and floating rates, little is known about the effect of dollarization on reforms. Lessons learned from this discussion are presented.

This chapter focuses on the institutional arrangements of the labor market to explain the political process and outcome of labor market reform. Under the institutionalized practices of employment protection covering a large proportion of the workforce, insiders, employers, and policy makers are more likely to form a political coalition in order to promote reform for outsiders, while privileging the interests of insiders and minimizing the political and economic costs of reform on these workers. In contrast, if employment protection systems have been less institutionalized with the coverage of the very small segment of the workforce, employers and policy makers are more likely to advance labor market reform for greater flexibility across the board. Decentralized industrial relations based on large enterprise unions are more likely to reinforce labor market inequality and dualism because such institutional configurations incentivize employers and insiders to opt for “segmentalist” approaches to the labor market and social protections.

This chapter examines the connection between trade liberalization and poverty reduction, with a particular focus on informal sector workers in cities and towns of the developing world. More specifically, it looks at the channel between how trade reforms affect urban informal workers and how that in turn affects urban poverty. It offers a general equilibrium model relating international trade, informal sector, and poverty with a wider reach. The theoretical result predicts that informal wages should increase if there is trade liberalization and that there would be an expansion in the urban informal industrial base. The aggregate empirical exercise tests growth in informal wages and estimates if wage growth is capable of reducing urban poverty.

This chapter examines the deregulatory aspect of labor reform, especially during the years leading up to and during the regional financial crisis of the late 1990s. During the 1990s, China, Korea, Thailand, and the Philippines to varying degrees and in different ways pursued market-conforming policies of labor market deregulation, institutional devolution to local and private sectors, and market-oriented social-policy reform. This chapter first considers the role played by labor market deregulation in encouraging ever-more-shallow protections among previously protected formal-sector workers and in devolving regulatory authority to local levels. It then asks whether increased labor market flexibility, and a corresponding increase in employment contingency, implies an increase in informality as claimed by some critics of labor market reform. It also discusses the extent to which the Asian experience has modeled the precepts of market-oriented reform in the area of social reproduction and protection of labor. Finally, it explores educational reform and the implications of labor market deregulation for the labor process.

This chapter examines the reregulatory face of labor market reform by focusing on social accommodation as it relates to labor markets and social policy. More specifically, it considers how Asian governments have sought to manage the tensions associated with labor market reregulation by redirecting, institutionally consolidating, and socially buffering economic reform. The chapter first explores efforts to enhance the functioning of labor markets and goes on to analyze the contractualization of labor markets and active labor market policies aimed at institutionalizing and enhancing the functioning of flexible labor markets in order to improve competitive efficiencies. It then looks at policies of social protection that are oriented to a concern for economic livelihood and political stability. It also describes the institutionalization of new worker entrepreneurialism by combining labor market policy and social policy. The chapter concludes with an assessment of social reproduction that puts emphasis on education and training.

This chapter analyses the development of dualised labour markets consisting of insiders in standard employment relationships and outsiders in non-standard employment. Existing research has explained this outcome by pointing to the representational interests of trade unions or social-democratic parties. In contrast, in this chapter we argue that unions' institutional power resources are the crucial variable explaining this outcome. In difficult economic times, when unions are asked to make concessions, they will assent to labour market reforms, but only to those reforms that do not threaten to undermine their institutional power resources. This second best solution allows unions to protect their organisational interests both by retaining their institutional role in the administration of dismissals and by living up to their institutional role as one of the organisations responsible for the direction of labour market policy.

This chapter examines the tensions and instabilities associated with economic reform policies and how they have influenced the policies and institutional strategies of ruling groups in China, South Korea, Thailand, and the Philippines. It begins with an overview of the most prominent element in most programs of labor market reform: the deregulation of labor markets. It then considers tensions of social reproduction and protection, with particular emphasis on how increasing labor market fluidity and a corresponding growth in contingent and contract employment reduce training incentives for employers. It also discusses institutional tensions in the labor process and concludes by analyzing attempts to shift from exports to domestic consumption to sustain development.

This book has investigated the implications of three decades of market-oriented economic reform for Asian workers. Using a conceptual framework that centers on labor systems and their regulatory regimes, it has drawn together disparate literatures on institutional change, labor relations, social policy, and development that directly or indirectly help elucidate the labor implications of market reform. It has also discussed the industrial sectors of the four Asian countries to illustrate contrasting contexts and trajectories of reform in the region. Finally, it has suggested a more general analytical framework that focuses on the dynamic relationship between two dimensions, or faces, of labor market reform: labor market deregulation and labor market reregulation.