Rigidities through flexibility: flexible labour and the rise of management bureaucracies

Alfred Kleinknecht, Zenlin Kwee and Lilyana Budyanto

Cambridge Journal of Economics, 2016, vol. 40, issue 4, 1137-1147

Abstract: Judging from organisation-level survey data, we find that organisations employing high shares of flexible workers have higher shares of managers in their personnel. This is in line with earlier findings that Anglo-Saxon countries with deregulated labour markets have thicker management bureaucracies than countries with more regulated labour markets of the ‘Rhineland’ style. We argue that flexibility in labour markets (i.e. easier firing and higher labour turnover) damages trust, loyalty and commitment. This requires more management and control. Related research suggests that easy hire and fire is at the cost of organisational learning, knowledge accumulation and knowledge sharing, thus damaging innovation and labour productivity growth.

Date: 2016
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