ABSTRACT

Economic change proceeds through both the destruction and creation of jobs. Although the net effect of economic adjustment is to increase aggregate national welfare, it is also clear that change creates losers. In the past two decades economic change has been a discontinuous process in which employment in growth sectors has not necessarily compensated for job losses in the contracting ones. The creation of new jobs has not always kept pace with the decline of jobs. This is especially a problem when the displacement process derives from rapid external shocks. New jobs may also require different skills or may occur in different locations from the old ones. Beyond these imbalances in the process of change, labour adjustment problems have been aggravated by the regional concentration of many declining industries, as well as by the poor overall economic performance that has troubled many OECD countries. Positive adjustment involves efforts to encourage the shift of labour to activities in line with their comparative advantage and relative prices reflecting international competitive developments (OECD 1983a:9). The focus of this chapter is on the ways in which political decision makers in industrialized countries have used labour market policies in dealing with the pressures of economic change. We will describe the major types of labour market policy instruments and evaluate them against economic, ethical and political perspectives. Then we will profile and compare the principal labour market adjustment strategies followed in Australia, the UK, Canada, France, Japan, Sweden, the US and West Germany. In the final section we will attempt to identify those labour market policies which allow governments to cushion the impacts of change while promoting adjustment and growth.