A note on labour market flexibility

In this article two aspects of labour market flexibility are discussed. Firstly, the dispersion of wages and changes therein, and secondly, the regulation of employment security. It is pointed out that wage flexibility per se is no indication of a well functioning labour market and that the views according to which permanent long-term jobs are becoming increasingly scarce is not supported by the data. The negative effects of employment security have been strongly exaggerated in the recent discussion. However, a closer examination of how the current rules affect the employment opportunities of small or new firms is warranted.