Letter: OECD on jobs: adaptability, not flexibility, is the key

Sir: The 'hard truth' conveyed by the Organisation for Economic Co-operation and Development's Job Study is not quite as simple as your leading article implies ('Jobs: the hard truth', 8 June). While the study shows that some developed economies have outperformed others in the fight against unemployment, it also makes clear that almost nowhere have labour markets and related institutions adapted satisfactorily in the face of long-run structural change.

The study is therefore careful not to propose any single 'model' of employment policy. Instead, the OECD suggests options for future action on unemployment, crucially one that seeks to combine job creation with the maintenance of social cohesion. Many commentators have latched on to the OECD's support for greater 'flexibility' in the labour market. But the essence of the study is that what labour markets really require is a greater degree of 'adaptability'.

In Britain and Europe the creation of an 'adaptable' labour market undoubtedly requires radical reform of welfare and employment programmes along the lines you suggest. The long-term jobless in particular should be helped into jobs rather than remain a wasteful burden on the taxpayer.

However deregulation, which you also advocate, can, if taken too far, run counter to adaptability. While some forms of employment protection may prove harmful to jobs, it is also important to establish mechanisms to underpin the wages of workers who are likely to be exploited.

Similarly, a 'hire and fire' culture may not be conducive to the creation of a 'high skill' economy - which the OECD identifies as the best route to long-run prosperity - because productivity-enhancing relationships between employers and workers can only be built in the context of employment stability.

Yours faithfully,

JOHN PHILPOTT

Director

Employment Policy Institute

London, SE1

8 June