ABSTRACT
It is widely argued that one of the main causes of the current high levels of persistent unemployment, especially in the European Union, lies in excessive regulation of labour markets. Much of the debate about labour market regulation is made unduly confusing because the main arguments and policies proposed are more relevant to some sections of the labour force than to others. To help cut through the confusion, I propose to divide the active labour force into three main groups, roughly according to their level of pay. The first consists of a low-wage, and mostly low-skill and low-productivity section; the second of skilled blue-collar and junior professional workers on middle pay levels; and the third, of managerial and higher professional workers on higher incomes. Indeed, this might be illustrated by a rather simplified diagram, dividing the labour force into three income levels, A to C (see Figure 11.1).
