chapter  2
55 Pages

The Insecurity Hypothesis and Flexibilization of Labour Markets

WithAnuradha Kalhan

This chapter states the Insecurity Hypothesis (IH), its corollaries and consequences. Although the entire IH has been stated and tested in the developed countries where labour market conditions are vastly different, IH has relevance and applications in the context of developing countries. The chapter highlights the policy implications, provides a critique of the flexibility and describes some empirical studies on IH in the United Kingdom, United States of America and India; the measured variables, and their principal findings. Evidence suggests that there is a strong and positive correlation between a country’s openness to trade and how much it spends on active labour market policies as a percentage of GDP. The national systems of regulation have moved towards creating flexible labour markets. The origins of flexible production and organization precede the current wave of globalization and also precede the rapid growth in flexible employment.