ABSTRACT
This chapter considers the desirability of traditional good employment practices over the new consensus preference for flexible labour markets. Firms should avoid making workers redundant even if their productivity falls below the wage, if external job opportunities are scarce. They should pay good wages and expect high effort from their workers. They should pay fair overtime rates, have wages rise with seniority and offer generous defined benefit pensions. All of this is consistent with efficient employment and maximises profits in a sustainable way. So-called flexible labour markets are inefficient because they do not recognise the advantages of a long-term employment relationship with commitments honoured on both sides. Government policies can support efficient labour markets of this sort. Pensions need to be guaranteed by the state, not in terms of providing public funds or subsidies, but in requiring that pensions be fully funded so that workers can be confident that their pension is safe and will be paid.
