Employers and Labour Market Insitutions: Friends or Foes?

The focus of this paper is not on employers as collective organisations, but on the behaviour and preferences of individual employers towards the main labour market institutions. Employers make important decisions on whom to recruit or dismiss, whether to integrate persons with reduced working ability and long-term unemployed, which employees should receive further education and training and whether to join employers’ associations and support collective bargaining with trade unions. Despite the importance of these decisions and with a few notable exceptions, the role of employers in labour market and welfare states has been largely neglected by labour market and social policy researchers.

In the analytical literature, there are three main theoretical explanations for why employers participate or do not participate in the development of labour market institutions: 1) Neoclassical labour market theory, 2) Power resource theory and 3) Varieties of Capitalism. Based on these theories, a typology of different types of employers is constructed. There are two underlying dimensions producing variation, i.e. attitudes and behaviour. We analyse attitudes on a scale from positive to negative and behaviour on a scale from non-participation to participation. This produces four ideal-types of employers:

(1) The involved employer has positive attitudes and actively participates in the maintenance and development of labour market institutions. This employer is similar to the predictions in the literature on coordinated market economies.

(2) The resistant employer has negative attitudes and does not participate in the labour market institutions. This employer corresponds to the predictions in neoclassical labour market theory and the literature on liberal market economies.

(3) The sceptical employer has negative attitudes to the labour market institutions but nevertheless participates. This may be because participation produces ‘selective incentives’ or because of pressure from other employers or the trade unions.

(4) The passive employer is basically positive towards the labour market system but does not participate actively. This may be due to a lack of knowledge or a perception that the labour market institutions are irrelevant to the functioning of the firm.

The typology illustrates that employers’ attitudes and behaviour are more complex and varied than often assumed. We do not assume that attitudes and behaviour are uniform across all employers, and we do not assume that positive or negative attitudes necessarily produce a certain type of behaviour (e.g. positive attitudes may correlate with non-participation and negative attitudes may correlate with active participation). We need empirical research to understand how employers act and react to labour market institutions.

The empirical data in the paper stems from a representative survey of Danish employers (+5 employees) of their attitudes and participation in the main labour market institutions of Danish flexicurity. We survey the opinions of employers towards employment protection regulation and income security and combine it with opinions and participation in active labour market policies and adult vocational training programs.

The findings do not support the analytical assumptions of the literature suggesting that Danish employers are positive and active in supporting the main labour market institutions (i.e. “involved employers”). The data show that the majority of Danish employers should be characterised as “resistant employers” who has negative attitudes and does not participate actively in labour market institutions or as “passive employers” who may have positive attitudes, but does not participate actively. Only a small minority of Danish employers in the survey can be characterised as “involved employers”.