External Flexibility in Sweden and Canada: A Three Industry Comparison

There is a substantial body of writing that identifies efficiency advantages from the provision of employment security, both within individual plants and at the level of the national economy. However, the business cycle persists in capitalist economies, so the question arises: how do managements deal with the fluctuations in the demand for labour which are associated with it? That is to say, what are management policies with respect to external flexibility? In North America, segmenting jobs into stable and unstable ones is thought to have provided a solution; in Scandinavia, until recently, full employment policies were thought to have eliminated the problem. In this paper, we compare the policies with respect to employment security adopted in a sample of plants in three industries in Canada and Sweden. Our evidence suggests that policies with respect to external flexibility are influenced by the character of demand for what is being produced, by the technology of production, and by the institutional structure within which firms operate. Our evidence also indicates to what degree employment security is, itself, insecure.