Do countries matter? Explaining the variation in the use of numerical flexibility arrangements across European companies using a Multi-level model

Do countries matter, especially compared to other aspects that affect the flexibility behaviours of companies? Many studies on the labour market assume that there are country differences, cross-national variances, and that it is a crucial factor in explaining the actual practices of the labour market by individuals and companies. The supposition is that although there are variations across countries, the behaviour of actors within the country is rather homogeneous. Thus, due to country level characteristics, the actors within the country are seen to act similarly. This is due to the fact that individuals and individual companies are restricted within the country due to their institutional frame, cultural and social boundaries. However, this does not necessarily mean that actors are completely restricted within these boundaries. This becomes more evident when we are dealing with labour market flexibility options, for this can be developed (in companies or perhaps by individuals) as a coping mechanism to overcome the restrictions of society. This paper asks the questions, do countries matter, and to what extent it does matter and how it matters. It addresses this issue by first comparing the variance of each level under examination, that is, the country, sector and company level, through the use of a multi-level random effects model. The examination of the variance of each level will allow us to see to which extent countries matter. Also this model allows us to see how factors that explain the flexibility behaviours of companies show different effects across countries to answer the question how countries matter in an exploratory manner. The issue of flexibility is addressed uniquely in this paper in two aspects. Unlike many of the previous studies on this issue, this paper uses a broader definition of flexibility, thus, it perceives labour market flexibility as a method used for the needs of workers as well as those of employers or companies. In other words, as companies facilitate their adaptation to business cycles through labour market flexibility, workers adapt to life cycles through it. Based on this definition, flexibility practices used within companies can be measured two dimensionally, on one side its overall level and another to whom it is (more) geared towards. Also, unlike studies that focus on one or few specific arrangements, this paper does not examine various flexibility options as separate entities. It examines the practices as a whole, i.e. the use and the combination of various arrangements in achieving numerical flexibility. The data used here is the European Survey of Working-Time and Work-life Balance (ESWT) from the European Foundation of the Improvement of Living and Working Conditions. This survey covers 21000 establishments in 21 EU member states for the years 2004/2005. The outcomes of this study show that being within a certain country is indeed an important factor in explaining the differences between companies in taking up flexibility options. However, the variance between companies within a country is much larger, especially when considering the flexibility options that are geared towards the needs of employers. Compared to country and company levels there are small differences between sectors within countries. Of the company level characteristics, size of the company, worker composition, industrial relation aspects, and variations in work loads were important determinants of the flexibility practices within companies. Also it seems that the effects of explanatory variables are different across the European countries. For flexibility options that are used for company’s production needs being within certain sectors have different implications across countries. For flexibility options that are used for worker’s work-life balance needs, industrial relations aspects of the company, thus the existence of working time agreements and employee representatives have different implications across countries. There seems to be a division with the EU 15 and the new accession countries in these effects where the relationship as well as the strength of the effect changes. There are some evidence that companies may use work-life balance options as incentives to recruit and maintain their skilled work force, as we can see the countries where labour force demand is strong the effect of proportion of skilled workers in the provision of flexibility options for workers is stronger, and visa versa. Also collective agreements on working time may help the use of various flexibility option for both worker’s needs as well as company’s needs, especially in countries where flexibility options are not widely and frequently used.