Management practices and unemployment

The possible impact of management practices on unemployment has been little explored. Normally, those practices voluntarily adopted by competitive firms are considered likely to improve their performance and thus their long term scope to provide jobs. Yet there are a number of areas where such management practices could adversely affect jobs. The paper starts by examining management practices and wage rigidity, reviewing some of the links, such as various forms of implicit contract, problems of low trust, and the influence of social norms. It then explores the issues of working time arrangements and management reasons limiting flexible hours. Training and internal labour markets are another important area of management policies. New production philosophies, such as 'lean production' and 'total quality management' are examined for their effects upon employment structure, and evidence is reviewed on their extent. The paper concludes by looking at current high levels and persistence of unemployment in the European Union, and explores the degree to which it could be due to a lack of functional flexibility within the firm. With relatively high job tenures and lacking such flexibility, European firms would be less well placed to adapt to external shocks, and so more reluctant to hire new labour. This paper accompanies a similar paper by the same author on industrial relations practices and unemployment.