הישראלי לדמוקרטיה- מרץ 2017

FLEXONOMICS
In a dynamic labor market, challenged by technological
disruption and increasing longevity, flexibility is key
By Ilan Evyatar
WE LIVE in a rapidly changing world.
A world where longevity is increasing,
requiring us to work for many more years;
a world where we will have to change careers
frequently and to constantly acquire
new skills; a world where we will have to
compete in a global marketplace and where
technology and automation create perpetual
disruption and threaten to take over our jobs.
It is a reality that creates both challenges
and opportunities, but also one that markets
must be prepared for in order to be able to
compete, thrive and prosper, and to enable all
sectors of society to participate.
The Israel Democracy Institute’s Center
for Governance and the Economy is tackling
the challenges this brave new world poses
to Israeli society, and has brought together a
task-force with representatives from across
government ministries, the business sector,
labor unions and academia – in fact anyone
involved in or researching the field.
“Our aim was first of all to bring together
all the relevant parties, to collect all the
available knowledge, to see what direction
things can be expected to go and how we
can prepare for and adapt ourselves to these
developments,” says the Center’s director
Daphna Aviram-Nitzan.
According to Aviram-Nitzan, the labor
market is already out of sync with the needs
of both employers and workers, with every
element, from labor laws to training, outdated
and in need of reform.
Aviram-Nitzan explains that what IDI, as a
neutral body, aims to do is sit around the table
with these variant parties and create a strategic
vision for the future of the labor market.
“If we don’t come up with models for the
future,” she says, “it will be a threat to the
stability of the regime and democracy.”
One of the issues the project is focused
on is labor reforms aimed at creating conditions
that will on the one hand enable employers
greater flexibility to compete in dynamic
markets, yet at the same time create
security for workers, who will need retraining
and a social safety net as they transition
between jobs.
If the education system
is better, then people
have better skills and
are better equipped to
deal with a changing
labor market
In order to understand the reforms required,
the Center set out to map the labor
market and understand its current status.
Prof. Yotam Margalit, a political economist
who co-directs the Center’s Labor
Market Reform program, says that one of
the things they are seeing is a growing increase
in the divide between educated and
non-educated workers.
The labor market, he explains, can be
divided into insiders and outsiders – insiders
being those who are, for example,
protected by union coverage – and then
subdivided into educated and uneducated
workers. It is those who are “uneducated
outsiders” that are the most vulnerable
members of society and in need of protection,
Margalit explains.
“In reforming the labor market,” says
Margalit, “we need to think how we improve
the prospects of all workers, but particularly
of those low-skilled outsiders.”
One of the ways of doing that, he says, is
by investing in what is known as Active Labor
Market Policies (ALMP), government
programs to intervene in the labor market
by providing retraining schemes, employment
subsidies and help finding jobs. Israel
however currently spends only about a third
of the OECD average on such programs.
“Those programs are a major way to help
low-skilled outsiders, because they are the
ones who tend to find themselves searching
for new jobs, as their jobs tend to be less
secure,” says Margalit.
But he also notes that on the other side
of the coin, “We need to think about how
to maintain a productive and agile economy
and that means there should be some
package deal that would entail increased
flexibility for employers on the one hand,
but would also increase job prospects or
security for workers, on the other.”
Better security, Margalit explains does not
mean clinging to jobs, but rather creating a
system that provides workers with better
opportunities for training and finding new
jobs, while giving them greater protection
and a stronger social safety net for the period
when they are looking for a job.
He says that Israel needs to adopt a higher
net replacement rate (NRR), the term used
for comparing how much an unemployed
worker receives when compared to their
last salary.
“If you provide people with a higher NRR
then you are giving them better opportunities
to find a new job, and secondly, if you
do lose your job, it isn’t the end of the world
as you are not broke or struggling. Such a
system would enable workers to live with
the idea of greater flexibility, which could
mean not just firing workers, but sometimes
shifting workers from one unit to another or
14 DEMOCRACY 3.0 APRIL 2017