final project - internexus - nn group

Team 109

InterNexus

NN Group

The Future of Labor and Human

Resource Strategies:

The Flexible Labor Model


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Executive Summary

NN Group is currently surveying the possibilities to restructure its labor force. In doing so, NN

Group proposes a flexible labor model in which companies from different branches work

together to educate graduates, and after a few years place them into a pool of preferred

freelancers with guaranteed commissions. This paper has investigated the thirteen countries

where NN Group is active in order to assess whether an implementation of the flexible labor

model in these countries could be successful.

Through conducting an SWOT-analysis on literature about flexible labor (models),

eleven variables could be identified that determine the successful implementation of NN’s

model. This theoretical framework formed the protocol for the case study research on the

thirteen countries where NN Group is active. Subsequently, all countries in question were

assessed to what extent they possessed the independent variables – and thus would be

considered as having the conditions for a successful implementation of NN’s flexible labor

model.

Specifically, research on the thirteen countries where NN Group is active has concluded

that Belgium, Czech Republic, Netherlands and Slovakia are recommended for implementing

NN Group’s flexible labor model. On the other hand, the other nine countries are not regarded

as possessing the conditions for a successful implementation of NN Group’s flexible labor

model. In general, NN Group should take notice of the fact that the proposed model cannot be

‘copy-pasted’, but that it should be contextualized relating to the particular circumstances of

the country in question. Moreover, further study should be conducted to clarify whether other

continents are perhaps more fruitful with regards to the successful implementation of NN’s

flexible labor model.


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Douwe Meuldijk Netherlands s1147307

Áron Miszlivetz Hungary s1305786

Sebastian Loerke Belgium s1236237

Kimberly Snoeijers Netherlands s1114271

Alexandra Ghidoarca Romania s1298607

Diederik de Groot Netherlands s1025651

Federico Brovelli Italy s1273264

Isabelle Scholte Netherlands s1293951

Mauro Spadaro-Tonin Germany s1280163

Noortje Minkhorst Netherlands s1241508

Alexander May Rasmussen Denmark s1294369

Kelly Kolkman Netherlands s1298518

Tamara Reygers Brazil s1217054

Miriam Adelina Ocadiz Arriaga Mexico s1269364

Dr. S.R. Koendjbiharie

S. van Rijswijk MSc MPhil

BA International Studies

Leiden University

01-05-2015


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Table of Contents

Executive Summary .............................................................................................................................. 2

Table of Contents................................................................................................................................... 4

Introduction ......................................................................................................................................... 10

Research Questions and Objectives ................................................................................................... 11

Literature Review ................................................................................................................................ 13

Introduction ....................................................................................................................................... 13

Strengths ............................................................................................................................................ 13

Weaknesses ........................................................................................................................................ 16

Opportunities ..................................................................................................................................... 18

Threats ............................................................................................................................................... 22

Conclusion ......................................................................................................................................... 25

Theoretical Framework ...................................................................................................................... 26

Diagram of Theoretical Framework ................................................................................................. 30

Conceptualization ................................................................................................................................ 32

Operationalization ............................................................................................................................... 32

Research Findings ............................................................................................................................... 35

Belgium .............................................................................................................................................. 35

Political .......................................................................................................................................... 35

Economic ....................................................................................................................................... 36

Socio-cultural ................................................................................................................................ 38

Legal .............................................................................................................................................. 39

Czech Republic .................................................................................................................................. 40

Political .......................................................................................................................................... 40

Economic ....................................................................................................................................... 42

Socio-cultural ................................................................................................................................ 43

Legal .............................................................................................................................................. 44

Netherlands ....................................................................................................................................... 45

Political .......................................................................................................................................... 45

Economic ....................................................................................................................................... 47

Socio-cultural ................................................................................................................................ 48

Legal .............................................................................................................................................. 49

Slovakia ............................................................................................................................................. 50

Political .......................................................................................................................................... 50


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Economic ....................................................................................................................................... 52

Socio-cultural ................................................................................................................................ 53

Legal .............................................................................................................................................. 54

Conclusions, Discussions and Recommendations ............................................................................. 57

Belgium .............................................................................................................................................. 57

Conclusion ..................................................................................................................................... 57

Discussion ..................................................................................................................................... 57

Recommendation ........................................................................................................................... 58

Czech Republic .................................................................................................................................. 58

Conclusion ..................................................................................................................................... 58

Discussion ..................................................................................................................................... 59

Recommendation ........................................................................................................................... 60

Netherlands ....................................................................................................................................... 60

Conclusion ..................................................................................................................................... 60

Recommendation ......................................................................................................................... 621

Slovakia ............................................................................................................................................. 61

Conclusion ..................................................................................................................................... 61

Recommendation ........................................................................................................................... 62

General Conclusion ........................................................................................................................... 63

Bibliography ........................................................................................................................................ 65

Literature Review .............................................................................................................................. 65

Strengths ........................................................................................................................................ 65

Weaknesses ................................................................................................................................... 65

Opportunities ................................................................................................................................. 66

Threats ........................................................................................................................................... 67

Research Findings ............................................................................................................................. 68

Belgium ......................................................................................................................................... 68

Czech Republic .............................................................................................................................. 69

Netherlands .................................................................................................................................... 71

Slovakia ......................................................................................................................................... 74

Appendix .............................................................................................................................................. 77

Appendix 1: Case Study Protocol ...................................................................................................... 77

Appendix 2: OECD entry rates into university-level education ........................................................ 78

Appendix 3: Percentage of graduates in OECD-countries in 2012 .................................................. 78

Appendix 4: Dutch government participation in public and private corporations in 2012 and 2013

........................................................................................................................................................... 79


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Appendix 5: Number of Dutch HBO and WO-graduates in the period January 2002 to November

2012 ................................................................................................................................................... 80

Appendix 6: Number of Dutch Master/PhD-graduates in the period January 2002 to November

2012 ................................................................................................................................................... 81

Appendix 7: Percentage of people with a high level of education in the Netherlands within the age

range of 15-64 years for the period 2001 to 2011 ............................................................................. 81

Appendix 8: Percentage of Dutch people enrolled in tertiary education in 2012 ............................. 82

Appendix 9: Confidence that unknown companies pay their bills among companies in the

Netherlands ....................................................................................................................................... 82

Appendix 10: Trust-relations between Dutch companies in times of crisis....................................... 82

Appendix 11: Bulgaria ...................................................................................................................... 83

Political .......................................................................................................................................... 83

Economic ....................................................................................................................................... 84

Socio-cultural ................................................................................................................................ 85

Legal .............................................................................................................................................. 86

Discussion ..................................................................................................................................... 86

Conclusion ..................................................................................................................................... 87

Appendix 12: Greece ......................................................................................................................... 87

Political .......................................................................................................................................... 87

Economic ....................................................................................................................................... 89

Socio-cultural ................................................................................................................................ 90

Legal .............................................................................................................................................. 91

Discussion ..................................................................................................................................... 91

Conclusion ..................................................................................................................................... 92

Appendix 13: Hungary ...................................................................................................................... 92

Political .......................................................................................................................................... 92

Economic ....................................................................................................................................... 94

Socio-cultural ................................................................................................................................ 95

Legal .............................................................................................................................................. 96

Discussion ..................................................................................................................................... 96

Conclusion ..................................................................................................................................... 97

Appendix 14: Japan ........................................................................................................................... 97

Political .......................................................................................................................................... 97

Economic ....................................................................................................................................... 99

Socio-cultural .............................................................................................................................. 100

Legal ............................................................................................................................................ 101

Discussion ................................................................................................................................... 102


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Conclusion ................................................................................................................................... 103

Appendix 15: Luxembourg .............................................................................................................. 103

Political ........................................................................................................................................ 103

Economic ..................................................................................................................................... 105

Socio-cultural .............................................................................................................................. 106

Legal ............................................................................................................................................ 108

Discussion ................................................................................................................................... 108

Conclusion ................................................................................................................................... 108

Appendix 16: Poland ....................................................................................................................... 109

Political ........................................................................................................................................ 109

Economic ..................................................................................................................................... 111

Socio-cultural .............................................................................................................................. 112

Legal ............................................................................................................................................ 114

Discussion ................................................................................................................................... 114

Conclusion ................................................................................................................................... 115

Appendix 17: Romania .................................................................................................................... 115

Political ........................................................................................................................................ 115

Economic ..................................................................................................................................... 117

Socio-cultural .............................................................................................................................. 118

Legal ............................................................................................................................................ 119

Discussion ................................................................................................................................... 119

Conclusion ................................................................................................................................... 120

Appendix 18: Spain ......................................................................................................................... 121

Political ........................................................................................................................................ 121

Economic ..................................................................................................................................... 123

Socio-cultural .............................................................................................................................. 124

Legal ............................................................................................................................................ 126

Discussion ................................................................................................................................... 127

Conclusion ................................................................................................................................... 127

Appendix 19: Turkey ....................................................................................................................... 128

Political ........................................................................................................................................ 128

Economic ..................................................................................................................................... 130

Socio-cultural .............................................................................................................................. 132

Legal ............................................................................................................................................ 133

Discussion ................................................................................................................................... 133

Conclusion ................................................................................................................................... 134


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Appendix 19: Bibliography ............................................................................................................. 135

Bulgaria ....................................................................................................................................... 135

Greece .......................................................................................................................................... 135

Hungary ....................................................................................................................................... 137

Japan ............................................................................................................................................ 138

Luxembourg ................................................................................................................................ 139

Poland .......................................................................................................................................... 141

Romania....................................................................................................................................... 142

Spain ............................................................................................................................................ 144

Turkey ......................................................................................................................................... 147


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Introduction

& Research Question


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Introduction

Nationale-Nederlanden Group (NN)

NN Group is an insurance and investment management company active in more than 18

countries. Established in 1845 in the Netherlands, it has become a multinational that employs

over 12,000 people and has strong presences in Netherlands, Belgium, Luxembourg, Poland,

Romania, Bulgaria, Hungary, Czech Republic, Slovakia, Greece, Spain, Turkey and Japan. Its

investment management branch offers services in several countries in Europe, US, Middle East

and Asia. NN Group exists of Nationale-Nederlanden, ING Insurance Europe, ING Life Japan,

and ING Investment Management. Its main objective is to help ensure the financial future of

their customers.

NN Group’s future plans

Traditional working models assumed people to work at one company in a lifetime. However,

workers switch employers more rapidly than ever before. Today’s extremely dynamic markets

represent a challenge for companies. As a response NN Group is currently surveying the

possibilities to restructure its labor force. One study is concerned with the mobility of

employees not being restricted by non-competition and confidentiality clauses in contracts. It

proposes a flexible labor model in which companies from different branches work together to

educate graduates, and after a few years place them into a pool of preferred freelancers with

guaranteed commissions. This model ensures that both employers and employees enjoy a

maximum of freedom of action with the companies’ investments and the workers’ social

security at an acceptable level of safety.

Possible challenges to these plans

Factors such as legislation and jurisprudence, and demands and rights of trade unions hinder

the introduction of this model in various parts of the world. In addition, cultural attitudes,

historical background, economic situations and political climates all play an important role.

Furthermore, the level of competitiveness of each country differs greatly, making cooperation

between competitors difficult.


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Research Questions and Objectives

Every implementation of a flexible labor model should be altered according to the country’s

context (Madsen 17). After all, labor markets worldwide are the product of local socio-

economic developments, and just ‘copy-pasting’ the model is therefore not an option (ICF

International 12). It is therefore argued that NN’s proposed flexible labor model should be

contextualized relating to the particular circumstance of the country in question (Sultana 145).

As a result, this paper will answer the following research question:

“Can the flexible labor model as proposed by NN Group be successfully implemented in the

countries where NN Group is active?”

With answering the abovementioned research question, this paper aims at giving

recommendations to NN Group whether it is worthwhile to implement its proposed flexible

labor model in the countries where NN Group is active. Moreover, suggestions will be made to

alter the model in countries when the original model will not fit, in order to subsequently

implement NN’s proposed flexible labor model successfully. Finally, only those countries

which have been positively judged in accordance with the research question will be covered in

this project; the research on the other countries will be enclosed in the appendices.


12

Literature Review

& Theoretical Framework

and theoretical framework


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Literature Review

Introduction

In order to make a valuable analysis for NN-Group on its flexible labor model, it is necessary

to draw upon academics who have elaborated on issues related to flexible labor markets. In

doing so, this paper will make use of a SWOT-analysis (Strengths, Weaknesses, Opportunities,

Threats). By using this analysis, one can identify the different characteristics of the model that

need to be taken into account in order to implement the model successfully. A valuable notion

with regards to analyzing a labor market based on the flexible labor model comes from Madsen.

He admits that every implementation of a flexible labor model should be altered according to

the country’s context (Madsen 17). After all, labor markets worldwide are the product of local

socio-economic developments, and just ‘copy-pasting’ the model is therefore not an option (ICF

International 12). Nevertheless, conducting an all-inclusive examination globally to both labor

market analysis and the design of labor market reforms can inspire those who have to formulate

policies regarding the implementation of the flexible labor model (Madsen 17).

Strengths

One of the most evident cases of a successful flexible labor market in Europe is in Denmark,

where market reforms based on the flexible labor model already started in 1993 (Bredgaard et

al 8). Here, the balance between the several components of Denmark’s current labor market

policy has been demonstrated by the ‘Golden Triangle’ – the interdependency between low job

security and active labor policies, high job-to-job mobility and a generous social security system

(ICF International 7). Together with a strong focus on high quality education, the Danish labor

market exists on a principle known as flexicurity (Wilthagen 10). Based on the conception of

the flexible labor model, the concept of flexicurity is “an integrated policy strategy with the aim

to enhance flexibility and security in the labor market” (Wilthagen 1).

Although the concept of the flexicurity model has its origins in the Netherlands,

Denmark has become one of the most important real-life examples of the flexicurity model

(Madsen 1). Active labor market policies is an crucial element of the Danish flexible labor

market and show that, compared to other EU-member states, a high percentage of the youth is

included in the labor market, despite the fact that there is a relatively low level of employment

protection legislation (Madsen 17). Moreover, well-conceived active labor market policies can

decrease labor market segmentation, and have even resulted, during the present economic crisis,


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in minor effects on the rise of long-term employment among all demographic groups (Madsen

17). Madsen also states, that the “main success criteria should however be the longer-term

adaptability of the economy to the shifting pressures of globalization” (Madsen 19). Here the

Danish model of flexicurity has proved successful, as it meets the global development of the

increasing demand among employers for more flexibility on the one hand, and the employee’s

increasing demand for security on the other hand (Wilthagen 1).

Kalleberg provides a different input with regard to the strengths of the flexible labor

model. Kalleberg(a) underlines the consequences of a more flexible workforce for workers and

jobs. He argues that all types of changes in society call for a more flexible production and labor

market, so the labor market can keep up with these fast development occurring in technology

and information (Ibid 155). There is thus clearly an increasing gap which the flexible labor

market model can fill. Next to this, Kalleberg(a) argues that there are several benefits for

employers. Next to the improvements in productivity and performance, “some organizations

have been able to save on labor costs by using temporary and part-time workers and thus have

enjoyed greater profits” (Ibid 156). Moreover, with regard to the employees, Kalleberg(a)

suggests that it depends on the amount of “control over resources” (Ibid 171), such as portable

skills, whether a worker can benefit from a more flexible labor market.

In a different article, Kalleberg(b) writes about the new functional-flexibility models

that some companies in USA and UK are currently introducing and describes its main advantage

within the autonomy and flexibility given in more detail. In the recent years, the human resource

management had been changed in order to empower workers with new “[…] skills, incentives,

information, and decision-making responsibilities” (Kalleberg(b) 481). This type of model

should improve the productivity and achieve new business growth. The original labor

organization, which is based on the hierarchical system of the Fordism models, is to be replaced

with new flexible mechanisms. Through an increased participation of the workers in the

decision-making process and in team works, employees will increase the organizations'

functional flexibility with their multiple skills. Furthermore, workers can quickly adapt to new

situations and take their own initiatives instead of being passive (Kalleberg(b) 481).

An organization can also rely on an externalized workforce, which includes different

non-standard employees. Costs can often be reduced with the externalization of administrative

control. Examples of this sort of labor model can be high skilled workers, such as consultants,

or low skilled workers, such as cleaners. (Kalleberg(b) 483). Externalizing some activities is

also an efficient way to protect the core and long-term employees of the organization. In fact,

the non-internal work force can be used as a sort of buffer in order to protect the core workforce


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in times of economic difficulties (Kalleberg(b) 484).

De Spiegelaere talk more specifically about the strengths of three types of flexible labor

modules – functional, wage, and contractual. The strengths of wage flexibility are normally

referred to the rewards, hence bonuses, that an employee can receive. These rewards can

incentivize greater engagement of employees and also boost their creativity (De Spiegelaere

656). Studies show that this sort of extrinsic reward does stimulate employees to share their

views and ideas to their team and therefore help in the employee driven innovation scheme (De

Spiegelaere 658). Within the functional flexibility there is the possibility of having job rotation

schemes. When employees are frequently allocated different tasks, their knowledge of the

organization increases, including their motivation and capabilities. Furthermore, having a

broader spectrum of skills does increase the ability of being more innovative and creative (De

Spiegelaere 657). The contractual type of flexibility is however, more complex than the former

models. This model addresses the flexibility the employees face in their contracts, which means

that on the macro-level the previous rigidity of employment contracts and the firing and hiring

regulations are more relaxed (De Spiegelaere et al 656). This can be of certain advantage for

firms in need of restructuring their organization in order to avoid bigger losses or even

bankruptcy.

In sum, all three types of flexibility models show certain strengths. Wage flexibility can

indeed be an important addition to a suggested payroll system, which could be part of a flexible

labor model, thus helping firms to improve their view on this model. It is however the functional

flexibility that is most positively related to organizational- and employee innovativeness. While

wage flexibility also gives multiple extrinsic rewards to the employees, functional flexibility

gives the more importantly intrinsic rewards. A final perspective on the strengths of the flexible

labor model comes from Benner, who demonstrates the importance and strength of flexibility

nowadays, substantiated by a case study on Silicon Valley. Silicon Valley is a main player when

it comes to innovation (Benner 3), which makes the economy very successful. Benner argues

that “certain aspects of labor flexibility are critical to the competitive success of Silicon Valley”

(Ibid 4) and that “the ability of Silicon Valley firms to innovate rapidly has been critical for the

region’s economic success” (Ibid 15). As such, Silicon Valley is another example that illustrates

the strengths of the flexible labor model.


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Weaknesses

Throughout Europe, labor market reforms have been implemented to improve economic growth

and equity. Some of these reforms aim to secure the special combination of increased flexibility

on the labor market and social security, where the point is to combine several different forms

of flexibility with several different forms of security, which is described by the Special Report

of Neujobs as “a combination of loose employment protection legislation (EPL), generous

unemployment benefits and strong efforts on active labor market policies (ALMPs)” (Koster

46). In this particular case, NN Group is surveying the possibilities to restructure its labor force

proposing a flexible labor market model in which companies work together to educate

graduates.

Studies from Green and Leeves investigate the effects of flexible employment on

worker’s wellbeing by analyzing data from the household, income and labor dynamics in

Australia (Green and Leeves 123). The authors introduce the flexicurity model that can be

compared to the flexible labor market model as proposed by NN Group since both models

consider numerous employment contracts throughout the career (Ibid 121). Whereas NN Group

wants to safeguard the workers’ social security workers will inevitably be subject to transitions

between employment and unemployment in the case of flexible employment (Ibid 121). The

authors’ findings indicate that flexible employment can be considered a problem for the flexible

labor market as well as workers in flexible employment encounter more unemployment and

experience increased job insecurity. This has some negative outcomes such as lower wages, job

insecurity and financial insecurity, which hinders the move towards a flexible model of

employment. The author suggests that there would be a need for policies from companies and

government to facilitate the employment transition (Ibid 137). From the view of the policy

maker, “flexibility can be obtained without detrimental effects on workers’ satisfaction if

policies aimed at favoring the use of flexible contracts are coupled with policies aimed at

enhancing employment stability, such as active labor market policies to assist workers in their

transition from one job to another” (Origo and Pagani 554). This should be taken into account

in trying to implement the flexible labor market model in a specific country in order to safeguard

the workers’ well-being.

Burroni and Keune argue how the concept of flexicurity suffers from considerable

shortcomings (Burroni and Keune 75). For instance, the authors regard the concept as

ambiguous, meaning that the translation of flexicurity into policies has been challenging due to

different views on what flexicurity actually entails (Ibid 78). Another shortcoming of the

concept of flexicurity would be the problem of trying to achieve a situation beneficial for both


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the employer and the employee since the social security of the employee is often not taken into

account (Ibid 86). As mentioned previously, the country in question needs to facilitate the

transition by securing the worker by providing stability, both job- and financial. Again, this

stresses the significance of considering workers’ job security when trying to achieve a more

flexible labor market. Therefore, Burroni and Keune argue that strengthening the connection

between flexibility and security will be of significance when trying to achieve a flexible labor

market (Ibid 87). In the countries that NN operates within, this connection varies greatly and

cannot easily be adapted unless they take into account the local and national conditions.

Another scholar, Sultana, also stresses the ambiguity of the concept of flexicurity. For

instance, there are different types of flexibility such as functional flexibility and temporal

flexibility. In addition there are different types of security arrangement such as job security and

income security (Sultana 148). Furthermore, the author explains as to why flexicurity is

becoming more and more attractive to implement, namely because of globalization and

demographic pressures (Ibid 149). Alike Burroni and Keune, Sultana acknowledges that

security of workers is equally significant as trying to create a more flexible labor market.

Therefore, Sultana argues that flexicurity should be contextualized relating to the particular

circumstance of the country in question (Ibid 145).

Similarly, Wilthagen and Tros emphasize the need for a flexible labor market without

undermining the importance of workers’ security (Wilthagen and Tros 166). In addition, they

stress the importance of favorable economic and labor market conditions since these can

contribute to the success and usefulness of the flexicurity model. For instance, during an

economic crisis, security of workers might be eroded whilst during a booming economy

traditional job security might be favored (Ibid 181). Therefore, the weaknesses of the flexicurity

model regarding the relation between flexibility and security displays significant aspects of a

flexible labor market that need to be taken into account by NN Group when trying to implement

their flexible labor market model.

According to Lefresne, flexicurity has been a weak point of EU employment regulation

and met with union distrust (Conter 10). The implementation of the model highlights the social

and economic differences between the Eastern and Western parts of the EU. Denmark and The

Netherlands have already sustainably implemented flexicurity by allocating sufficient

economic and political resources such as highly trained human capital, capital and good

governance to create a stable basis. However, the European Trade Union Confederation has

argued that there was a “gap between the principle of flexicurity (‘genuine flexicurity’) and the

fact that it was ‘not applied in practice’ (ETUC 9). According to an interview with an


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international officer of Unite, French and British trade unionists argued that the lack of a

bargaining culture and the absence of high trust-relations make it impossible to implement it in

most member states.

Even where flexicurity has been implemented, there have been concerns about the real

success and sustainability of such model. According to the Economist, “the Danish system of

flexicurity puts too much emphasis on security and not enough on flexibility”. It is also said

that if countries with a high degree of employment protection adapt to the Danish/Dutch model

they need to seek compensation in form of unemployment benefits which can become a burden

in public spending and reduce the incentives of the unemployed to seek employment (Andersen

5). It seems that the model falls short of creating a proper balance between the principle of

“rights and duties” and often do not motivate job seekers. The unemployed will be less likely

to go on an active job search. There has to be a proper incentive to actively seek a job, where

flexicurity is based on an individual needs based benefit system. The model also contradicts the

work ethics of societies where the work culture is different. Madsen argues that the Danish

model and productivity gains are not available for migrants, unskilled workers and people with

health problems. It might seem that the model favors those with the best possible skills,

providing activation offers for the best skilled workers (Madsen 13).

Opportunities

Bentolila et. al. make an extensive analysis of the history of the Spanish labor market both

before and after Spain launched a liberalization of their labor contract flexibility. The article is

very critical towards today’s flexible labor. They especially emphasize the negative

repercussions on the labor market as whole. However, they do give interesting insights in the

opportunities that allowed more flexible labor laws to be implemented in Spain. They suggest

that the relatively high unemployment rate among the well-educated represents a great

opportunity for flexible labor models to be implemented. For the project one can use this source

to investigate how unemployment represents an opportunity for the flexible labor model, NN

Group wants to create.

Chung looks into flexibility of labor markets of the 21 EU member states at the time of

writing in 2006. In eight of these NN Group has a presence, namely The Netherlands, Belgium,

Luxembourg, Poland, Hungary, Czech Republic, Greece, and Spain. It is an interesting read,

not only for the opportunities for flexible labor models the countries possess but also to learn

about the history of their implementation in general. One of the conclusions is that countries


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where the average company has more flexibility arrangements for employers, it provides more

arrangements for employees as well, and there seems to be more variation in the provision of

the latter than the former. Among such arrangements are flexible working times, leave schemes,

or early retirement schemes. On a country level, there is a positive relationship between the

provision of flexibility arrangements for the needs of workers and those for the needs of

companies. Furthermore, providing flexibility for workers’ needs and flexibility for companies’

needs are not necessarily at odds with each other. In fact, the two may be able to help one

another develop and can be reconciled to have more of a synergy effect towards each other,

which would then provide real flexicurity for both workers and companies. So if a country’s

workforce is generally more open towards the idea of flexible labor, if provides great

opportunities for NN Group.

To identify the opportunities for the flexible labor model, it is important to identify the

criteria for a flexible labor market. Klau and Mittelstadt argue that there are four aspects of

labor market flexibility: real labor cost flexibility at the economy-wide level, adaptability of

real labor costs across occupations and enterprises, labor mobility, flexibility of working time

and working schedules (Klau & Mittelstadt 10). They expand upon each of these criteria by

giving concrete examples of how they can be achieved on a national-level labor market. First,

aggregate labor cost flexibility would mean that real-product wages and related non-wage costs

can immediately and fully be adjusted to a change in productivity levels or terms of trade (Ibid

10). Second, and more relevant to the research, is that the condition of adaptability of real labor

costs across occupations and enterprises, is argued to depend on two dimensions: the

adaptability of wages to the changing scarcity of skills, and the adjustment of wages to the

earning power of individual firms (Ibid 12). This is an precondition for a flexible labor market

that if present in a country’s economy, can present an opportunity for NN Group’s flexible labor

model.

To move on to a case study for opportunities for the flexible labor model, literature on

“Agenda 2010” can be reviewed. Deutsche Welle, Germany’s international broadcaster reviews

the reforms that were implemented in Germany in 2003 called “Agenda 2010”. Of most

relevance, Agenda 2010 entailed the reform of the German labor market to make it more

flexible. Not only did it become easier for employers to fire and hire employees, the policies

also cut back on spending on unemployment benefits and required companies to immediately

inform the Federal Labor Office when an employee has been given notice (“A quick guide to

Agenda 2010” 1). This information can help us better understand the perceived success of

Agenda 2010, which is often accredited with Germany’s success in withstanding the recession


20

and its economic incline in the last decade (Barkin 1). An opportunity for the flexible labor

market presents itself when it can be compared to proven successful reforms in the past. This

means that the flexible labor model might have a good chance of being supported by the German

government and also businesses that have reaped the benefits of the Agenda 2010 reforms.

A more recent article published in 2013 points to the concerns of a small group of

politicians and economists fearing that Germany’s current government is unwilling to expand

upon the Agenda 2010 reforms thereby losing its competitiveness (Barkin 1). This article

provides us with more current information on how the Agenda 2010 reforms can serve as an

opportunity for the flexible labor model since it can be presented as an answer to the concerns

of this “small but vocal group” (Ibid 12). The weakness of both sources is that media

broadcasters, thus not being academic, publish them. Furthermore, one must be reluctant in

relying on opinion in these cases. To supplement the knowledge on Agenda 2010 the article by

Camerra-Rowe “Agenda 2010” can be analyzed. This article provides us with information on

the origins and the impact of the Agenda 2010 reforms. It is a peer-reviewed academic article,

and therefore potentially more reliable than the media articles.

Sánchez covers the different aspects of labor flexibility and debates under what

conditions it can best exploit opportunities for expansion. Capability Theory (Teece 509):

predicts that the firm’s ability to build and reconfigure internal and external competencies to

respond to rapid changes in their environment lies at the centre of innovativeness. There are

two categories for a labor force of a company: the internal labor force (or 'core' labor force),

which consists of long-term employees, and the external labor force that consists of short-term

labor force (usually exterior to the company). Then there is the Internal HR Flexibility Theory:

Internal HR flexibility includes functional flexibility and internal numerical flexibility. First,

functional flexibility means a process through which firms adjust to changes in the demand for

their output by an internal reorganization of workplaces based on multi-skilling, multi-tasking,

teamwork, and the involvement of employees in job design and the organization of work.

Internal numerical flexibility refers to the ability to change the size of the company's internal

labor force. Sánchez formulated the following hypothesis: The greater the firm’s functional

flexibility, and internal numerical flexibility, the greater the firm’s innovativeness (Sànchez

719). While numerical flexibility relies entirely on the ability of letting go part of the firm's core

labor force, functional flexibility is concerned with the free movement of labor within a firm.

Useful methods to enhance functional flexibility include re-allocating tasks among employees

and retraining of the labor force.

Globalization has increased economic competition and added pressure on companies to


21

have a more flexible labor force. The recent waves of migration brought, to some degree,

cultural diversity to Japan that is something entirely new. Although the migrant workforce is

often limited to temporary jobs, since the economic recession of the late 1990's employers have

begun to hire workers of foreign background as long-term employees. An opportunity for

improving the flexibility of labor in Japan lies in improving the education standard of the

migrant part of the population. Indeed, with better general knowledge of the Japanese language

and culture there would be much room for improved socio-economic integration of the migrant

population. Studies show the migration of foreign labor to Japan is a relatively new

phenomenon. There are two main factors as causes for this phenomenon: the economic

recession of the late 90’s and the aging of the Japanese population. According to Takenoshita,

the increased amounts of migrant workers is happening jointly with the flexibility of labor in

Japan and will doubtlessly be a determining factor in shaping the future Japanese labor market.

In an article by Høj, he presents a case study of the Dutch housing market: improving

the flexibility of labor to enhance labor mobility. This is very valuable when seeking to learn

more about the dynamics of labour markets. The Netherlands has a very rigid housing market,

which brings down employment rate and can potentially lead to misallocation of labor. The

rigidity of the housing market arises from excessive government intervention. One should aim

to identify the policies that made the Dutch housing market rigid. Then, one should attempt to

analyze what may be the most efficient way to alter these policies to achieve a high level of

labor flexibility. The author identifies several reasons for government intervention: 1) there is

a relatively small supply of houses for the high population density and 2) in order to preserve

living environments, the Dutch government makes use of restrictive land use policies. In

addition, Høj lists one more policy change necessary to achieve labor flexibility: subsidies to

the housing sector should be removed. Because government subsidized the rental of housing in

the Netherlands, the purchasing and selling of housing is taxed. In this indirect manner, the

Dutch government is sure to limit the creation of additional housing.

The case study of the Dutch housing market demonstrates how labor can be made rigid

via government intervention. Minimal government intervention in a particular sector is thus

necessary to ensure a flexible workforce. It must be said however that substantial improvements

have been made in the housing sector over recent years concerning labor flexibility. As the

Dutch government grows more lenient with its policies towards the housing sector,

opportunities emerge for encouraging labor flexibility.


22

Threats

Looking at different articles, a first potential threat can be found in the fact that job rotation

does not necessarily mean an increase of creativity and innovation among employees. If there

is a job rotation scheme, employees are frequently rotated around different jobs in the

organization in order to increase their knowledge of all sorts of processes, as well as to ensure

a high level of motivation. De Spiegeleare did not find a study that suggests that there is a link

between job rotation schemes, the increase of the creativity or innovation among employees

who are involved in this rotation scheme. They further cite an article that researched job rotation

on the company level, “on the company level, Beugelsdijk (2008) studied the relation between

job rotation and innovation using a stratified sample of 988 firms of which the director or HR

manager were subjected to a face-to-face interview. He couldn’t find a significant relation

between job rotation and innovation” (De Spiegeleare 657). This could be a threat to the flexible

labor model NN wants to implement, as it is not desirable that employees do not develop their

skills and increase their creativity in the process. On the other hand, they cite only Beugelsdijk,

which is perhaps not very convincing in proving that no other authors have made this claim.

In another article by McGuiness and Wooden two relevant points are postulated. The

first is the potential mismatching of employees. It is of course possible that there is a mismatch

in the flexible labor model or that some employees are not as suitable for the companies as

thought of in the beginning, for example. In this case, the writers argue that there is a high quit

probability, which would be a waste of the resources for the NN Group, or for one of the other

companies involved in the model that invested in the development of this particular worker

(McGuiness and Wooden 12). The second point is related to the requirement of acquiring new

skills, which might be needed when moving from one company to another. When this is

required, there is a significant connection to higher job quitting (Ibid 13). For that reason, these

two point indicate that some aspects of the flexible labor market might be connected to workers

quitting their job, which would thus mean that the company has wasted valuable resources in

that particular worker. However, with respect to the upskilling, NN Group has transformed this

negative aspect into a positive by giving people specialized training so they can work in other

companies with the same set of skills.

A third article assesses an already existing flexible labor market model, namely the

Danish ‘Flexicurity’ model. An interesting aspect of this article is that it argues that flexible

labor market models are not transferable to other countries, “It is neither possible nor desirable

to transfer one model from one country to another, in short there are no ‘copypaste’ solutions”

(European Commission 12). This is a result of the fact that for each country the socio-economic


23

history should be addressed separately. This might form a threat to the desired model of the NN

Group, as it will have to adapt in order to make it suitable in other countries in which the NN

Group is operating. This will require a lot more research and time. In an article by Madsen, he

refers to the fact that “the Danish model of flexicurity is not resistant to economic crisis. To the

contrary, rather large fluctuations in employment can be expected” (Madsen 19). Especially in

the current economic situation, this can signify that the model will not be sufficient since it is

unstable and will not provide a beneficial tool in order to alleviate the crisis by making

employment more stable.

Additionally, Kleinknecht provides some interesting insights to the concept. They state

that “a permanently high rate of people joining and leaving a firm may diminish social cohesion

and trust and increase the probability of opportunistic behavior” (Kleinknecht et al 174), which

can form a threat to the companies investing in a flexible labor model as it can create a gap, for

example, in teamwork, that in the end might lower the motivation of the employees and lead to

inefficiencies. In order to decrease this risk, companies are required to invest more time and

money in controlling and monitoring its employees. A second important point mentioned in

their article is that “flexible and short-run labor relations may also favor the leaking of trade

secrets and of technological knowledge, which may discourage investments in R&D and

innovation. In other words, the loss of social capital will aggravate the problem of market failure

due to positive externalities” (Ibid 174). This aspect of creating a greater risk of market failure

can be seen as an enormous threat, since that is what every company wants to avoid.

Nevertheless, in today´s world in which communication and media is so advanced, it is difficult

to keep confidential information secret. For this reason, Jordy Veth stated that sharing and

exchanging information between companies is a lot more beneficial. This indicates that they

have incorporated this while developing their flexible labor model.

While the previous articles were looking at the side of the employer with regard to the

challenges of the flexible labor market, the flexibility in employment also brings along some

implications for employees. As discussed in the peer review on the concept ‘Flexicurity’, a

main threat towards the employees is that they face the risk of being dismissed from their work

more easily - “There is low protection for employees, which means that it is easy for employers

to dismiss workers” (Mutual Learning Programme 1), which means that there are an

increasingly work instability. Besides, Bentolila´s article presents the case of Spain to

exemplify how employees within the flexible labor market have lower wages than those

employees with a fixed contract. However, a person with a fixed contract is subject to more

rigidity in skills than a flexible worker who comes with a range of skills due to flexibility in the


24

way of thinking and an higher adaptability towards the working environment. Furthermore, this

last article mentions how flexible labor employees tend to have a weaker position in their jobs.

As flexible employees have less attachment to the companies, they are underestimated in the

decision making of the company, especially in setting wages. Although, this threat varies per

country, it seems true that flexible employees are less able to create workers union (Bentolila

16, 17-20).

One should note however, that the flexible labor model as desired by the NN Group has

a payroll system with a fixed wage. This could be a counter argument of what Bentolila

mentions because there seem to be ways to work with a fixed wage rate as well. Additionally,

the researcher warns that flexible labor has been understood as a positive model for employees;

however such benefits cannot be appreciated immediately. It takes time until the flexible labor

market reach stable ground to allow workers to achieve a positive outcome. In fact, Bentolila

mentions that this can be exemplified in Spain, where the flexible labor market was introduced

in the 1980s and raised the unemployment 6% between 1991 and 1993 (Ibid 30). Also, Bentolila

points out that the flexible model is not just a challenge for the employees, but also for the

company because "increasing the flexibility of permanent employees is usually politically

difficult" (Ibid 31). The researcher remarks how the flexible model is threatened by the different

levels of adaptability and possible reactions in each country, even within the same region.

Feldmann follows the pattern of Bentolila and highlights the remarkable challenges of

applying the flexible labor market in different countries. In his article, Feldmann analyzes the

cases of Poland, Hungary and the Czech Republic because of their position as being new

countries in the European Union. Feldmann highlights that the flexible model mostly deals with

the politics of host countries, especially those with a Communist background (Feldmann 273).

In order to apply a flexible labor model in different countries, a company needs to realize that

the participation of local governments and policies may represent a threat to its goals. For

instance, the case study of East European countries display differences in education, the number

of educated employees, taxation, labor participation, working-time and dismissal regulations,

retirement systems, job-placement services, minimum wages and differences between genders

(Feldmann 274-307) These are just some of the issues that NN Group might deal if they decide

to extend the flexible labor model to new borders. Moreover, the government in host countries,

as Feldmann suggest in the case of Eastern Europe, may not cooperate with the flexible model

requirements.


25

Conclusion

Using the SWOT-analysis structure proved to be very helpful in classifying the different

implications of the flexible labor model. At first, some significant strengths of the flexible labor

model have been identified. For instance in Denmark, there is a high percentage of youth

employment due to its flexible labor market. Besides, a flexible labor market can also increases

creativity, productivity and innovation. However, other scholars draw different conclusions.

Some authors, for example, have argued that rotation job schemes, which is central aspect of a

flexible labor market, decreases innovation and creativity. Next to this example of a weakness,

there is a threat that the flexible labor model will result in the mismatching of employees,

diminished cohesion and social trust, and the need for adaptations because of the social

economic history of a certain country. Additionally, the implementation of a flexible labor

model will probably lead to the other threat of highlighting socio-economic differences between

Western and Eastern Europe. Moreover, workers will be subject to transitions between

employment and unemployment. Also, the lack of a bargaining culture and high trust-relations

in most states, could pose a threat to the implementation of the model. Yet, Spain proved to be

an example for opportunities to the flexible labor model. In this country, high unemployment

among a highly educated workforce can provide opportunities for the successful

implementation of this model. Although some sources have the tendency to contradict each

other - thus making us to find new or adjusted conclusions -, the numerous useful sources which

have helped to identify certain strengths, weaknesses, opportunities and threats of the

implementation of a flexible labor model.


26

Theoretical Framework

NN Group is currently surveying the possibilities to restructure its labor force in order to keep

up with the shifting pressures in the labor market. It proposes a flexible labor model in which

companies from different branches work together to educate graduates, and after a few years

place them into a pool of preferred freelancers with guaranteed commissions. This model

ensures that both employers and employees enjoy a maximum of freedom of action with the

companies’ investments and the workers’ social security at an acceptable level of safety. As the

literature review has identified certain mechanisms that are at the basis of defining an

efficacious application of a flexible labor model, a theoretical framework can as such be

formulated which will highlight the factors that would determine the successful implementation

of NN’s flexible labor model in a given country.

Active policies at the government level with regards to both labor issues as social

security are required for a proper execution of NN’s flexible labor model. After all, there are

certain problems along with the implementation of a flexible labor model, like job insecurity,

that could hinder employers to move to this model (Green and Leaves 121, 137). However,

flexibility can be obtained without detrimental effects on workers’ satisfaction when a situation

beneficial for both the employer and the employee is provided when the country in question

facilitates the worker by providing job stability (Burroni and Keune 86). For instance, active

labor market policies that assist workers in their transition from one job to another (Origo and

Pagani 554). Furthermore, the literature review has thoroughly made clear that you can’t have

flexibility without a decent social security system. After all, financial insecurity is next to job

insecurity the main obstacle for employees to move towards a flexible model of employment

(Green and Leeves 137).

For instance Denmark, the most evident case of a successful flexible labor

implementation, shows that the Danish flexible labor model has only proved successful as it

meets the employee’s increasing demand for social security due to the increasing demand for

more flexibility (Wilthagen 1). Also, the case of Denmark underpins the necessity for active

labor policies. Denmark has shown that active labor policies result in a high percentage of the

youth included in the labor market, despite the fact that there is a relatively low level of

employment protection legislation (Madsen 17). Moreover, well-conceived active labor market

policies can decrease labor market segmentation, and have even resulted, during the present

economic crisis, in minor effects on the rise of long-term unemployment among all

demographic groups (Madsen 17). Again, these examples stress the significance of considering


27

workers’ security when trying to achieve a more flexible labor model (Burroni and Keune 87).

Therefore, Burroni and Keune argue that strengthening the connection between flexibility and

security will be of significance when trying to achieve a flexible labor model (Buronni and

Keune 87). Sultana acknowledges that security of workers is equally significant as trying to

create a more flexible labor model (145), and similarly, Wilthagen and Tros emphasize the need

for a flexible labor model without undermining the importance of workers’ security (166). As

such, it is expected that there is a positive relation in a given country between a high degree of

both active labor policies as the social security system and the successful implementation of

NN’s flexible labor model.

The case of Japan, a country where NN Group is also active, shows that although the

migrant workforce is often limited to temporary jobs, employers have since the economic

recession of the late 1990's begun to hire workers of foreign background as long-term

employees. An opportunity for improving the flexibility of labor in Japan lies in improving the

education standard of the migrant part of the population. Indeed, with better general knowledge

of the Japanese language and culture there would be much room for improved socio-economic

integration of the migrant population, thus shaping more room for the implementation of a

flexible labor model (Takenoshita). Likewise, the flexible labor market in Denmark could never

have succeed as it does now without having the government strongly focusing on high quality

education, thereby enhancing flexibility and security in the labor market (Wilthagen 1, 10).

Therefore, it is expected that there is a positive relation in a given country between a high degree

of active policies at the government level with regards to the quality of high education and a

proper execution of NN’s flexible labor model.

Furthermore, active policies with regards to high quality education foster the rise of a

high degree of human capital, another precondition for a successful implementation of NN’s

model. Denmark and The Netherlands already have sustainably implemented flexicurity by

allocating sufficient economic and political resources such as highly trained human capital

(Conter 10). More practically, it is NN Group’s vision to create and educate a pool of talented

graduates in the countries where it is active. A high degree of human capital in the countries in

question will only benefit the implementation of this vision, a statement underpinned by

Bentolila et. al (30-31). The statement of Sánchez only reinforce this necessity of human capital;

he argues that the greater the firm’s functional flexibility, and internal numerical flexibility, the

greater the firm’s innovativeness (Sànchez 719). Functional flexibility means a process through

which firms adjust to changes in the demand for their output by an internal reorganization of

workplaces based on multi-skilling, multi-tasking, teamwork, and the involvement of


28

employees in job design and the organization of work. Internal numerical flexibility refers to

the ability to change the size of the company's internal labor force. While numerical flexibility

relies entirely on the ability of letting go part of the firm's core labor force, functional flexibility

is concerned with the free movement of labor within a firm. Useful methods to enhance

functional flexibility include re-allocating tasks among employees and retraining of the labor

force. A higher degree of human capital will as such be more adjustable to changes in the

demand for their output than a country with a less-trained labor force. Therefore, it is expected

that there is a positive relationship in a given country between a high degree of human capital

and a successful implementation of NN’s flexible labor model.

According to Klau and Mittelstadt, another requirement for a successful implementation

of NN’s flexible labor model is a high degree of real labor cost flexibility and adaptability (i.e.,

high wage flexibility and adaptability) at the national economy-wide level (10, 12). For

example, wage flexibility can be an important addition to a suggested payroll system, which

could be part of NN’s flexible labor model, in turn thus helping firms to improve their view on

this model (De Spiegelaere 656). Furthermore, a high degree of flexibility with regards to

employment contracts is a factor that determine the successful implementation of the flexible

labor model as proposed by NN Group. Flexibility which the employees face in their contracts

means that on the macro-level the previous rigidity of employment contracts and the firing and

hiring regulations are more relaxed (De Spiegelaere et al 656). This can be of certain advantage

for firms in need of restructuring their organization, like NN Group, in order to avoid bigger

losses or even bankruptcy. Therefore, it is expected that there is a positive relation in a given

country between a high degree of real labor cost flexibility and adaptability at the national

economy-wide level and a successful implementation of NN’s flexible labor model on the other

hand.

Also, flexibility can be obtained without detrimental effects on workers’ satisfaction if

policies aim at favouring the use of flexible contracts (Origo and Pagani 554). For instance,

Germany’s ‘Agenda 2010’ entailed the reform of the German labor market to make it more

flexible. It became easier for employers to fire and hire employees (“A quick guide to Agenda

2010” 1). This low degree of rigidity with regards to employment contracts is often accredited

with Germany’s success in withstanding the recession and its economic incline in the last

decade (Barkin 1). Therefore, it is expected that there is a positive relationship in a given

country between as a low degree of rigidity of employment contracts and a successful

implementation of NN’s flexible labor model on the other hand.

Besides, the government has to have the willingness to develop a flexible labor market,


29

and at the same, has to limit its intervention in the market to the greatest extent possible in order

to establish a fruitful operation of NN’s model. The government in host countries, as Feldmann

suggest in particular with regards to the case of Eastern Europe, may not cooperate with the

flexible model requirements (Feldmann 273). In order to apply a flexible labor model in

different countries, a company needs therefore to realize that the participation of local

governments are necessary for a successful implementation of a flexible labor model (Feldmann

274-307). Therefore, it is expected that there is a positive relationship in a given country

between a high degree of government’s willingness to establish a flexible labor model and a

successful implementation of NN’s flexible labor model.

Moreover, the case study of the Dutch housing market demonstrates how labor can be

made rigid via government intervention. Minimal government intervention in a particular sector

is thus necessary to ensure a flexible workforce (Hoj). Therefore, it is expected that there is a

positive relationship in a given country between a low degree of government’s intervention in

the market and a successful implementation of NN’s flexible labor model. Furthermore, also

companies themselves should be willing to develop a flexible labor system, while

correspondingly high trust-relations between companies should be established. For instance,

French and British trade unions argue that the absence of high trust-relations between

companies make it impossible to implement the flexible labor model in most European Union

member states (ETUC 9). Therefore, it is expected that there is a positive relationship in a given

country between a high degree of trust-relations between companies and a successful

implementation of NN’s flexible labor model.

In addition, Chung states that at a country level, there is a positive relationship between

the provision of flexibility arrangements for the needs of workers and those for the needs of

companies. Furthermore, providing flexibility for workers’ needs and flexibility for companies’

needs are not necessarily at odds with each other. In fact, Chung states that the two may be able

to help one another develop and can be reconciled to have more of a synergy effect towards

each other, which would then provide real flexicurity for both workers and companies. So if

both a country’s workforce as corporate climate is generally more open towards the idea of

flexible labor, if provides great opportunities to implement a flexible labor model there.

Therefore, it is expected that there is a positive relationship in a given country between a high

degree of companies’ willingness to establish a flexible labor model and a successful


Finally, high participation of workers in the company’s decision-making progress is a

factor that is of importance when considering an effective employment of NN’s model. As


30

flexible employees have less attachment to the companies, they are underestimated in the

decision making of the company, especially in setting wages. Although, this threat varies per

country, it seems true that this matter is of importance and flexible employees are, for instance,

less able to create workers union (Bentolila 16, 17-20). These barriers could hinder the decision

of employees to be flexible in their employment. In addition, Bentolila warns that flexible labor

has been understood as a positive model for employees; however such benefits cannot be

appreciated immediately. It takes time until the flexible labor market reach stable ground to

allow workers to achieve a positive outcome. Therefore, through an increased participation of

the workers in the decision-making process, employees are able to positively regard ánd be of

use to the organizations' increasing flexibility in the long run (Kalleberg 481). As such, it is

expected that there is a positive relationship in a given country between a high degree of

workers’ participation in the company’s decision-making process and a successful


Diagram of Theoretical Framework

The diagram of the theoretical framework hereunder is made in line of the model used for a

PESTLE-analysis. As environmental and technological factors have not been found of

importance to determine the successful implementation of NN’s flexible labor model, the

independent factors that do have been found of relevance are clustered under the group of

political, economic, socio-cultural and legal factors. Furthermore, these groups have been

clustered under more specific mechanisms that define a successful implementation of a flexible

labor model. Finally, these independent mechanisms have been in turn clustered under three

key in this theoretical framework identified fundamentals of a successful implementation of a

flexible labor model – security, flexibility, and cooperation.


31

The successful implementation of NN's flexible labor model in a

given country

Flexibility High job-to-job mobility

Political

High degree of active labor policies

Low degree of government intervention in the market

EconomicHigh degree of human capital at the national economy-wide level

LegalLow degree of rigidity of employment contracts

Security

Financial Security EconomicHigh degree of social

security system

Job security Political

High degree of active labor policies

High degree of policies that foster high quality

education

Cooperation

Trust

Economic

High degree of labor cost flexibility and adaptability at the national economy-

wide level

Socio-cultural

High degree of worker's participation in the company's decision-

making process

High degree of trust-relations between

companies

Willingness

PoliticalHigh degree of willingness of government to develop

a flexible labor market

Socio-culturalHigh degree of willingnes

of companies to develop a flexible labor system


32

Conceptualization

In this paper, an answer will be given to research question whether the flexible labor model as

proposed by NN Group can be implemented in the countries where NN Group is active. This

flexible labor model is a model in which companies from different branches work together to

educate graduates, and after a few years place them into a pool of preferred freelancers with

guaranteed commissions. This model ensures that both employers and employees enjoy a

maximum of freedom of action with the companies’ investments and the workers’ social

security at an acceptable level of safety.

The dependent variable in this research is the successful implementation of NN’s

flexible labor model, whereas the independent variables are the factors that determine this

successful implementation in a given country. These eleven independent variables are to be

found in the theoretical framework and, subsequently, the case study protocol.

Operationalization

The dependent variable in this research – the successful implementation of NN’s flexible labor

model in a given country – is being determined by the list of independent variables as found in

the theoretical framework and, subsequently, the case study protocol. This protocol can be

found in appendix 1. Therefore, in order to answer the research question, this paper will conduct

a descriptive research through performing multiple case-studies. More specifically, the cases

which are being examined are the countries where NN Group is active. By investigating

whether the independent variables are present in the countries where NN Group is active, the

research question can be answered.

The analysis in this paper largely refers to academic literature that is mainly occupied

with the implementation of flexible labor models and the associated consequences. Therefore,

the academic literature is particularly valuable when assessing the degree of social security

system; degree of policies that foster high quality education; degree of worker's participation in

the company's decision-making process; degree of trust-relations between companies; and

degree of willingness of companies to develop a flexible labor system. Also, official

government reports are being thoroughly examined, works that are especially useful in

determining the degree of active labor policies; degree of rigidity of employment contracts;

degree of labor cost flexibility and adaptability at the national economy-wide level; and

willingness of government to develop a flexible labor market. Next to content analysis, the case-

study research will also partly be based on statistical research. Statistical information is


33

especially fruitful when identifying the degree of human capital at the national economy-wide

level and the degree of government intervention in the market.

Yet, due to the fact that there is a lack of extensive information with regards to NN’s

flexible labor model, it is hard to define sufficient and necessary independent variables that

determine the success of the implementation of this model. For instance, it is argued that in

theory a high degree of social security in a given country is necessary to make a flexible labor

model to a success in a given country. However, when it is clear that NN’s flexible labor model

proposes its own social security system exclusively for those employees of the cooperating

companies, it can be argued that the independent variable of social security in a given country

is not relevant at all. Because it’s thus difficult to value the worth of the presence of the

independent variables in general, the conclusions deprived from the research will come to

recommendations and suggestions not solely on basis of absence or presence of the independent

variables discussed in the theoretical framework. The conclusions per case study will be

formulated on the context of the country, when keeping in mind the independent variables that

have been identified in the theoretical framework, and those independent variables that will be

identified when conducting research. After all, every implementation of a flexible labor model

should be altered according to the country’s context (Madsen 17). It is therefore argued that

NN’s proposed flexible labor model should be contextualized relating to the particular

circumstance of the country in question (Sultana 145).

Additionally, finding consistency in measuring the relevant independent variables for

all countries in question is problematic. Although the research committed itself to search in the

same category for identifying the variables, this paper has nonetheless put effort in doing justice

to the various analysed countries and the related differences in culture and society. As a result,

there exists difference among the investigated countries where NN Group is active with regards

to the operationalization of the independent variables. Furthermore, certain variables – in

particular socio-cultural variables – are not able to be measured statistically, and this project in

general is not a statistical research. This paper thus makes use of qualitative above quantitative

research methods, thereby keeping mind the diversity in culture and society of the research

objects. Therefore, this also contributes to the differences in the operationalization of the

independent variables among the various investigated countries.


34

Research Findings


35

Research Findings

Only those countries which have been positively judged in accordance with the research

question will be covered in this project; the research on the other countries will be enclosed in

the appendices.

Belgium

Political

Degree of active labor policies

The Belgian welfare system is a safety net which covers people who do not enjoy a social

insurance (these persons are usually not covered because of insufficient work experience, delay

in insurance payments and so on). If they pass a means test, these individuals can boost their

income up to the determined level of the Minimum Income Guarantee (MIG) at their local

welfare agency. (Cockx 9) In Belgium, workers remain entitled to unemployment insurance

benefits for an indefinite duration. Furthermore, after a waiting for a period of six months,

school-leavers are entitled to unemployment insurance benefits. (Cockx 10) Legislation

stipulates that Welfare Agencies (WA) may employ welfare recipients for them to be entitled to

social insurance benefits. This is commonly referred to as social employment.

Degree of policies that foster high quality education

Belgian education policies are organized at the (linguistic) community level. Higher education

policies have been reformed according to the Bologna process. The reforms consisted of greater

integration and a common organization in three cycles : bachelor (180 ECTS), master (60 – 120

ECTS) and doctorate. (European Network 19) Nearly all universities and colleges, which the

two main sorts of higher education institutions in Belgium, are publically funded. In Flanders

funding is given according to teaching results and research output, while in Wallonia funding

is directly dependant on the amount of students attending in order to encourage high

participation. The underlying principle to higher education in Belgium is that of open access :


36

any student with appropriate degree can go to any university and register in any BA degree.

Since 1996 a national quota was set on the number of students allowed to enroll in medical

specialities.

Degree of willingness of government to develop a flexible labor market

There are great incentives from the Belgian government to flexibilise the Belgian market : by

ensuring that social benefits for being unemployed, the Belgian government intends to

encourage people to move more freely between jobs. (Klau 13) A high level of cooperation

between the government and employers in putting together social security schemes is also

observable. This is due to the fact that both the government and employers realise and work

together towards achieving a flexible labour market. (Klau 34)

Degree of government intervention in the market

Protective labour laws and trade union action are results of direct government intervention and

have had a considerable impact on the Belgian labour market and has determined the

development of the labour relations system. The Belgian economic system is a market economy

with active government intervention in its cyclical and structural evolution. (Blanpain 36)

Autonomy of the social partners, the employers' associations and the trade unions, especially

when engaged in the negotiation of wage agreements, has always been one of the main aspects

of the Belgian labour relations system.

Economic

Degree of social security system

The Belgian social security system is very extensive. People without the Belgian nationality

also are entitled to certain allowances and to social services, although these are strictly

dependent on the conditions under which they are residing on Belgian soil. The Belgian social

security system is financed by social contributions on income of employees. (European

Commission 6) An employer in Belgium pays every between 30 and 40% more for each of

his/her employees into the social security fund. The self-employed can also request social

security, they then also pay a share of their income into the social security fund. (European


37

Commission 8)

Degree of real labor cost flexibility and adaptability at the national economy-wide level

The level of real labour cost flexibility may be affected by institutions present in the labour

markets such as trade unions. In Belgium, despite being divided in different political factions,

trade unions are very strong as more than half of the total labour force is actually unionised.

(OECD n.p.) Another factor which can be seen as very representative of real labour cost

flexibility is that of the real wage rigidity level. As can be observed, real wage rigidity levels

vary in Belgium depending on the type of employment. In the case of jobs requiring higher skill,

one can observe a strong rigidity level, mainly due to the fact that these employees are hard to

replace. (Du Caju 4) On the other hand in the case of temporary or precarious jobs, one can

observe a much lower real wage rigidity level. The wage level in Belgium is especially

representative of real labour cost flexibility because due to the high amount of benefits received

by a worker upon losing employment, changing the wage level is often a good alternate method

of altering labour costs. (Du Caju 33)

Degree of human capital at the national economy-wide level

Belgium ranks eighth among OECD countries for levels of investment in all levels of education,

spending USD 11 028 per student per year compared with the OECD average of USD 9 308.

While the share of private expenditure on all levels of education is at an average level of 16%

for OECD countries, it is at a mere 5% for Belgium. (OECD 1) Tertiary education is especially

affordable when put in relation with the OECD countries average: 10% of private spending for

Belgium while the OECD average is at 32%. The percentage of the Belgian population attaining

tertiary education (35% for 25-64 years olds in 2011) is slightly higher than the OECD average

(31%). It is observable that among the younger part of the population more and more people

are achieving tertiary education (43% for 25-34 year olds). (OECD 1) This means that not only

does Belgium have a substantial amount of human capital, but that amount is increasing. It has

been theorised that part of the reason for this growth in human capital can be attributed to the

economic crisis which pushed more and more young people to continue their education rather

than enter an unstable labour market. (De La Croix 35)


38

Socio-cultural

Degree of participation of workers in the company’s decision-making process

Belgian trade unions are divided in competing confederations with deep political roots. The

largest two are the CSC/ACV (Christian movement) and the FGTB/ABVV (Socialist movement)

with a smaller third movement the CGSLB/ACLVB (Liberal). Despite the divide, unions in

Belgium are able to co-operate and more than half of the total workforce is unionised (3.5

million members to this day and growing). (Fulton n.p.) Although employment law is still

decided on a national level the division between the French-speaking and the Dutch-speaking

communities has an impact on relations between unions. Trade union membership has went up

by 13% between 2001-2010 while the overall proportion of trade unionists remained stable. In

addition to employment benefit and legal services to members the unions in many Belgian

industries are also able to offer members an annual financial bonus paid by the employers.

Belgian trade unions, due to their sheer size, have considerable impact in their companies'

decision-making process including in setting the wage level. (Klau 11)

Degree of trust-relations between companies

Research conducted in many European countries show that two main cultural styles exist when

evaluating trust in industrial relations. Northern countries such as Denmark and Holland follow

the 'Northern model' which consists of low power distance between management and workers

and high trust between them. (Elgoibar & Lourdes 260) Other countries, like Spain and Portugal

follow the 'Mediterranean model' (Hyman n.p.) with high power distance between management

and workers and low trust between them. However in the case of Belgium, due to a variety of

opinions having been found, a clear trend can not be deducted. Trust relations thus basically

depend on the sector and/or organization in question. It is interesting to point out however that

several Belgian unionists have declared upon being interviewed that having trustful relations

with the management is possible as long as it is understood that trade unionists are there to

defend the worker's interst and only that. (Elgoibar & Lourdes 264)


39

Degree of willingness of companies to develop a flexible labor system

A number of main companies are quite willing to make Belgian labour more flexible, and one

way to achieve this is by making use of Belgium's elderly. Delta Lloyd, a prominent insurance

company, came up with a part-time retirement system and a revision of the tax scheme.

Companies are on the eager to exploit opportunities which would make Belgian labour more

flexible. (Contreras n.p.) This is because the tax and pension systems in Belgium do not give

workers much incentive to work. Quite the opposite, many workers actually prefer to retire

before the legal retirement age (65 years old). Although there have been some incentives made

by employing companies in order to encourage workers to stay until retirement age, there is

still much room to make Belgian labour more flexible. (Contreras n.p.)

Legal

Degree of rigidity of employment contracts

Belgium is characterised by strong real wage rigidity and very low nominal wage rigidity,

consistent with the Belgian wage formation system. Except for low earnings close to the

minimum wage, nominal rigidity is essentially absent in Belgium. Several factors concerning

employment and wage rigidity in Belgium are apparent. First, there is higher real wage rigidity

for white-collar workers: as they are more difficult to replace and monitor firms are less inclined

to cut their wages. Secondly, rigidity decreases with age. (Du Caju 5) Thirdly, very low earnings

tend to have a low degree of real rigidity mostly due to the precarity of these jobs. Fourth,

downward real wage rigidity is more prevalent in small firms than in large ones. (Du Caju 6)

Fifth, Belgian firms with low quit rates are characterised by stronger real rigidity. Finally, the

degree of rigidity varies depending on firms' economic conditions.


40

Czech Republic

Political


Especially by the end of the 20th century spending on active labor market policies (ALMPs)

was quite high and these policies were very successful. The main activities by which these

policies were carried out are the following: subsided employment, public works, youth training

programs, sheltered workshops and training programs (Vecernik 54). Nevertheless, “either

because of permanently low unemployment or a lack of energy on the part of labor market

offices”, spending and participation in active labor market policies decreased (ibid 54). And,

according to the OECD, from all its members, spending on active labor market policies has

been one of the lowest in the Czech Republic in the period prior to the economic crisis, and

decreased even further during the crisis (OECD 92). But, with the introduction of the new

government in 2013, increased spending on ALMPs became part of the political agenda. So,

even though spending on ALMPs had been very low, the government of the Czech Republic is

currently aiming to make this of higher importance


The government of the Czech Republic seems quite involved with the provision of high quality

education. The Czech Republic has an education policy that is concerned with the preparation

of students for the future, by high enrolment and attainment in vocational and tertiary education,

so that the needs of students and the labor market can be met. The 3 main policies contributing

to this are:

1. “The strategy of lifelong learning in the Czech Republic (2007), which aims to improve the

match between skills and the labor market” (OECD 8).

2. A new education policy that focusses on the increased accessibility and higher quality of

education, named the new Strategy for Education Policy of the Czech Republic until 2020”

(European Commission n.p.)

3.“The Strategic Plan for the Scholarly, Scientific, Research, Development, Innovation, Artistic

and other Creative Activities of Higher Education Institutions for 2011-15” (OECD 8). The


41

main goal of this strategic plan is to take away the focus from quantitative higher education

towards qualitative higher education (Ministry of Education, Youth and Sports 3).

Taking all these actions together, it can be argued that the government of the Czech Republic

is highly involved in fostering high quality education within its nation.


The Czech government seems rather willing to participate in actions that lead to more

flexibility. As a result of limited increases in employment rates, the government came up with

adaptations in the labor law that should allow for more flexible labor. To give an example, due

to the mismatch between skills of employees and demands of the employers, the government

came up with the Higher Education Act, which was aimed at “increasing the flexibility of

graduates to suit the needs of a quickly changing society and quickly changing labor market

requirements” (Pichrt & Štefko 94). Additionally, in the national reform program is stated that

in order to keep up with the modernizing labor market and employment policies, the country

should behave according to the ideas of Flexicurity (Kwiatkiewicz 8). One final relevant point

relates to the changed labor code in 2012, which enabled “easier modification of working hours

or temporary assignment of an employee to another employer” (European Commission n.p.).

So, it is clear that the government is indeed willing to participate in the development of this

flexible labor market, particularly because the government seems to realize that flexibility

becomes a necessity when it comes to modernization.


The Czech Republic government intervention activities are focussing the currency policy. Their

aim is to strengthen the local economy thus, facilitating export of national products by

weakening the local currency Koruna. In relation to the Euro the Koruna plunged 4.4 percent

in November 2013. By means of printing more money the government aims to increase a

favourable inflation rate and this way currency value weakens (Shedlock 2013). Because of

their communist history reform forces have now demanded a diminishing role of government

interventions and the introduction of a free market (Petit 1995). Thus with exception of their as

mentioned above currency policy, the Czech Republic has relatively few government

interventions in comparison to other European countries.


42

Economic


Czech Republic has a relativly high degree of social security system regarding the employment

protection such as the early retirement pension, but on the other hand it shows weaknesses in

the security implemented by effective activation measures that allow workers who are

unemployed to reenter in the labor market. However a negative aspect about the rigit degree of

social security, is the low flexibility for employers and strickt dismissal protections for

employees, which make the relocation of labor force more dificult (Münich 2006). Additionaly,

a downside of the security system is because of the high amount of pensions the labor tax is

equally high (Feldmann 2004). Within the last years the county’s social security system is

increasingly improving, as well as the retirement age is gradually increasing. In general, the

security and degree of employment, especially for elderly workers, is ensured in the labor

market. An essential flaw in this social security system; however, is that the long-term financial

sustainability still needs improvement, which can be succeeded by adopting further reform

steps.

Degree of real labor cost flexibility and adaptability

According to the labor market flexibility in comparison with the EU-14 States the Czech

Republic has very low flexibility in unemployment insurance benefit duration and the

coordination of wage bargaining as well as a low coefficient of union density and union

coverage (weak role of trade unions) (Michal 10), which is important aspect in the flexibility

of the labor market since unions are often opposing flexibility in employment relations (Münich

3). However, it has a higher flexibility in strictness of employment and protection legislation

than the EU-14 and slightly higher flexibility in tax wedge (Michal 10). For this reason it can

be concluded that due to the high employment security and poor labor market flexibility of the

Czech Republic, there is a high level of unemployment. Nevertheless, as most CEE countries

Czech Republic is on a positive development path towards labor market flexibility ensuring

labor cost adjustments and the reduction of unemployment rate (Eichhorst et. All, 19-20)

(Romih 2008).


43


With regard to human capital it seems that the Czech Republic has an average score. Based on

the target group for the NN model, it is interest to look at university level students, as they will

form the basis for this model. The graph in appendix 2 shows data on entry rates into university-

level education, in which the Czech Republic scores slightly above the average of the OECD

countries, with 60 percent (OECD 29). However, how many of these university students do also

actually graduate? The graph in appendix 3 gives an overview of the percentage of graduates

in the Czech Republic in 2012. Looking at this graph it can be seen that the first-time graduation

rate for the Czech Republic is about 40%, which is again slightly above the OECD average

(OECD 31). Furthermore, it is argued that the Czech Republic has an inherited high human

capital level because they historically emphasized “high quality higher education” (Svejnar 3).

However, with the aim to exploit opportunities for growth, increased spending in human capital

is implemented as a goal of the structural reform programs (IMF 15). So, even though the degree

of human capital in the Czech Republic is quite high, improvement is still desired to keep up

with the needs of the economy.

Socio-cultural


To analyse the participation of workers in companies it is important to look at the type of

organizational structure, which is the internal formation of human resources, work,

technologies and information a company applies. In major Czech companies the classical,

hierarchical organisational structure is still commonly used (44%) (Mládková 266). Normal to

these structures is that, decisions and management tasks are primarily done by top managers

who distribute the tasks, rules, norms and direction to subordinate levels. For this reason, the

decision making process is concentrated on the higher hierarchical level and thus, the

spontaneity and flexibility of workers need for innovation, knowledge sharing and cooperation

is very low and a non-participatory environment is created. Consequently these companies

show a very low level adaptability to the fast changing environment which is often unbeneficial

for productivity. The implementation of these structures are often connected to cultural factors

(Kribikova 2014).


44


Researching the degree of trust-relations between companies in the Czech Republic is quite a

hard task, as there is a lack of data on this factor. There is however an article that discusses

different types of trust as perceived by organizations that operate in the Czech Republic. The

study shows that the two most important types of trust among Czech organisations are: trust

based on knowledge and trust based on relationships. These findings leads us to say that in the

Czech Republic “people tend to trust people who are known to have certain knowledge and

people with whom they have good relationships” (ibid 265). So, out of this it can be argued that

the degree of trust relations between companies is probably quite low, unless these companies

have a good relationship or highly value the particular knowledge of a company. Creating a

trust-relationship between two companies that do not yet have a certain kind of affinity can be

problematic in the Czech Republic.


In the Czech Republic the labor system has relatively low flexibility, which are often drawn to

cultural and historical factors. For this reason, culturally implemented traditions within

companies, employers and employees are not very open and used to change towards a more

flexible labor system (Vecernik 70). Furthermore, internal problems such as the lack of trust of

employees and external factors such as legal restrictions and difficult economic conditions for

firms, hinder a path towards the willingness of a flexible labor system . In general the younger

generation is more willing to accept a more flexible labor system (Kribikova 182). Additionaly

there is more willingness of large companies, instead of small companies, to move towards a

more flexible labor system since they have more financial means and can often implement their

own human recourse climate (Broughton et. al 69-70).

Legal


The employment contracts as they exist in the Czech Republic are generally very protective

towards employees. In a review of the OECD is mentioned that “by international standards, the

Czech Republic has strong employment protection for regular workers but little restriction on


45

temporary employment” (Malgorzata 40). As discussed already in the political section, the

government of the Czech Republic aims at having a more flexible labour market, which would

imply a reduction in the protection for employees with regard to dismissal. Nevertheless, even

though the government introduced a more flexible labour law, “Czech labour law still prohibits

an employer from dismissing his/her employees without a fair reason” (Pichrt & Štefko 92). In

addition, a for this research very relevant change in the labor law, implemented in 2011, is the

reintroduction of temporary assignments. Employers can now “temporarily assign the employee

to perform work for another employer” (Clauweart & Schömann 2). This is a very positive

aspect for the implementation of the NN Group’s model.

Netherlands

Political


Public expenditure on active labor market policies is a relatively high percentage of GDP. In

2011, it was 1.1%, while the OECD average was 0.6%. The Dutch activation model focuses on

inclusion, and “the social security system [is used] as a trampoline from social security benefits

to participation and paid labour” (Vinken and Ester 6). The Netherlands is the first European

country that enforced a “full reintegration market” (Tergeist and Grubb 4). It could be argued

that there are extensive yet ineffective active labor market policies. Currently, the labor market

has continued its recovery initiated in 2013 (The Netherlands(a) 4) focussing on more people

reintegrating in the market. Notably, “the increase was especially seen in groups of people who

found a job without re-integration support: their share in the total job finders increased from 82

to 87 percent” (ibid 25). The total number of people that became employed after or with re-

integration support actually decreased from 89.000 to 75.000 (ibid 25). Low-skilled

professionals were more affected by the crisis than high-skilled professionals. Therefore, it is

arguable that these numbers represent the low-skilled people slightly better.


46


In 2000, the European Union “committed itself to the ambitious objective of becoming the most

competitive and dynamic knowledge based economy [...]” (Jongbloed 3). The Dutch

government, in terms of actual policies, recently established the ‘Quality and Variety in Higher

Education Act’ (The Netherlands(c) n.p.). The Act includes measures that foster high quality

education such as: i) the implementation of the ‘associate degree’ which entails a short tertiary

educational program for people from the upper secondary educational sector. The idea is to

foster a continuation of studies in higher education; ii) a more fair and just payment for a ‘pre-

master’: this is also backed with the idea of fostering a continuation of studies; iii) facilitated

access from upper secondary education to the tertiary educational sector and lastly; iv) more

specialization of universities (The Netherlands(d) n.p.). In an attempt to promote the excellence

of education, “a comprehensive strategy called the Teachers’ Programme (2013-2020) has been

introduced” (OECD(2014a) 11). The main points are attracting high performing students into

teaching programmes and developing schools as learning organisations by engaging teachers

and school boards (ibid 11).


During the 1990s the Dutch government reshaped labor market policies with the aim of creating

more flexibility (Remery et al. 478). The government, together with employers looked for a

more flexible labor market while workers looked for security (ibid 492). As Anderson argues,

“the Dutch experience demonstrates that there is a viable response [...]” (203). The crisis that

affected the Netherlands caused the government to take action with regard to its hiring and

firing regulations (ibid). The governments is aware of the need to reconfigure its policies with

regard to the changing labor market. On the official website of the Dutch government it is stated:

“Employers are looking for a more flexible workforce. Employees want security. The Dutch

government aims at balancing both interests” (The Netherlands(f)).


The current crisis caused some government intervention, especially in the financial sector

(OECD(2014b) 58). Although this is gradually declining “the government holds a substantial

stake in most banks (e.g. the ING) (ibid 58). The government deficit as a % of GDP used to be


47

0.2 in the years 2006 to 2008 before it dropped to -5.5 in 2009. This is currently recovering (-

2.3 in 2013) and in line with the recent crisis (OECD (2014c) n.p.). This is explained by the

Dutch government: “[...Measures had to be taken] since 2008 to stimulate the economy and

cushion the hardest blows. [The government] intervened to protect savings and support

business, industries and the housing market” (The Netherlands(h) n.p.). Appendix 4 shows that

government participation in public and private corporations is slowly reducing in recent years.

Moreover, the OECD discloses data on “the degree to which policies promote or inhibit

competition in areas of the product market where competition is viable” (OECD Statistics n.p.).

It covers state control, barriers to trade and investment and barriers to entrepreneurship. The

Netherlands ranks the lowest in all aspects1, which means a very low degree of government

intervention in these areas in comparison to the rest of the world (ibid n.p.).

Economic


The Netherlands has a history of social security with an inclusive nature (Goud and Fenger)

and is “praised [...] for its ‘flexicurity’ reforms” (Anderson 203). The Ministry of Social Affairs

and Employment aims at offering more security for employers with a flexible contract in 2015

(The Netherlands(k)). From July 2015 onwards, employees that are fired receive a ‘transition

compensation’ under the condition that they have been employed in the company for at least 2

years (The Netherlands(j)). Benefits for non-standard workers are expanded (Anderson 204).

Moreover, the conditions necessary for getting unemployment benefits are defined as such that

both flexible and non-flexible workers can apply (European Commission 23). The Dutch

system is “combining more flexible labor markets with retirement security” (Anderson 204).


The degree of real wage flexibility can be affected by the presence of unions (Babecký and

Dybczak 23). In the Netherlands, “collective labour agreements cover about 80% of workers”

(OECD(2014d) 111). Also, the OECD mentions a “highly coordinated and broad wage-setting

framework” (Gerritsen and Hoj 14). In addition, “the strong centralisation tends to preserve

1 Except for the “Barriers to Entrepreneurship”, where it ranks fourth-lowest.


48

relative wage structures, distorting wage signals between declining and expanding sectors and

thus hampering labour reallocation, putting the Netherlands at a disadvantage in a globalised

world” (Gerritsen and Hoj 14, OECD(2007), OECD(2004)). The effects of the recent crisis in

the Netherlands regarding wage flexibility are expressed in a “(marginally) higher

responsiveness of real wages to real shocks which corresponds to an increase in real wage

flexibility” (Babecký and Dybczak 17). As result of the price deflator of the crisis, the Dutch

experiences an “unambiguous increase in real wage flexibility” (ibid 19).


The Netherlands ranks 4th in the Human Development Index of 2012/13, which includes

education (United Nations). Appendix 5, 6 and 7 demonstrate that there has been an increase in

the period 2002-2012 in the number of BA diploma’s achieved from universities (-of applied

science) as well as in the number of Masters and PhD’s. Besides, the percentage of people with

a high level of education within the age range of 15-64 years for the period 2001-2011 grew

from below 30% to above 30%. Appendix 8 shows that 77% (gross) of the Dutch population is

enrolled in tertiary education in 2012. Comparing this to the world ratio (31 %) and to the

European Union ratio (66%), this is truly high.

Socio-cultural


There is quite some space for the participation of workers in company’s decision-making

process and this is apparently a cultural feature of Dutch society. Stam argues that consensus

decision making in the Netherlands is the preferred way and “the right to participate in the

discussion, to voice one’s opinion, is strongly developed in the Netherlands and is defended

rigorously” (362). According to a Hofstede survey, the Netherlands is characterized by the “[...]

hierarchy for convenience only, equal rights, superiors accessible, coaching leader [...] Power

is decentralized, managers count on the experience of their team members and employees

expect to be consulted. Control is disliked and the attitude towards managers is informal”

(Hofstede Centre n.p.). Moreover, the Dutch Works Council Act defines the employees’ rights

to participation in the organization. Article 25 grants the Work Council the right to “render


49

advice on several decisions” (SER 19) that the entrepreneur is about to make. If the advice is

not followed, the work council needs to be informed with the reasons (ibid 19).


Trust-relations between companies is a hard aspect to find extensive data on. However, research

published by Graydon in 2012 demonstrated that trust between companies in the Netherlands

is very low (n.p.). The most distrust appeared with regard to unknown companies, where only

2% is “very confident” that unknown companies pay their bills (Appendix 9). However, 96%

of the companies that participated believed that trust is essential for good cooperation (n.p.).

Visibly, the crisis highly affects the degree of trust-relations between companies negatively

(Appendix 10).


My findings indicate that the Netherlands has already a flexible labor market in which several

actors take flexibility into consideration. The willingness of companies to develop a system as

proposed by NN Group highly depends on the company itself. The answer to this aspect is not

to be found in the literature nor data. A research done on collaboration between corporates and

start-ups found that 94% of the Dutch corporates think that “collaboration increases their

capacity to innovate” (KPMG 12). However, “in practice, most collaborations are superficial,

[...]collaboration is not yet at heart of the strategy” (ibid 13). With regard to these two types of

enterprises “both think it is particularly important to keep focusing on their own mission” (ibid

13). Moreover, collaborating is one thing, but participating in a flexible labor model as NN’s,

is another.

Legal


Today, the Netherlands has quite a flexible labor market (The United States 16) and the Dutch

government responds to it as follows: On the one hand, the law with regard to firing will be

easier, simpler, more fair and less costly for employers from July 2015 onwards (The


50

Netherlands(e)). There will be ‘fixed firing route’. On the other hand, there is a strengthening

of the legal position of flexible workers (ibid). The flexible workers will receive facilitated

access to a fixed job. Also people working on zero-hour contracts and temporary workers will

receive better rights and there will be better protection against dismissal for payroll employees

(The Netherlands(f)).

Slovakia

Political


Slovakia’s spending on active labor market policies is among the lowest in the OECD. In 2010,

it only accounted for 0.3% of GDP, which was less than half the OECD average (Klein 8). This

is detrimental to the flexible labor market model as high strong and efficient labor market

policies can ensure a better use of the labor force through better matching between employees

and employers, improved mobility and cooperation. Spending on ALMPs has been very volatile

in the last years during the economic crisis, and has therefore not been truly reflecting the labor

market development. ALMPs are mainly financed through EU funding, which explains the low

reactivity of ALMP to labor market developments (Klein 9). In addition, Slovakia spend in

2012 0.69% of GDP on labor market policies, again among the lowest in the OECD. This shows

that there is a lack of synergy between ALMP and LMP, which is detrimental for the Slovakian

flexible labor structure.


In 2011, the Slovak government adopted the Lifelong Learning Strategy (LLS), which ‘aims to

ensure that every citizen has equal access to quality lifelong learning opportunities after school,

during the working process and in the retirement’ (LLS 1). The goals are plenty ranging from

educating young professionals towards the employer’s needs, guidance and counseling services

as well as further development of professional and personal competencies for individuals (LLS

2). These aims are however, not supported by any substantial increase in public spending on


51

education as public spending on education only increased minimally from 3.9% of GDP in 2000

to 4.05% in 2012 (World Bank). This is below the OECD average with 5.4% and 6.3%,

respectively.


Shifting political climates in Slovakia has either relaxed the constraints or increased rigidity to

the development of a flexible labor market. The Labor Code provides the legal framework that

defines employer/employee relations and regulates different labor matters such as

establishment of employment, working hours, annual vacation, etc. It is clearly visible from the

laws within the Labor Code to determine the degree of willingness of the government to develop

a flexible labor market model (Labor Code). Over the years the Slovak government has made

several amendments to the Labor Code. On January 1, 2013, the latest amendment came into

force. This strengthened the position of employees and trade unions while slightly

disadvantaging employers (Futej and Steklacova n.p.). The Slovak government has however,

still in international comparison a flexible Labor Code (Harvan and Machlica 1).


The findings in this section are of limited character as the literature is insufficient. The

Slovakian government did take some anti-crisis measures after the first signs of economic

downturn in late 2008. In the financial sector banks and other financial institutions came under

strict government supervision, while other measures were taken regarding public finances and

the business environment (Buček 205). As the economic crisis increased in magnitude, the

Slovak government’s awareness adapted. Consequently, measures were taken to decrease the

crisis’ negative effect on the social and economic development. These measures mostly

concerned employment support, the business environment and investment support (Buček 206).

In the labor marker, the government listened to increased demand from employers to implement

a flexible labor market regime in an effort to adapt the new economic situation.


52

Economic


Slovakia provides a comprehensive social security system comprising health insurance, social

insurance and a pension savings system. Health care is universal for all inhabitants and is funded

by compulsory insurance contributions paid by employees, employers and the state. The social

insurance system comprises sickness, invalidity, occupational injury and unemployment.

Lastly, the mandatory pension insurance is based upon twin foundations. First, an old-age

pension financed by the state and a pension savings system based on savings in an individual

account (European Commission 4-5). Social security contributions paid employees is around

13.5%, the employers around 35% while the state accounts for the rest (Čechová & Partners 3).

Everyone domiciled in Slovakia is entitled to the services provided by the social security

system.


In times of changing economic environments, real labor cost flexibility helps the economy to

better adapt. In Slovakia, sectoral and company wage settlements negotiated through collective

bargaining have proved insufficient in responding to macroeconomic shocks. This is due to the

regional wage differentiation and the fact that some companies are not covered by the collective

wage agreement (Koske 14). Avoiding significant increases in minimum wages is another way

to maintain wage flexibility. In 2013, the annual minimum wage in Slovakia was among the

lowest in the OECD at around 7000 USD (OECD iLibrary). This minimum wage is, under the

law, set by an agreement between the social partners consisting of the employers, employers,

and trade unions. If an agreement cannot be reached, the government will specify the increase,

however, not to the extent where it can threaten employment opportunities (Koske 14).


Although Slovakia has improved in recent years tertiary education is still lagging behind other

OECD countries. In 2011, the percentage of 25-64 years olds (19%) and 25-34 year olds (26%)

that have attained tertiary education was below OECD averages (32% and 39%, respectively)

(OECDa). Graduation rates, however, have improved significantly and are now among the


53

highest in the OECD. From 1995-2009 the percentage of first-time graduates have risen from a

mere 15% to over 60% surpassing typically strong educational countries such as Denmark and

the Netherlands (OECDb). In numbers, over 71,000 graduated from tertiary education in 2012

(OECD iLibrary). From 1995-2009, Slovakia has experienced an incredible growth in the

percentage of first-time graduates from university level: from around 15% in 1995 to around

61% in 2009. In a similar vein, the annual costs for workers that have tertiary education are at

least 30.000 USD less than the OECD average (OECDc).

Socio-cultural


Slovakia has, in a number of ways, addressed the issue of worker participation. As no national

level collective agreement exist, the principal level of collective bargaining takes place on both

industry and company level by the KOZ SR, which represents around 17% of the Slovakian

workforce (SOURCE). This is the dominant trade union confederation with approx. 99% of the

trade unionists in Slovakia. Only around 35% of employees are covered by a collective

agreement (Cziria n.p.). Both single-employer collective agreements and multi-employer sector

agreements play an important role in forming employment conditions and wages. At workplace

level, employees can, since 2002, be represented by trade unions or by work councils, where

the former is entitled to collective bargaining. The latter can only conclude agreements with the

management in companies without trade union representatives. Local union organization must

have at least three members that, with the employees, are to participate in the creation of just

and satisfactory working conditions encompassing work rules, health and safety issues, changes

in work organization, pay and conditions, etc. (ETUI n.p.).

It is important to notice that all the regulations of workplace representation and

collective bargaining must be in accordance with the legislation in the Slovak Labour Code,

which provides the legal basis for all negotiations. At board-level, Slovak legislation provides

for the representation of employees at supervisory board level in the private sector and in SOEs.

The supervisory board oversees the management board, which runs the daily business. In state

companies, employees have the right to half of the chairs and in the private sector, the right for

employees to be represented depends on the company’s size and legal status (ETUI n.p.).


54


As trust as a concept is hard to measure and no index specifically addresses trust-relations

between companies, my findings have been limited and of varying character. Trust relations are

established and depends on the political situation, economic factors and, most importantly, on

cultural values. A comparative analysis of Slovakia, the Czech Republish, the US and the EU

shows that Slovakia has a rather high inclination of believing traditional authorities, such as

financial analysts and CEOs (Kollmannová 10). CEOs and leaders are the personalized

representation of the company so their trust is playing an important role in public relations and

communication management (Kollmannová 11). One way for CEOs and leaders to build inter-

company trust is by following The Corporate Governance Code for Slovakia (CCCS), which

‘sets up relations within a company as well as the company’s relations with its environment on

the principles of openness, integrity and accountability’ (CCCS 4).


Today, it is paramount that Slovakian companies are working within a flexible labor system so

they can quickly adapt to the changing environments in which they operate. By adapting

Slovakian companies are ‘capable to react to the changed requirements and flexibility and adapt

their organizational structures, establish work sites, create flexible work regimes and implement

distance work’ (Bajzikova et. al. 1). Companies have therefore pushed for increasing flexibility

in the labor market regime, which policy makers have acknowledged thus adding several

amendments to the existing Labor Code.

Legal


Employment contracts in Slovakia are stipulated by the Labor Code (LC) and try to fall under

the main aspect of flexibility ‘easy hire, easy fire.’ The Labor Code opens for flexible and

reliable contracts that regulate the employee/employer relations of hiring and firing and it aims

to find a middle ground between employer protection and business flexibility. Employment

relationships are normally agreed for an indefinite period but since business also have the


55

opportunity of offering fixed-term employment, which can be of maximum two years (World

Bank Group, n.p.). Fixed-term employment terminates on the expiry of the agreed period but

the Labor Code also give opportunity to terminate relationships by mutual agreement, instant

termination, notice of termination and termination within the trial period (LC Art. 59-72). There

have been several amendments to the Labor Code in recent years as it must reflect current the

current labor market situation. Employers demand employment flexibility, thus decreasing

employment security while trade unions want increased employment security at the expense of

flexibility (Bagdanskis and Fodorová 44).


56

Conclusions,

Discussions and

Recommendations


57

Conclusions, Discussions and Recommendations

Belgium

Conclusion

Due to having both an extensive social security system as well as welfare system with many

financial benefits for people without insurance ensures financial insurance for people between

jobs. With high education standards and a growing pool of young people having achieved

tertiary education (graduates), Belgium seems to show favourable conditions for the

implementation of NN’s flexible labor model as far as education and human capital are

concerned. Employment which is not temporary or precarious in Belgium has quite a rigid real

wage level as opposed to jobs with fewer requirements. While the government is actively

intervening in the Belgian market economy, there are great incentives from both the government

and employers to make the labour market more flexible. Since one main trend cannot be

deducted concerning trust relations between companies in Belgium, it has been assumed that

these relations are specific to the firm concerned. Due to the sheer size of Belgian trade unions

(over 50% of the workforce unionised), employees are quite involved in their company's

decision-making process.

Discussion

Although not part of the case study protocol, the degree of gender equality arguably remains an

important factor to take into account when attempting to evaluate the conditions for the

implementation of the flexible labor model as suggested by the NN Group. Indeed, a low degree

of gender equality may indeed constitute an obstacle to making labor more flexible. This is

because labor can hardly be flexible if the movement of labor is restricted by the workers'

gender. This factor has been found relevant for the case study made on Belgium. As estimated

by the World Bank, the female labor participation rate in Belgium is 46,9% in comparison to

59,4% for the male labor participation rate, showing a considerable gap.

In addition, both 'Willingness of the Government' and 'Willingness of Employers' for

more flexible labor have been comprised in the case study protocol. However, the willingness

of the labor force to become more flexible is actually also a very relevant factor in evaluating a

case study country for the implementation of the flexible labor model. In the end, it will be the


58

workers themselves that will determine the success or failure of the model, depending on how

eager they are to take part in a more flexible labor market. A number of factors play a part in

determining the degree of willingness of the labor force : retirement benefits, social benefits,

social security and so on. When looking at the degree of willingness of the labor force it would

be important to break down the results of any survey made on the topic in different age groups.

Recommendation

Given the conditions found in the Belgian labour market, it seems apparent that all things

considered Belgium is rather suitable for implementing the flexible labour model articulated by

NN Group. As it has been articulated in the theoretical framework, the NN model cannot simply

be replicated exactly the same way in all countries where it may be implemented, changes need

to be made. Belgium is no different, although some elements (such as the education standards

and social security) are favourable to the model such as it is, other alterations are necessary.

First is the level of government intervention: although it is articulated in the model that

government intervention and protectionism should be kept at a minimum level it is hardly the

case. Furthermore, the rigidity of high-qualification employment is also an issue that needs to

be dealt with. These issues although significant should not be unsurmountable, given the level

of government and companies' willingness to move towards a more flexible labour force.

Czech Republic

Conclusion

In conclusion, there is divided view on the implementation of the NN model in the Czech

Republic. On the one hand it is possible to implement the model. There is low government

intervention, low trade unions density, high degree of willingness to create a flexible labor

market in order to catch up with the level of western economic markets, interest in high quality

education and there is the demand for high skilled labor. On the other hand, from the side of

the employers and employees, implementation would be more difficult. This is because of a

rooted cultural mentality and the country´s communist history of a fixed labor market.

However, The Czech Republic would be a suitable customer for the NN model, because there

are no legal restrictions on flexible work and temporary assignment recently became


59

reintroduced in the labor law. So the fundamentals are there, the only Impediment of successful

implementation is the mentality of both employers and employees. This is however is a factor

that can be changed, considering that the younger population is starting to get more open

towards flexibility and both employers and employees realize that flexible labor is a way to

compete with the international labor market.

Discussion

Although not part of the case study protocol, an article by Horst Feldmann discussed an

important variable when determining the success of NN’s model. In this article. it is argued that

Czechs “traditionally are reluctant to change domicile” (284). Out of a survey held in the

country it appears that among the interviewees 66.3% of at the moment unemployed persons

argues that he/she is not willing to move for their job. The reason given for this attitude is that

Czechs “traditionally have a very close system of family ties” (Ibid 284). This can be a factor

that makes it harder to implement such a flexible labor model in the Czech Republic. Of course,

this factor is only relevant when the companies that would participate in this particular flexible

labor model are located in different parts of the country, which makes relocation necessary.

But, since this is a likely situation, it is relevant to make a remark about this.

In addition, it is argued that “Czechs are often reluctant to take risks” (Katz n.p.). This

is another factor that makes implementation more difficult, because it is inherited in the Czech

culture that people do not often take risky decisions. A survey conducted among insurance

students (a branch similar to the branch in which the NN Group is working), shows that the

most important career goal of persons that are about to take part in the labor market is job

security (Doyle, Evans and Quigley 1). This highly valued job security is an aspect that will not

be provided by this flexible labor model. So, participating in a flexible labor system might be

considered a risk for Czechs, as it does not provide employment security, and therefore can lead

to unwillingness to participate. To mention another risk that would come along with the

implementation of this model: in the Czech Republic there is a relation between temporary

employment contracts and low employee protection (Kwiatkiewicz 7). Since the model as

designed by the NN Group would lead to more temporary contracts, this can definitely be seen

as a risk, as this will lower overall employee protection. Besides employment insecurity, this

can be seen as another risk because of which Czechs might prefer not to participate in this

system. For successful implementation of the model, the willingness of the people is very


60

important, so one should bear in mind such factors that could be decisive to whether or not

people would like to participate.

Recommendation

Since the government gives already the majority of the fundamentals that are required for

successful implementation, the NN Group should focus on influencing the mentality of

companies and employees. With regard to the degree of trust between companies, it would be

wise to choose companies selectively, based on the fact that they already know each other or

are interested in each other’s knowledge. This could be done by for example interviewing

companies to see with which companies they might be willing to develop such a flexible labor

model. It is very important to raise awareness among employers as well as employees about the

increased necessity of flexible labor, which could be done through specific oriented workshops

and trainings. The timing for implementation seems right, so the NN Group should really focus

on attracting employees and companies by showing the benefits of this model, creating a pool

of human capital which can easily be shared between companies.

Netherlands

Conclusion

Most crucial factors that would make sure a successful implementation of the model are present

in the Netherlands. Next to the high degree of human capital at the national economy-wide level

and the existence of several policies that foster high education, one of the most important

aspects, the stance of the government, is favorable towards the NN model. The labor market in

the Netherlands already has a history of flexibility with substantial social security, and the

degree of willingness of the government is high while the government intervention in the market

is low. Also, the low rigidity of the employment contracts is quite supportive since it focuses

on flexibility while it does not disregard protection for workers. The degree of workers’

participation in the decision-making process is as well quite high and thus allows for

implementation. Points to consider however also exist. Those are the apparently ineffective

active labor policies, the low but increasing degree of real labor cost flexibility, the lacking

trust-relations between companies and the lack of knowledge about the willingness of

companies to actually evolve the model. It is suggested that NN goes for implementation,


61

provided that attention is paid to the recommendations. Moreover, NN´s model cannot be

implemented in its original form due to these points. Therefore, the model should be slightly

modified.

Recommendation

The trust-relations and willingness of the companies are hard to measure. In the end, this

depends on the particular company itself. Therefore, the deceiving outcome of the research

should not be an impediment for implementation of the model. Rather, it is suggested that NN

has some actual conversations or particular interviews in which it concludes on this aspect. It

is suggested that this is done with carefully selected companies with which there already is an

existing link in some way, and that can benefit themselves from the implementation of the

model.

The degree of real labor cost flexibility is a considerable feature NN cannot influence

highly, while it does affect the intended payroll system. Recommendations include an attempt

to lower as much as possible the non-wage labor cost, as this could increase the flexibility and

lower the overall costs in some way. The finding regarding this factor should definitely be taken

into account. However, since the Netherlands already knows a quite flexible labor market, this

should not be a factor that impedes the model from being implemented.

The ineffective active labor policies is again a feature NN can poorly influence.

Although the situation of the low-skilled people is possibly better represented in the findings,

NN should consider having its own active labor policies in order for graduates to feel more

attracted to working within the model. It is of considerable importance since, in the end, the

model will create a pool of freelancers that surely deal with periods of instability and

unemployment. These should cover properly functioning activation networks through which

the trained freelancers will easily assume a new position and diverse, intelligently organized

trainings that will make sure a high degree of job occupation and job matching within the pool.

Slovakia

Conclusion

After analyzing the political, economic, socio-cultural and legal factors in Slovakia, it seems

plausible that the flexible labor model, as proposed by NN, can be implemented. It will

however, take a considerable effort which will be deliberated upon in the discussion part. The


62

political climate in Slovakia is generally in favor of a flexible labor model with a high

willingness from the government. The spending on ALMPs, however, can pose a problem as it

is currently among the lowest in the OECD. The economic factors all seem to be in favor of

model. Slovakia has a well-functioning social security system, high degree of wage flexibility

and significant lower minimum wage than OECD average, and has a relatively well-educated

labor force. The socio-cultural factors also seem to be in favor of a flexible labor market model.

Although trade unions and collective bargaining is at a low level compared to other OECD

countries, workers are still represented at work- and board-level. Companies also seem to show

a willingness to adopt a flexible labor model as it suits their economic interests. The level of

trust-relations between companies is hard to measure but a company that chooses to adhere to

business etiquette and common rules must be assumed to establish trustworthy relationships.

Finally, Slovakia has several times added amendments to its Labor Code in an effort to further

employee protection while at the same time increase the work regime for companies to better

adapt to changing environments.

Recommendation

Although Slovakia poses a good case where the flexible labor model, as proposed by NN Group,

can be implemented there are still some concerns and challenges that must be properly

addressed. Before any implementation can be successfully implemented it is crucial that the

level of human capital in Slovakia is raised. This is a long-term process however, and any results

will be not visible in the near future. In order for NN Group to counter this they can offer

internal educational programs for their graduates at other offices before sending them to

Slovakia. This exchange will ensure that the graduates that finally arrive in Slovakia will have

the needed qualifications and knowledge to work in the Slovak market.

Another important factor that NN Group needs to keep in mind is the degree of worker’s

participation in the decision-making progress. Although only a small amount of workers are

represented by unions, there are still laws in place to secure worker representation at work- and

board-level. In the case of a better sectoral collective wage agreement, NN Group can find

justify paying higher wages because the graduates are significantly less costly than in other

OECD countries.


63

General Conclusion

NN Group wants to know whether it is worthwhile to implement its proposed flexible labor

model in the countries where NN Group is active. As such, this paper has answered the

following research question; can the flexible labor model as proposed by NN Group be

successfully implemented in the countries where NN Group is active?

All the thirteen investigated countries where NN Group is active have one thing in

common; they all highlight the uniqueness of an individual country’s society and emphasize

that NN’s flexible labor model cannot be ‘copy-pasted’. Research has nonetheless resulted in

four positive recommendations to NN Group with regards to the research question. Belgium,

Czech Republic, Netherlands and Slovakia provide according to the research in this paper

fruitful ground for the successful implementation of NN’s flexible labor model. Yet, various

recommendations are posed to foster the successful implementation of this model. On the other

hand, this paper concluded also that nine other countries where NN Group is active are not

suitable for a successful implementation of NN’s model. Finally, as all countries examined are

present in Europe – except Japan –, further study could be conducted in order to assess the

question whether NN’s proposed flexible labor model could be easier implemented in countries

in other continents – thereby perchance discovering new space for operational activities of NN

Group.


64

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65

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Appendix

Appendix 1: Case Study Protocol

Political

- High degree of active labor policies

- High degree of policies that foster high quality education

- High degree of willingness of government to develop a flexible labor market

- Low degree of government intervention in the market

Economic

- High degree of social security system

- High degree of labor cost flexibility and adaptability at the national economy-wide level

- High degree of human capital at the national economy-wide level

Socio-cultural

- High degree of worker's participation in the company's decision-making process

- High degree of trust-relations between companies

- High degree of willingness of companies to develop a flexible labor system

Legal

- Low degree of rigidity of employment contracts


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Appendix 2: OECD entry rates into university-level education

Appendix 3: Percentage of graduates in OECD-countries in 2012


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Appendix 4: Dutch government participation in public and private corporations in 2012

and 2013

Source: Statistics Netherlands(a). “Government Participation; public and private corporations”. CBS, Den Haag/Heerlen. 19 Dec. 2014. Web. 2 April 2015.

http://statline.cbs.nl/StatWeb/publication/?VW=T&DM=SLEN&PA=82891ENG&LA=EN

http://statline.cbs.nl/StatWeb/publication/?VW=T&DM=SLEN&PA=82891ENG&LA=EN


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Appendix 5: Number of Dutch HBO and WO-graduates in the period January 2002 to

November 2012

Bachelor of a University of Applied Science (HBO) x1000.

Bachelor of a University (WO) x1000.

Source: Statistics Netherlands(b). “Onderwijs in één oogopslag.” CBS 2015, n.d. Web. 2 April 2015. <http://www.cbs.nl/nl-

NL/menu/themas/onderwijs/cijfers/kerncijfers/onderwijsdashboard.htm>


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Appendix 6: Number of Dutch Master/PhD-graduates in the period January 2002 to

November 2012

Master/PhD x1000.



Appendix 7: Percentage of people with a high level of education in the Netherlands within

the age range of 15-64 years for the period 2001 to 2011




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Appendix 8: Percentage of Dutch people enrolled in tertiary education in 2012

Source: The World Bank. “School Enrollment, Tertiary (% gross).” The World Bank, n.d. Web. 25 Mar. 2015.

<http://data.worldbank.org/indicator/SE.TER.ENRR/countries/1W-NL-EU?display=graph>

Appendix 9: Confidence that unknown companies pay their bills among companies in the

Netherlands

Source: Graydon Nederland BV. “Results Trust Research.” Graydon BV Amsterdam (2012): 1-7. Print.

Appendix 10: Trust-relations between Dutch companies in times of crisis

Source: Graydon Nederland BV. “Results Trust Research.” Graydon BV Amsterdam (2012): 1-7. Print.


83

Appendix 11: Bulgaria

Political


Employment stability in Bulgaria depends mainly on the employer. There are no direct

protective measures for employment or business. There has been an increase of job-market

flexibility in Bulgaria. The private sector has played an important role in this. Thanks to them

there has been an increase in opportunities for part time employment, self-employment,

temporary employment and multiple job holding (Cazes and Nesporova 2009).


According to a World Bank report from 2013, Bulgarian higher education needs reform. 85 %

of students are dissatisfied with the qualified of education and the same percentage think

university curricula are outdated. The World Bank presented a report with recommendations

for the Bulgarian government in order to improve university education. The Bulgarian

government stated it will adopt most of those recommendations. Unfortunately, it was not able

to find government reports which are not in Bulgarian, which makes it more or less impossible

for me to check this. However, it can be concluded that such reforms take time, and years will

probably pass before the quality has significantly improved (World Bank 2013).


No evidence can be found that the government participates in this process at the moment.

However they have liberalized the economy in a fast pace which gave much power to companies

and which made the Bulgarian labor market relatively flexible (Cazes and Nesporova 2009).

Developing a flexible labor market at the moment is left to the private sector as explained at the

first bullet point.


84


Government intervention is getting lower and economic freedom is getting higher in Bulgaria.

The economy is now the 55th freest economy. Bulguria advance on this list was because of a

better investment environment, improvements in the fiscal outlook, diminished perceptions of

corruption, and low inflation. Business freedom and investment freedom are both on the rise.

Despite these positive developments, which seem to continue in the coming years, Bulgaria is

below the European and regional average when it comes to economic freedom and government

intervention in the economy (Heritage Foundation 2015).

Economic


The public social insurance in Bulgaria administered by the National Insurance Institute

provides cash compensations, benefits, and pensions for: temporary incapacity to work;

maternity; temporary reduced ability to work (reassignment); unemployment; invalidity; old

age; death. Health insurance in Bulgaria is compulsory (European commission 2008). As a

result of the financial crisis, financing gaps exist in the pension system which created trade-offs

with other policy areas. This has to be addressed in the future (Social Watch 2010).


Wage setting is relatively flexible in Bulgaria according to most labour market institutional

features. Wage bargaining takes place mainly at firm level and at individual contract level, with

a relatively low coverage of collective wage agreements (about 14% of employees, Bulgarian

National Bank, 2011). Adjusted bargaining coverage amounts to 30% of employees, which is

the lowest in the EU apart for the Baltic countries (European Commission 2013).


As said earlier the Bulgarian educational systems needs reform as it underperforms and is

viewed as insufficient by Bulgarian students. The OECD has not include Bulgaria in its main


85

datasets but it does figure in a few negative examples it presents. Bulgaria ranks among the

weakest countries in the world when it comes to proficiency in problem solving and

performance in mathematics (OECD 2014). The human capital index ranks Bulgaria lower

than the average of the NN countries. Bulgaria is now on the 56th place (Schwab 2014).

Socio-cultural


Collective bargaining takes place on industry level, company level and municipal level. The

key focus is however on company level bargaining because companies are very reluctant to do

this on industry level despite the government and unions trying to increase this. About 30% of

workers are covered by collective bargaining. Local unions are the key body to represent

worker’s rights. Since 2001 it is possible to elect employee representatives to represent

employees’ social and economic interests, both in relation to the employer and to government.

This has not been done extensively, but has been done in larger organizations were unions are

not present. Although there is quite an extensive framework which outlines workers’ rights, this

mainly implies that workers have the right of information. There are however no rules that state

that representatives or unions should agree before the employer decides on changes, only a

requirement to consult (Fulton 2013)


There is no hard data available which examines trust between companies in Bulgaria. It is

possible to make a judgment on an individual level however. Bulgaria has a 50,9% of

interpersonal trust, which makes it the country with the highest trust in the eastern European

countries where NN is present. Trust in the other NN countries is mostly significantly higher

(Medrano). However it is suggested that there is a natural awkwardness towards formal trust

relations in Bulgaria. This stems from the communist times were there was distrust towards

formal organisations. Informal group contacts are more important in Bulgaria than formal

participation on an institutional level (Pehlivanova 2009). This cultural characteristic might

formal agreements between companies less trustworthy.


86


As Cazes and Nesporova stated the Bulgarian labor market is already relatively flexible. The

reforms after communism have made the market flexible and decreased employment protection

and income security. This has created more freedom for employers to react to internal and

external shocks due to increased labor flexibility. This has also led to companies being able to

keep labor costs low and survive on that basis. Although these things can and have had negative

consequences for employees they have been positive from the perspective of the companies and

employers, and developing an flexible labor system will therefore be welcomed by companies

(Cazes and Nesporova 2009).

Legal


Protection against dismissal from a job applies to special groups of people in Bulgaria. For

example: Pregnant women, people with certain medical conditions and mothers with children

who are younger than three. The General Labor Inspectorate executes legislation in this respect.

In 2001 a regulation was adopted which made it easier for employers to terminate contracts

without having to face significant costs (Belokonski 2012). The employer does not have to give

justification for the proposal to terminate a contract. The employer does have to offer a

compensation which is minimum four gross monthly remunerations (Cazes and Nesporova

2009).

Discussion

In the theoretical framework, there is no variable of demographic developments included.

Considering that Bulgaria has one of the fastest ageing populations of the EU and the fact that

the population is declining quite fast due to migration it might be a variable which is of

influence on the decision of NN. NN off course search in a large pool of highly educated

young people and migration might create a brain drain which is negative for the country and

its business


87

Conclusion

It seems that Bulgaria is a country were the model can be implemented on the basis of the labor

market itself. Bulgaria has a very flexible labor market were the companies have lot of freedom

to decide on issues like wages, contracts and labor policies. Economic freedom in Bulgaria is

on the rise and this will likely proceed in the coming years. This said, Bulgaria is still under the

average in terms of economic freedoms compared to the other NN countries. Companies also

have a lot of freedom in determining policies within in the company and there is little real power

the government and unions have to influence decision making within companies legally. These

factors can all be seen as welcoming for NN to adopt the flexible labor market. There are

however some important factors present which are negative for the implementation of the model

and can probably not be directly influenced by NN. Education in Bulgaria needs to be reformed

greatly and there are no indications that this will be a speedy process. Also there are some

concerns about trust relations in Bulgaria. It is a socio-cultural characteristic that those are

mainly informal and on a personal basis. The distrust for formal and institutionalized

agreements in Bulgaria might make it risky to engage into formal relations with other

companies and individuals. All in all , it would be advised to NN not to implement the model

in Bulgaria. The low human capital and the problems in higher education can have a very

negative influence on the NN model. It seems that this are problems which will not be resolved

in the near future. Although other conditions might be favourable for the model, it would

unfortunately be not the advise to implement it in Bulgaria.

Appendix 12: Greece

Political


The degree of active labor policies in Greece was relatively low up until 2010. The Greek

government did introduce just a few policies to stimulate employment in the private sector. In

2008, at the beginning of the recession, Greece spent about 0,12 % of the total GDP on active

labor policies one of the lowest in the whole European Union. The spending did increased in

2010 when it accounted on about 0.2 % of the total GDP, but it still accounted on less than half

of the EU28 average Employment and business start-up incentives take the biggest part of this


88

expenditure. Even though the NN model might call for more active labor policies, the recent

changes emphasis a development that can continue in the near future (Theodoropoulou 1).


Higher education in Greece is mainly divided between Universities and Technological Institutes

(TEIs), which have both the same constitutional provision and administration. There are in total

23 Universities and 16 TEIs and they are all financed by the state as established by the Greek

constitution. Tuition fees, ancillary fees, and textbooks are provided free of charge to students

and meals and dormitory costs are subsidized (Prokou 51). Yet, funding to high education

institutions are not as high as the European average. Furthermore, legislation restricts on how

universities can use their funds, making it a very static system that cannot evolve in the short-

term.


The government took initiative to improve the matching of workers and vacancies and to tackle

long-term unemployment (Theodoropoulou 1). However the first adjustment program was only

introduced in 2013, when the unemployment situation already reached high levels. The main

aim was to facilitate the mobility of workers across sectors and also different occupation, hence

increasing the flexibility of the workforce. Short-term public works were introduced as a

temporary measure of emergency for long-term and young unemployed. Private businesses are

also incentivized with youth vouchers that should promote the training of young people

(Theodoropoulou 1). Although, the active labor policies seem to be lower than other countries

of the European Union, the Government showed a high commitment in the implementation of

new regulation that both allow an increase flexibility of the workforce and boost employment.


Greece intervention in the market can be explained by the degree of taxation, tariffs, and barriers

it imposes. The top individual income tax rate is 42% and corporate tax is 26%. Public

expenditures account of 58.5% of the total domestic output and this underlines the significance

of government intervention in the economy. Nevertheless, public expenditure decreased


89

substantially because of the recent austerity measures. Being part of the EU, Greece is relatively

open to external trade, even though some non-tariff barriers exist. Greece has some barriers in

order to protect some professional services (Greece (a) 224). Overall, government intervention

in the market decreased since the beginning the crisis, due to the high budgetary deficits and

previous accumulated debt of 173% of the GDP (Greece (a) 223).

Economic


The social security system, hence unemployment benefits, insurance and assistance, is not very

effective in Greece. The low coverage of unemployment is mainly due to the high demanding

eligibility conditions (Theodoropoulou 1). The new policy of the Greek government in 2010

saw to reduce the costs of the social security system by decreasing the unemployment insurance

benefits. Additionally, an unemployed worker could only claim for 4 year unemployment

benefits and the benefit itself was reduced from an average €454 to €360 a month (Labour

Market Information – Greece (a) 1). It is also important to mention that support from family

constitutes an alternative and important role as a form of social protection. Even though social

security is compulsory, its benefits are only available to those who are registered and

contributing to the social security system. Contributions are paid by the employer and the

employee or by the individual if they are a self-employed worker or business owner. Social

Security covers the risks of old-age, invalidity, death, accidents at work and diseases, sickness,

maternity and unemployment. The state also contributes with subsidies to social insurance

institutions (Your Social Security Rights in Greece 6). Yet social security remains relatively

low.


Since the crisis, the administrative extension of the sector-wide salary arrangements has been

suspended. Firm-level collective agreement now prevails over occupation-level agreements.

Legislative changes, such as Act No 2024/2011, permit so-called “association of persons” to

sign company level collective agreements with firms, provided that 60% of the employees

belong to them. This means that real labor cost flexibility and adaptability is increasing, as wage


90

adjustments do no longer need to be discussed through the bigger trade unions (“OECD

Economic Surveys: Greece 50)


The centralized state-education and the lifelong training programs provide a equal educated

workforce which is an opportunity for a high degree of human capital. In fact, in 2012, 27% of

the adults had attained tertiary education, which signifies an increase of 2% since 2012 (Greece

141) . Especially young people enrolment increased as in 2012 35% of the Greek citizens

between 25-34 years old completed a tertiary education. This is positive for the NN model as it

gives a pool of young skilled people (Greece (b) 143).

Socio-cultural


The collective barging participation rate in Greece is up to 65%, which is actually high if

compared to the countries where NN is present. Collective bargaining takes place between an

association of employers and trade unions. This high rate has been triggered by the fact that

Greek government is in need of structural reforms due to the economic crisis. However, the

participation rate in trade union is relatively low, namely 25%. This reduces the leverage

workers have within the companies (Greece (c) 1)


Unfortunately there is no real indicator that can give a clear account on the trust relations

between companies in Greece. However several facts can draw to the conclusion that the current

economic crisis tends to create distrust as a matter of protection. On the other hand, new

initiatives in order to increase efficiency and growth are certainly welcomed (Το ευέλικτο

ωράριο, μονόδρομος για την ανταγωνιστικότητα 1).


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A study carried out by Cornerstone International shows the willingness of the Greek companies

to adapt a flexible labor model. The results show that 91% of the companies asked, think that a

flexible model, especially with regards to working hours, would not halter productivity and

efficiency. There are some companies, which are cautious in wanting to implement such model,

as they fear to be exploited by the workers. Nevertheless, a flexible labor system is highly

considered and appreciated (Το ευέλικτο ωράριο, μονόδρομος για την ανταγωνιστικότητα 1).

Legal


Greece is one of the countries in Europe with the most restrictive Employment Protection

Legislation, which however is starting to change since the crisis. Reforms in three measures

took place, since 2011. The first measure aimed to make it easier to fire workers, such as

reducing the cost of dismissal and reduce the time for providing the worker a dismissal notice.

The second measures aimed to increase the use of temporary and long-term contracts. This will

be done through the introduction of sub-minimum wages, especially for the younger people.

The third measure should increase the flexibility of the working time arrangements. The

flexibility of time should promote the use of regular contracts and incentivize the employer to

hire more workers (Theodoropoulou 1).

Discussion

Further points that could be discussed within the debate about the adaptability of the NN model

are several in the case of Greece. For instance, homeownership, which in Greece reaches 80%,

decreases the flexibility and mobility of the worker. Not to mention that the strong cultural

tradition of family connection also plays an important role (Labour Market Information –

Greece 1). The degree of gender inequality is also an important point that still should be

discussed within the NN model. For example, if maternity leave is low in a country then the

female employee’s job security might be at a greater risk. Additionally, the discrimination based

on gender can decrease the quantity and variety of human capital a country could offer. A final

important suggestion that towards the NN model is that it needs to be open to changes. In the


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case of Greece, the model could implement a social security system on its own, where

companies work together in order to assure employees an adequate unemployment benefit. This

increase the cost of the model and therefore further research has to be done.

Conclusion

The economic situation in Greece is one of the biggest issues that NN would find in its way if

they want to implement their model. Even though reforms are on its way, it is difficult to predict

which form the factors mentioned in this case study will have in the following years. The

government is trying is certainly trying to attract business and boost employment and the

rigidity of employment is decreasing. The NN model might be an attractive solution to the

Greek government and business, as a new alternative solution in order to avoid high

unemployment and brain drainage from the country. In conclusion, as the situation is now, the

NN model cannot be implement in Greece, especially because of the low social security system.

However, the country should be kept under further analysis, as current events might also play

an important role for the future.

Appendix 13: Hungary

Political


The Hungarian Work Plan implemented in 2012 strengthens ALMP promoting employment for

the unemployed, disadvantaged and inactive people. The expenditure towards the enhancement

of ALMPs has risen by 20%, due to available European Social Fund and government budget.

The government has also introduced housing allocation for people who commute to their jobs.

This is available for 18 months for people who travel over a 100km radius. Improving youth

employment and their integration into the labour market has also been a priority for Hungary.

Furthermore the START program for public, low skilled workers provides. “In accordance with

2012 country - specific recommendations, Hungary strengthened the active labour market

measures aimed at promoting the employment of the unemployed and the inactive” (62:2012).


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The Hungarian education system has undergone several reforms. The government implemented

policies that prefer vocational school graduates over high school graduates. Currently the

government wants to cut the available “not sustainable” university courses which, according to

some ministers, do not create any value, such as media-marketing, philosophy and literature.

The policies and the wage pyramid are in favour for those who have a degree in phzsics, IT,

chemistry and engineering.


The new Labor Code adopted in 2012 is an ambitious program which would like to create the

most flexible labor force in the world by creating 1 million new jobs by 2020. The government

gives more focus on full employment than job quality. However, the new law gives more power

to the employer and less to the employee. It is a general trend that most employees are not part

of a trade union, which would give more leverage to the workers, since the wages and working

hours are all centralized. To conclude, there is great willingness from the government to create

a flexible labor force and a labor market.


The government’s intervention in the market has been an active and conscious decision to

protect people from accumulating too much debt. With the sectorial and bank taxes the central

budget has been increased. Intervention went as far as aiding the people who became indebted

in foreign currency, where there is a possibility to get compensation from the bank and a total

rescheduling of loans. So far the macroeconomic policies have contributed to one of the biggest

rise in GDP over 3%, inflation around 1% and budget deficit lower than 3% which is the criteria

to get out of the Excessive Deficit EU Procedure. The government also paid back the IMF loan

during their second term and now focus on economic development.


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Economic


Current government policies want to initially phase out social benefits on the basis of

unsustainability. The economic priority is to create full employment in 10 years and to give

everyone the availability to work. For low-skilled workers the government created the public

work program, where the employed earn lower than the minimal wage. The government also

has a great emphasis on employing roma people and starting various agricultural projects to

boost the economy.


Wages in Hungary have risen in the biggest ratio within the EU, however wage flexibility is

sensitive to economic shocks. The 2008 crisis has decreased the real wage flexibility however

the decrease has been unambiguous. The wages could be capable to reach the EU average within

50 years. The policy on wages has fallen within the scope of the government. This means that

only the ministers will be able to raise wages and keep them competitive in the long term.

“Hungary ranks among the countries with the lowest degree of downward real rigidity” (Katay

4) . The low real rigidity and moderate nominal rigidity makes Hungary a country with high

wage flexibility (Katay 5).


The investment in human capital still needs a long way to go. Since more emphasis is put

towards the people who work in the real sciences field and physical labor, economists say that

the productivity of the Hungarian labor force is one of the lowest within the EU-28. Human

capital needs to be strengthened by more and better jobs. Incentives need to be given in higher

wages to overcome the burden of Income inequality. Since half of the taxpayers live under the

minimum wage it is important to financially support the less advantaged. Hungarians work one

of the longest hours too in Europe (around 1880) whereas the Dutch only work 1300.

Productivity can be overcome by radically raising the minimal wage and providing a sustainable

framework for organizing labor.


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Socio-cultural


According to the study made by IBM and the Institute of Social and European Studies, the

workers are more likely to be left out of the decision-making process. The study states that the

anonymously made decision behind doors only strengthen the counterproductive mechanisms

that lead to a negative relationship between employer and employee (Miszlivetz et al. 206).

Employees often do not receive adequate information when a decision is made by their

supervisors. Hungarian workers feel that the foreign companies only exploit them while lacking

a form of cooperation (Miszlivetz et al. 57).


Unfortunately there has been no data on trust relations between companies but only between

employers and employees. The previous study says that the CEOs of multinational corporations

see Hungarian workers as looking for loopholes, under motivated and do not take any personal

responsibility for their actions (Miszlivetz et al. 56). Workers would often not act even if their

interest are at stake and would rather accept unfavourable decision. On the other hand the

Hungarian workers see the MNCs as lacking an understanding of the work culture and

exploiting cheap labor (Miszlivetz et al. 59). The research concludes that to change the work

culture, a deep structural and educational reform needs to be a political priority (Miszlivetz et

al. 206).


The Hungarian Labor Market Report by several author, describes a high degree of willingness

in creating a flexible labor system. Companies enjoy a high degree of flexibility when it comes

to the regulation of elements such as holiday and recreation possibilities for employees (Rigó

208). Laszlo Neumann distinguishes numerical and functional flexibility. The former allows

flexible firing and hiring along with work time patterns, whereas the latter allows employers

for flexible job rotation with multiple skill workers and the flexible training and improvement

of employees skills (Busch et al. 288)


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Legal


The right to fire and hire employees has been facilitated by the new Labor Code implemented

in 2012. With regards to the flexibility of individual employment, the new law makes it easier

to „change the quantity of labour” (Busch et al. 291). The new labor code intends to radically

increase the flexibility of workers to the detriment of social security. Since the working hours

and wages are also centrally defined by the government workers and unions have little to not

say on labor policies such as contracts. The MNCs provide a individual contracts. The contracts

are in favor of families with children where working hours can be reduced by half until the child

reaches the age of three. (Busch et al. 292). However workers may be dismissed under different

forms of unpaid leave and employers are not forced to consult with trade unions when

dismissing workers (Busch et al. 292). Thus the new Labor Code gives more power to the

employer to the detriment of labor unions and employees.

Discussion

There are several factors that are important to Hungary when determining the implementation

of the model. The biggest problems are the economic and social factors that need to be changed

to ensure the success of flexicurity. A letter from the statistical office stated that 36% of all

households were living below the living wage2 in 2013. The people in poverty can not acquire

professional skills and usually their social status determines the outcomes of their future. To

ensure that people will be motivated for the model the minimum wage must be raised

significantly. This would also increase consumption and high productivity.

Second of all, the trade unions must have more bargaining rights for workers to ensure

the equilibrium between employer and employee, since the current legislation favors the former

to a greater extent. Companies must ensure professional language and skills training for

employees. The hierarchical environment within firms should also be changed to a form of

partnership (Miszlivetz et al.:198). The dual-training system has been promoted by the

government to ensure the proper training of engineers and mechaniciens. However there should

also be a greater partnership between the humanities graduates and governmental actors. Only

2 http://kimittud.atlatszo.hu/request/letminimum-alatt-elokrade-szama-magy


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an interdisciplinary approach can ensure that skills are transferrable from different sectors and

that they can be constantly tested. All in all, the legal and political factors highly promote a

flexible workforce.

Lastly, according to the Gender Inequality Index Hungary still lags behind the EU

average which received 54 points. Hungary overall received 41.4. At least a quarter of women

have dealt with sectorial segregation, where only 6.2% of men felt the same. 5% less of women

have a more flexible working time than men but more women receive training at work. A study

by the Equal Treatment Authority presents a 15% average wage-gap between men and women

(2011 16). Women are still underrepresented in political and economic positions and suffer

from discrimination at the workplace according to the Gender Equality Index.

Conclusion

Analyzing the socio-cultural, economic, legal and political factors above, the flexible labor

model in Hungary cannot be implemented. Even though the legal and political factors are

positive in the sense that they greatly help the establishment of a flexible labor force, the other

two factors still need improvement. The socio-cultural and economic factors can only be

developed by long-term policies that cannot be measured immediately. Since the political

climate changes quickly from left to right there is no consistency on policy making. The

Hungarian work-culture also needs enhancement. Changing a society’s perspective towards

work can only be facilitated by proper education and political will. There needs to be a lucky

constellation of factors to receive a positive outcome. It is not impossible with hard work and

willingness.

Appendix 14: Japan

Political


Japan has a polarized labor market in which there is extensive liberalization of the market for

non-regular workers, whereas it has an elaborate system of protection in the market for regular

workers (Song 28). This is because firing regular workers who worked in a company for a


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longer time is more difficult due to the high level of severance pay as well as compensation

requirements for the employers (Song 25). In addition, the regulations regarding employment

conditions regarding non-regular workers were more liberalized (Song 26). Therefore, the

current duality in the Japanese labor market seems to support regular workers more than non-

regular workers.


Already in the 1990s, policy makers in Japan have enforced various substantial amendments on

higher education which included among other things improving quality as well as creating

efficient and effective higher education (Huang 1430). Furthermore, the aim of these

amendments was to make sure that every university is forthcoming to the demands of society

and to develop further cooperation between universities and industries (Huang 1431).

Therefore, a high quality of education is present in Japan.


Although not much can be found on the willingness of the Japanese government to develop a

flexible labor market, Japanese society is challenged by the aftermath of an economic slump,

the creation of industries which can compete internationally as well as the development of

industries that match their ageing society at present (Ebisuno 2). Therefore, Japanese policy

makers stress the need for ‘’reallocation of labor to grow industries without causing

unemployment’’(Ebisuno 2). However, the Japanese government as well as employers,

employees and even the judiciary seem to maintain their support for the lifetime employment

system (Keizer 1524).


In addition, the Japanese government has hardly changed employment protection for regular

workers, but instead focused on the liberalization of employment and working positions of the

non-regular workers (Song 50). Therefore, there still exists a major duality in the Japanese

labor market regarding the situation of regular and non-regular workers.


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Economic


In Japan, there is not really big role for unemployment compensation within the social security

system, especially for non-regular workers. The compensation regarding unemployment is

often decreased because of pension and medical insurances (Kitazawa 124). Therefore, being

unemployed can be considered as a unfavorable position in Japan. In addition, policy makers

still support the maintenance of regular employment as the most important ‘’social safety net

for workers’’ (Song 73). Furthermore, a substantial reform known as the Employment Insurance

Program in 1974 supported several labor market policies contributing to learning new skills and

alternative employment opportunities only for regular workers (Song 72).


Regarding lifetime emplotment in Japan bonuses that are given in June or July and in December

form some kind of wage flexibility because these are not set in advance (Flath 135). Usually

the amount of bonus that is paid around these times is somewhere between one-fourth and one-

third of the total labor earnings (Flath 135).It not only provide the employees with something

to look forward to, but it also enable employers to dissuade workers from quitting (Flath 362).

Therefore, the bonuses that are given to lifetime employees can be considered as some sort of

wage flexibility. In addition, wages of non-regular workers do not increase as they get older as

opposed to the seniority-based wage system of the regular workers (Steinberg and Nakane 7).


Japan has a high level of human capital regarding tertiary graduates. Between 2000 and 2012

the amount of adults who enjoyed tertiary education increased from 34% to 47% (OECD 2014).

In addition, 80% of people that hold a tertiary education degree are employed (OECD 2014).

This indicates that there is a considerable amount of human capital available in Japan. However,

this amount could be higher. Whereas the amount of women who have a tertiary qualification

between the ages of 25-34 years rose from 49% in 2000 to 61% in 2012, only 69% of women

with a university or advanced research degree are employed (OECD 2014).


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Socio-cultural


In Japan, workers are involved in the decision-making process in a company through the

organization of formal as well as informal meetings in which a worker can express demands or

suggestions and where management can put forward the needs and policies of the company

(Taplin 107). Workers are involved in this decision-making process because it is in their interest

to maintain their career which they built on inside the company (Nakamura 290). Meetings

include long discussions as well as short talks among employees (Stam 361). These types of

meetings can, therefore, be considered as a two-way style of communication because everybody

in the company can be included in these talks. In addition, during these meetings different topics

can be discussed in order to improve the company, such as working conditions, working

schedules as well as certain policies but, there is almost no bargaining in wage issues (Taplin

107). Whereas the workers’ demands and suggestions are taken into account, the eventual

decision-making is done by the top managers of the company, because these people will

eventually have the authority and responsibility of the success of the company (Stam 361).

Moreover, the main objective of the company’s organization is to inspire loyalty from the

workers and to establish an integrated company culture (Taplin 108). Additionally, education

and training provided to the workers within the firm are not only supporting the further

development of workers, but are also strengthening their ties to the company (Inoue 41).


According to Hagen and Choe, in the case of trust one can expect another to keep his or her

promise and another to cooperate (590). Whereas Japan is often regarded as one of the leaders

in cooperation between companies, Hagen and Choe identify various sanctioning mechanisms

that contribute to the perceived high level of trust in cooperation between firms in Japan (593).

For instance, contracts provide some kind of assurance that companies will not be cheated on

by other companies (Hagen and Choe 598). In addition, there also exist social sanctions which

prevents cheaters from circumventing their responsibilities, because cheating will result in

social as well as economic exclusion (Hagen and Choe 595). Furthermore, Kuwabara et al

regard Japan as a low-trust society compared to the United States (348). In addition, monitoring


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and the sanctioning system provide the confidence for Japanese companies to cooperate with

each other (Kuwabara et al 356).


Although there is not a vast amount of information on the actual willingness of the companies

to establish a flexible labor system in Japan, Inoue provides some arguments as to why Japanese

companies might not favor a flexible labor system in which human resources are exchanged

between companies. A large number of Japanese companies provide an education and training

system in Japan. This system of education and training within lifetime employment is for

different kinds of employees within the firm, new as well as old employees, lower as well as

higher placed workers (Inoue 36). Japanese companies consider this type of system as a long-

term investment for the development of their human capital (Inoue 36). It is, therefore, unlikely

that Japanese companies are willing to share their human resources with other companies.

Furthermore, because of the investments made by the companies it is in the company’s interest

to keep the trained employees within the firm for their whole career (Inoue 41). Other reasons

for the employers to maintain this lifetime employment system include the ability to plan their

human resources on a long-term, adaptation of the employees to the company’s traditions and,

therefore, obtain loyalty, and it provides a harmonious workplace (Inoue 42).

Legal


As opposed to France and Spain, Japan has less stringent employment contracts for non-regular

workers, whereas it has stricter regulations regarding regular contracts (Masui 373). However,

when it comes to hiring a worker, Japan does not have specific legal requirements to the form

of the agreement, but it should include some type of agreement on the working conditions

should be handed to the workers (Emden, Heuvel and Labat-Oliveau 201). When it comes to

firing an employee, the worker needs to be notified 30 days before the dismissal and an

employer needs to have an ‘objectively reasonable ground’ as to why he or she wants to fire

this particular worker (Emden, Heuvel and Labat-Oliveau 206).


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Discussion

Whereas there are already many different factors included in the case-study protocol, the factor

regarding gender inequality may influence the success of the implementation of the flexible

labor market model by NN Group to some extent. Whereas there is an increase in women

participating in the educational system, there is still a noticeable pattern involving women not

continuing their career after giving birth (Shirahase 47). Only one third of the mothers start

working again after giving birth (Shirahase 47).

Source: Shirahase page 46. Trend in female labor force participation by age group (%). The

so-called M-shape pattern.

This might be an important obstacle to keep in mind for NN Group when dealing with the

female labor force in Japan, because female workers might not return to the company after

giving birth. In addition, Japan has a low labor force participation among female university

graduates (Shirahase 190). Moreover, the role of the full-time housewife is regarded in a

positive light (Shirahase 191)


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Conclusion

In Japan, there are amendments made in order to create more efficient and effective higher

education contributing to a possible more educated workforce. Furthermore, workers enjoy the

involvement in decision-making processes within companies through formal and informal

meetings discussing various topics relating to their working conditions. Whereas there are a

few factors that can contribute to the success of the implementation of NN’s flexible labor

model, there are still some factors that will make it very difficult for NN Group to implement

it. For instance, being part-time employed does not provide the same security as being fulltime

employed causing a duality in the employment system in Japan. The proposed model of NN

Group wants to create a pool of specialized and trained employees that are shared between

companies. However, this might not work in the case of the current duality in Japan’s

employment system. Another stringent factor possibly hindering NN Group’s model includes

the trust between companies. Whereas it may seem that Japan is a high trust society, this is only

due to certain social and economic sanctions that contribute to a higher confidence in the

cooperation between different companies. In addition, this is part due to lifetime employment

of workers, because the longer a worker works at a company the more trusted he or she is within

the company. Moreover, companies which have a lifetime employment system invest further

education and training of the employees in order to keep the workers within the company and

to create an integrated work culture. Therefore, the implementation of this model by NN Group

in Japan might not be recommendable.

Appendix 15: Luxembourg

Political


Luxembourg authorities realize that flexicurity requires a lifelong learning system that is

sufficiently effective to ensure the adaptability and employability of workers. Therefore, in

2006, the government adopted a bill on continuous vocational training. Career guidance and

initiation courses are to form an integral part of the education and training system. However,

active policies such as vocational training of unemployed in Luxembourg still only account for

only 9 percent of the country’s labor market policy, against 43 percent in the EU (SGI 1). The


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Luxembourg government puts emphasis on passive rather than active labor policies. Between

2007 and 2010 Luxembourg increased labor market policy expenditures by more than 46

percent. However, Luxembourg’s public expenditure allocated to active labor market policies

still averages at 0.5 percent of GDP in recent years, which below NN Group country average

(OECD 2013 1).


The financial sector alone accounts for approximately 36 percent of Luxembourg’s GDP. To

respond to the high educational demands this industry poses, Luxembourg authorities

emphasize high quality education (CIA Factbook 1). In recent years Luxembourg’s educational

policy shifted towards a focus on student performance and progress in classrooms. The Ministry

of National Education and Vocational Training (MENFP) has increased the degree of autonomy

for schools to increase the level of competition among educational institutions. However, the

school system remains highly centralized with the MENFP responsible for the planning and

administration of all teaching in public schools (Shewbridge 3). The MENFP directly appoints

school leaders in public schools. Each school is under the authority of a local education

authority inspector, who monitors the school’s compliance to laws and regulations and reports

to the MENFP (Shewbridge 3).


Compared to other OECD members, Luxembourg’s labor market is highly regulated. However,

especially since 2006 the government has made efforts to liberalize the labor market. The Act

of 19 May 2006 created more flexibility in regards to aspects of the organization of working

time. Under certain conditions guaranteeing time off in lieu, the employers and trade unions are

allowed to depart from the general rules on break times, daily and weekly rest periods, the

extent of night work and the reference period (SGI 1). The ‘job retention policy’ of 2010 aimed

to find alternative solutions to redundancy, and started the latest round of labor market

liberalization, which is still in process. The measure aims to provide for a higher amount of

available trainings, more part-time work, and easier changing of work posts. Furthermore,

Luxembourg authorities gradually open the labor market for foreign workers. Only 29 percent

of the workforce is Luxembourg nationals, while more than 43 percent is trans-border

commuters. This circumstance guarantees high flexibility and short-term fluctuation in the


105

labor market. Because of the steady growth of the resident population via a high inflow of

economic migrants and corresponding national employment, the unemployment rate in

Luxembourg persisted under 7 percent throughout the recent financial crisis (STATEC 1).


The Luxembourg government preserves the right to provide support to the Luxembourg

financial system via government investments, government guarantees, and, increase of the

depositor protection scheme. During the financial crisis the government intervened heavily to

back the Luxembourg economy. It provided for several of socio-economic, tax and

environmental measures aimed at combating the negative effects of the economic crisis. These

measures allow Luxembourg authorities to provide financial assistance to businesses by giving

any business up to 500,000 Euro of capital support, and guaranteeing up to 90 percent of bank

loans entered into by the relevant businesses. The total amount of such guarantees available is

limited to 500 million Euro (Bloomingdale 6).

Economic


Luxembourg provides a comprehensive social security system. It offers extensive protection in

the case of sickness and maternity, accidents at work, old age, unemployment and family

benefits (BSP 41). Both resident and non-resident taxpayers exercising employment activity in

Luxembourg must contribute to Luxembourg’s social security system. Social security

contributions are withheld by employers at a rate of approximately 25 percent. The employee

contributes circa 12 percent, while the employer's contribution the rest. Thus, in Luxembourg,

NN Group’s model must contain agreements with affiliates that regulate which company must

contribute to social security payments of employees in the working pool (European

Commission 1).


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Luxembourg is one of the few countries within the OECD to maintain a system of automatic

legislated wage indexation, so that the wages of all employees are automatically linked to cost

of living. This system was temporarily suspended during the global financial crisis but came

back into operation in 2010. The system is problematic because it locks in price rises that stem

from negative supply shocks. This reduces the competitiveness of local firms and prevents

downward adjustments of real wages in firms where productivity has declined (OECD 2010

76). Consequently, Luxembourg’s wage indexation may raise inflation, reduce demand for

labor, and may have accelerated the relative decline of Luxembourg’s industrial sector. OECD

competitiveness indicators point out a serious erosion of relative unit labor costs in Luxembourg

over the past ten years. Luxembourg’s wage indexation might contribute to higher downward

real wage rigidity relative to other industrial countries (Lawson 21).3


The level of human capital in Luxembourg is relatively high. Of all countries, in which NN

Group is present, Luxembourg has the second highest rate of young people who hold a tertiary

education degree, only surpassed by Japan. 47 percent of Luxembourg’s 25–34 year old citizens

finished tertiary education, while the OECD average is only 39 percent (Schwab 1). World

Economic Forum reports rank Luxembourg ninth position in the world on ‘Enabling

Environment.’ This indicates Luxembourg’s strengths in legal infrastructure and social

mobility (Gilbert 1).

Socio-cultural


Luxembourg has a rather high participation rate in collective bargaining. 60 percent of

employees are covered by collective bargaining while trade union density is about 40 percent.

Two main bodies represent employees at the workplace, one deals with employees’ every-day

concerns and the other - a joint employer/employee body – attempts to improve industrial

relations in the workplace. A law introduced in 2013 aims to strengthen the latter one over the

3 See Individual Report Appendix


107

coming years. Thus, NN Group will face relatively strong bargaining power of employees

within the company. This might be a disadvantage for the labor-pooling model. Furthermore,

Luxembourg’s unions have important rights in labor structure and the majority of employee

representatives are union members (Fulton 1).


There is no index measuring company-to-company trust within Luxembourg. However,

interpersonal trust is measured by studies such as the JDS survey that considers economic and

political indicators. The economic indicators compare individual’s perception about his/her

personal economic situation and his/her country’s economic situation at present, in the past and

in the immediate future. The political indicators measure satisfaction with how democracy is

working and with the government’s performance. Luxembourg scores below the average of all

countries, in which NN Group is present (Medrano 1). Although institutional social dialogue is

well developed in Luxembourg, since the global financial crisis citizen’s general trust in the

Luxembourg government has decreased and is in urgent need of reinforcement. Internationally,

financial trust in Luxembourg is well established. All major credit rating agencies give

Luxembourg’s sovereign bonds the highest possible rating (Trading Economics 1).


The high level of human years, Luxembourg multinationals have pushed for a liberalization of

Luxembourg’s labor market. Because Luxembourg’s own citizens do not meet domestic

companies’ demand for specific job qualifications, Luxembourg firms continuously and

actively look for foreign employees (Clement 1). Due to high unemployment rates in the

neighboring countries of Luxembourg, Luxembourg companies find it easy to hire foreign

professionals. However, this in turn increases the level of structural unemployment within

Luxembourg.


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Legal

Degree of rigidity of employment contracts (i.e., degree of relaxed firing and hiring regulations)

Luxembourg’s employment contracts are relatively rigid. This may present a challange to the

labor pooling model. According to the OECD, permanent workers’ protection in Luxembourg

is similar to that of other EU member states, thus similar to most countries NN Group has a

presence in. However, Luxembourg has the most protective employment legislation in Europe

for temporary workers. This might represent an obstacle to NN Group’s labor pooling model

(Ries 1).

Discussion

Gender equality indicators as a means to assess a country’s labor market is not included in the

theoretical framework. However, the dimension of gender equality is overlooked in the debate

concerning flexicurity. It is a key dimension in assessing the strength of a country’s labor force.

And it more than complements other factors InterNexus considered such as human capital and

educational policies. When highlighting the advantages and effectiveness of the flexicurity

model, one may hide the consequences of a lack of gender policies that need to be implemented

simultaneously in order to increase and ensure women’s access to and participation in the labor

market (Agustin 16). Gender equality serves labor market efficiency, economic growth, and

competitiveness by strengthening the workforce. Therefore, there have been research and

evaluation on gender equality in Luxembourg’s labor market. Luxembourg’s companies do not

fully exploit the existing female labor force potential but do make more use of the country’s

female workforce than most European states. This isolated fact strengthens Luxembourg’s

image as country with a high human capital base. However, the fact that the proportion of

women on supervisory boards is well below EU average is alarming and at odds to NN Group’s

flexible labor pooling model.

Conclusion

Luxembourg’s potential as a location for the labor-pooling model proposed by NN Group is

discrepant. Compared to all countries, in which NN Group is present, Luxembourg has a high

level of human capital with second highest rate of young people who hold a tertiary education


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degree (CIA Factbook 1). Since NN Group’s proposed model is strongly reliant on a highly

educated workforce, Luxembourg appears to be promissing. However, Luxembourg’s system

of vocational training is strongly centralized, so that the possibility of an implemantation of NN

Group’s model is questionalble (Shewbridge 3). Although Luxembourg authorities are making

efforts to consistently liberalize the country’s labor market, it is still highly regulated compared

to other NN Group countries (SGI 1). Also, Luxembourg’s public expenditure rate allocated to

active labor market policies is below NN Group country average (OECD 2013 1). Luxembourg

has a high participation rate in collective bargaining (Fulton 1) and provides a comprehensive

social security system (BSP 41), which is positive for NN Group’s model. However,

Luxembourg is the only NN Group country to maintain a system of automatic legislated wage

indexation. Furthermore, Luxembourg’s employment contracts are relatively rigid and legal

protection for temporary workers is the highest in Europe (Ries 1). Both these factors are crucial

hindrances for the implementation of NN Group’s model. In conclusion, Luxembourg’s labor

market appears to contain too many obstacles to NN Group’s labor pooling model.

Appendix 16: Poland

Political


Poland has a range of active labor policies geared towards preventing and eliminating

unemployment that enjoy a high participation rate and are thought to be moderately to highly

effective (Wisniewski and Maksim 2013). In 2004, the year that Poland joined the EU, the Act

on Employment Protection and Labour Market Institutions, which emphasized unemployment

prevent, took effect (Wisniewski and Maksim 23) Within the labor market policies two types

of labor market instruments have been defined: supply side oriented and demand side oriented.

Even as these policies are in place the European Commission argued in 2010 that the Polish

government should work on reinforcing active labor market policies to ameliorate labor activity

and mobility across sectors and industries as Poland was found to have low labor force

productivity and utilization of the workforce (Kwiatkiewiz 6). Therefore, it seems that the

degree of active labor policies should be considered not to be moderate.


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The Polish government has fundamentally reformed the country’s education system in 1999,

which, has resulted in a dramatic increase in the quality of education. Poland delayed the choice

of which vocational stream to choose after elementary school by one year and shortened the

maximum duration of high school by one year as well. The goal was to increase the quality and

make secondary education more relevant and suitable for competition in a knowledge economy

(“Successful Education Reform: Lessons from Poland” 2-3). Poland’s scores on PISA, a

standardized test in assessing quality of education, have significantly increased since 2000,

making it the 9th ranking country in the world in 2006 (ibid. 3), and it is still performing at a

high level (Wittmeyer). Another indicator of Poland’s government willingsness to invest invest

in education may seen in their high expenditure on all levels of education as percentage of

public expenditures, which is consistently above the OECD level for 2000 to 2010 (“Education

at a Glance 2014” 248). In sum, it seems that the degree of policies that foster high quality

education can be considered to be high.


The amendments to the Labour Code in 2002 have significantly relaxed the constraints on

temporary employment and lead to a drastic increase of the percentage of temporary workers

in Poland. Unfortunately, most of these temporary workers are lowly skilled workers however,

and therefore would not be suitable applicants for the NN model (Ingham and Ingham 2014).

Moreover, it should be noted that many restrictions still exist on temporary work agency

employment that make make it possible for temporary work agency workers to only perform

seasonal work and work that the comanpy’s regular employees are unable to complete or as a

replacement of absence of a regular employee (Poland: Regulations in Force on 1 January 14)

. It seems that the concept of flexicurity has not found any significant interest by the Polish

government, possibly due to the implications for higher expenditures on social security

(“Poland: flexicurity and industrial relations”). Thus, even though some flexible reforms have

been made, the degree of willingness of the government to develop a flexible labor market

seems to be relatively low.


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Even though product market regulation in Poland has significantly decreased between 2003 and

2013, product market regulations are seemingly still higher than the OECD average in 2013

(OECD Economic Surveys Poland 5). Government involvement in business operations has

declined drastically between 2003 and 2013 as well as explicit and implict trade and investment

barriers, even though remaining among the highest in the OECD in 2013 (OECD Economic

Surveys Poland, 6). Easiness of business transactions has been improved through reforms in

registration of property, payment of taxes, enforcement of contracts and the resolving of

insolvency, even though administrative costs are still high, particularly for starting up a business

(ibid). All in all, the degree of government intervention in the market seems to be relatively

high.

Economic


The Polish social security system is co-financed by premiums paid by the employer, employee

and is based on three pillars since a reform in 1999. The 1st pillar is obligatory and premiums

are deducted from salaries, therefore payment of pensions are financed by people who currently

work. (Investor’s Guide – Poland 130) The second pillar is not mandatory and employees can

choose whether to transfer 2.92% of their premiums to this pillar or leave it in a sub-account to

pillar 1. Pensionable funds in pillar two are managed by private investment firms that invest in

financial markets. Pillar 3 is organized as an investing fund and is also not mandatory.

Social security paid by employee and employer includes: pensionable insurance; rental

insurance; insurance in case of sickness leave or maternity leave; insurance in case of accidents

at work and occupational diseases. Furthermore, the social security system covers

unemployment benefits paid for by the employer with any deficit funded by the government.

The amount of the benefit is based upon the duration of employment and the duration of the

payment of the benefit ranges from 6 to 18 months an depends on the unemployment rate in the

region (“Social Security Programs Throughout the World”). Overall, the degree of social

security seems to be moderately high.


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The Polish government seems to adovocate wage flexibility, however, it also insists on

protecting the right to a stable and decent salary ("Poland; Wage Flexibility and Collective

Bargaining."). A survey that included over 1200 Polish firms in 2007 found that Poland has,

compared to other EU countries, a relatively average nominal wage rigidity but a rather high

flexibility of real wages (Strzelecki 6). Furthermore, the high extent of real wage flexibility is

also evident in an Eurostat data analysis that shows that the percentage of Polish real labor cost

change due to real shocks in the period 2001-2010, was constant at almost 100% (Babecký and

Dybczak 16). In sum, the degree of labor cost flexibility and adaptability at the national

economy-wide level seemst to be relatively high.


Poland holds fourth place after United Kingdom, Germany and France in number of people

enrolled in tertiary education. About 1.5 million people study at tertiary education facilities,

among which 58% were women. The most popular field of study were information technology,

law, management, construction, mechanics and engineering, economics, automatics and

robotics, environmental engineering and pedagogical. Also 43.6% of the students attend

foreign language courses at university (Investors Guide – Poland 85).Even so, whether the high

performance of the Poland on the PISA test scores is due to the educational reform or any factor

is not undisputed (Wittmeyer). Furthermore, Palowski (2010) argues that the education reform

has resulted in a mismatch between skills acquired at school and those demanded in the labor

market. Overall, it appears that the degree of human capital can be estimated to be moderately

high.

Socio-cultural


A study of 79 Polish manufacturing companies by Staniec et al. found that in a little over half

of the companies, the decision-making was highly centralized and formalized (92). These

companies were mostly businesses performing in a highly specialized market (Staniec et al.

90). However, in about twenty percent of the companies studied the power division was highly


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decentralized (Staniec et al. 92) and these companies were characterized by operating in a

medium to low specialization market. The study furthermore found that the most important

determinants for the organizational structure were customer requirements, employee

qualifications and kind of business activity (Staniec et al. 91). Overall, the degree of

participation of workers in the company’s decision-making process seems to be moderate.


It seems that there is insufficient data on trust relations between companies. Even so, data can

be found on interpersonal trust in Poland, and trust in business. The 2015 Edelman Trust

Barometer found that a little below half of the Polish population says that they trust business in

2015. That percentage increased from 43% in 2014 to 48% in 2015, and is a little below the

global average of 57% of people trusting in business. The report also notes that the origin of

the company is of great significance to the level of trust, with people distrusting companies

based in developing countries such as the BRICs, and trusting enterprises based in developed

countries such as Germany, Canada and Sweden (Edelman Trust Barometer 2015). This could

indicate that the level of trust in business is moderate, but that NN could have an advantage in

being based in a developed country.


A study by the European Social Partners found that after the crisis more prudent hiring practices

and fixed-term contracts are common practice among Polish companies. (Kwiatkiewiz

4)..Furthermore, the report reviewing, the trade unions and employers opinions on flexicurity

found that employers think that modern labor markets are characterized by flexible work

contracts and that therefore it awareness about flexible employment as an option for high quality

employment should be built. In addition, they also point out that the perception about hiring

and firing should be changed and that the shift to flexible labor contracts result from the need

to adapt to a changing business environment (Kiatkiewiz 11). In conclusion, the degree of

willingness of comanpies can be estimated to be relatively high.


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Legal


The current Polish Labor Code allows for only a limited variety of employment contracts. It

allows for the contract to be for a probation period, only once between a given employer and

employee to allow for the assessment of the employee’s suitability for the job. A fixed period

contract is also allowed under Polish law. The restrictions on these types of contracts are

however, that the maximum duration should be “reasonable”, that there is a limited number of

fixed term contracts that can be concluded with one employee and that a permanent employment

contract should follow after two consecutive fixed term contracts. The last temporary contract

is one for the period of absence of another employee. Lastly, Polish law allows for indefinite

period contracts (Investor’s Guide – Poland 129). However, Poland has seen a great increase

in fixed term contracts in the past decade and in 2008 is even had the highest proportion of

fixed-term contracts in the EU27. The attitude towards temporary work however, is still

negative, with people accepting fixed-term work when they cannot find full-time employment

but their attitude becoming much less flexible when they have indefinite employment

(Kwiatkiewiz 7). All in all, the degree of rigidity of employment contracts seems to be

moderate.

Discussion

It seems rather challenging to implement NN’s model in Poland since the one factor that is hard

to influence is governmental action and intervention. At this current moment, the Polish

government does not show interest in the concept of flexicurity and as they still have a

significant influence in the market, it would make it extremely difficult for NN to alter their

model to adapt it to these conditions. Even so, as the government has made reforms towards

flexible labor, it may be recommended to pay attention to Poland as a possible participant for

the NN model in the future, as many other factors seem favorable for the model’s

implementation.

This study is limited by the number of sources available in English. Secondly, in a the

research on a number of factors, conflicting data was found which made drawing a conclusion

about the level of the given factor problematic. This was the case for the degree of human

capital as well as the degree of active labor policies. Thirdly, when it comes to the assessment


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of trust relations between companies one had to rely on data about trust in businesses which

may not accurately portray the trust relations between companies. The data on the willingness

of the government to implement flexible labor reforms is similarly sparse.

Conclusion

In conclusion, it seems that there are some significant obstacles to the implementation of NN’s

model in Poland and some modifications to the model may not lead to successful

implementation because of the biggest obstacle being the government. Most importantly, the

degree of willingness of the Polish government to develop a flexible labor market seems to be

relatively low, in addition to the degree of government intervention in the market appearing

relatively high. Furthermore, the degree of active labor policies, the degree of participation of

workers in the company’s decision-making process, the level of trust in business and the rigidity

of employment contracts seems to be moderate to low. Even so, the degree of policies that foster

high quality education and the degree of social security the degree of labor cost flexibility, the

willingness of companies to develop a flexible labor market and the degree of human capital

are found to be moderate to high.

Appendix 17: Romania

Political


Starting 1997, Romanian government initiated active programs with the help of a loan from the

World Bank. The ALMPs in development were and still are on the Ministry of Labor’s agenda.

Four kinds of ALMPs were implanted: training and retraining (TR), self – employment (SE),

public employment (PE) and employment and relocation services (ER). Even if the project was

a government initiative, it was only implemented at county level through the local Agencies for

Employment and Vocational Training, yet contracted to public or private service providers,

therefore at a national level there was no aim for it. The outcome was that only the unemployed

had access to these trainings and were selected on the basis of completing the program, thus not

everyone was able to access employment in the end (Rodriguez – Planas and Jacob 69).


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Budget deficits reduced investments in education and as a result the educational system is not

in line with the labor market and its demands. The economic crises Romania is still believed to

go through have a strong impact on the quality of life and therefore at an individual level there

is not much interest to pursue a higher education that will bring revenues in terms of career and

knowledge in the future (Aceleanu 4402). Thus, the main issue is poor involvement of

government spending within the education system and attention to develop it to a point where

it becomes sustainable for other markets: financial and labor primarily.


Concerning the willingness of government to develop a flexible labor market, it is important to

mention the Lisbon Agenda that created the need for new reforms in Romania, implemented

through the National Program of Reform for 2007-2010, establishing national priorities to

achieve growth and flexibility towards the growth. These transitions targeted regulations within

state institutions to stimulate employment and creating a flexible system of social security. The

outcome envisaged by these reforms was an effective management of labor through reforming

the labor market by correlating the job supply and demand, reforming the pension system, social

assistance and health services, and important the reform education field to facilitate life-long

learning and improvement of public employment service for all vocational training structures

(Ioan-Franc and Vasile 20).


However, how the government got involved in the labor market was crucial in 2011 when Labor

Market reform was adjusted and had an effect of diminution of several union leaders’ rights

such as reducing protection of union leaders against dismissal after termination of mandate and

no right to payment when performing union activities. The new reform applied to the Labor

Market mostly creates advantages for the employer and not the employee (ILO report 11). This

episode shows a high degree of government involvement at a given time and able to drastically

change laws that overnight might not be favoring the working class.


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Economic


But the social security system needs to be taken into consideration and it is worthy to mention

how in this system the public pensions are included and referred to. Basically all employees

contribute to it plus any other taxpayers forced by law. The public pension system in Romania

is very disproportionate in regards to the taxes one pays during his working years and what

receives when retired. The formula behind this calculation involves the amounts paid ad the

point value, however, the point value is politically determined and subject to the political

development and the economic orientation of the leadership. Within the social security, there

are 4,1 million employees supporting 4,7 million pensioners. This approach to the social

security weighs heavy on the safety of it in the eyes of the population because this formula

encouraged early retirement, whereas it aimed at solving growing unemployment, and between

1990 and 2010 the number of pensioners increased by approximately 80% (Panzaru 316).


Furthermore, a flexible labor market model is also interested in researching aspects of real labor

cost flexibility and adaptability. According to World Bank’s Doing business Indicator, Romania

is lagging behind with this, with large deviation of real wages from equilibrium for instance

(Goretti 22). Poor labor flexibility and adaptability foster expanding labor market conditions

and firms cannot achieve the desired level of workers. Therefore for Romania low wage levels,

tight labor market conditions due to strong labor demand and institutional characteristics of the

labor market heavily influence the development of real labor costs and make it rigid and

inadaptable.


When looking at the development of human capital by means of investment in educational

processes, Romania is scoring low. The educational system is in acute need of efforts to

generate competitive resources on the labor market, as the current reforms do not look at

restructuring the substance of the educational act and meet the demand of the labor market.

Therefore, there is higher education at mediocre EU levels that generates graduates, yet not in


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accordance to the labor market. Also, there is little initiative to offer life-long learning programs

or labor education to tailor these graduates for the labor market. Quality of labor education must

be seen as a factor for economic development and an instrument to a highly-skilled job and

flexible employees. In Romania from 2006 to 2010 the number of people in professional

training went from 65.031 to 39. 987 ad this significant difference shows a problem of rigidity

and lack of investment in graduates and opportunities for them at a national level (Moisescu,

Manole and Dascaleanu 74).

Socio-cultural


Another problem in the Romanian labor market is the participation of workers in the company’s

decision making processes. All jobs created by the various multinationals are important and

seen as durable when the investor is attracted by the domestic market (Dunning in Brancu and

Bibu 189), however when considering the poor initiative at a national level to train graduates

or employees in these new jobs created, the company needs to come with their own plan and

rise the skills level to fulfill the job profiles. Therefore, at company level usually the decisions

and lead plans come from the outside due to quality and poor offer of the labor market itself

(Brancu and Bibu 192).


Due to minimal employee participation in decision making processes, it is logic to analyze the

degree of trust relations between the worker and the company. Studies show in Romania

psychological aspects influence the development of elevated levels of trust, yet economic and

social aspects needs to be considered as well. Individuals show trust to the employers who

exhibit honesty and are open to discuss, but an important aspect within the Romanian case is

how the employee shows reliability and identification with the company in terms of

remuneration level and financial entitlements (Sonea and Campeanu-Sonea 925).


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This last dimension is also enhanced by the conditions companies bring to facilitate employees

jobs and provide easy tools to do it. There insufficient spread of the information technologies

and a lack of coherent regulations within the rights and obligations of the parts supposing to

make flexible the labor use – for example tele-working was 2% compared to an average of 8,3%

of the EU (Casuneanu 133). Thus, the issue of creating a more flexible labor system lacks from

the very first steps a basic development within the ICT field. It is unfortunate how this can still

be considered a problem in 2015, but it is an important aspect of real working life in Romania.

To develop working flexibility in theory, it needs first to have the practical working flexibility

to stimulate employees to look further on than lack of technology needed to do their job.

Legal


Temporary agreements are prevailing in the private sector (82%) and there are more among

other occupational categories, particularly unskilled workers (48%) and among very young

people (51%). In these circumstances, it can be said that in Romania among economic agents,

employment with temporary employment scheme is less practiced, leading us to the idea that it

is regarded more as a lack of alternative employment and less as a flexible work opportunity

(Stegaroiu, Velciu and Dragiu 4). It is high because permanent task jobs do not get a fixed-term

contract, rather the employee gets the job on a permanent basis. Probationary periods are three

months at a minimum pay (World Bank gender data).

Discussion

When looking at the labor market there is also a high degree of gender inequality and how

genders are partitioned in accessing it. Gender inequality exists in employment, wages,

entrepreneurship and pensions. According to World Bank a difference of 15 percentage points

exists in between women and men in labor force participation rates – much larger than in the

EU. A gender gap of 9,7% suggests segregation and discrimination. Also, women are only one

third of business owners (World Bank Group). The law guarantees pregnant and nursing women

workplace protections from dismissal as well as placement in an equivalent position when they


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return from maternity leave; however, it does not guarantee rights to a flexible schedule (Doing

Business of World Bank Group).

Conclusion

To conclude, given the model Nationale Nederlanden wishes to implement as a working

framework for young high skilled workers in Romania, it is considered as not a good ground at

the moment to break into the market with this concept. First of all, the political stage is not

necessarily stable in the sense that parties change often at a leadership level. This causes Codes

such as the labor one to be volatile and subject to often changes which does not offer a degree

of stability for the model, nor for the employees. Also, the social security level is quite low and

it does not offer security to a pool of high skilled workers to be flexible within their careers and

take the risk given the problem with the pension system for instance. And finally the problem

is the notion of flexibility in a market that is not necessarily opened and developing innovation

within all fields and encouraging it at the same time, which led to a massive brain drain ever

since the country joined the EU in 2007 and these students, due to lack of innovation and

business development, do not return to Romania, and as a consequence the higher education

system has to suffer of low quality and investment.

As a suggestion how the flexicurity model can be tailored for the Romanian labor

market, would be an initiative from the NN group to target the highly skilled Romanian

graduates outside the borders, attract them in jobs within the NN group where it operates, train

them in a life-long education mentality and then send them to Romania. This exchange bring a

native back in the system, with the flexible labor market as a working frame and ideology, and

a knowledge exchange can occur in favorable conditions, led by people already trained to think

flexible about labor markets, job profiles and skills.


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Appendix 18: Spain

Political


Between 2004 to 2007, the Spanish policies established undefined contracts for a maximum of

3 years and increased the firing costs (Ortíz 97). Nevertheless, the reforms of 2010 aimed reduce

the duality of the market and support companies to shift from temporary to undefined contracts,

as well as to promote internal flexibility in the companies. In 2012 the Reforma del Decreto-

Ley 3/2012 and Ley 3/2012 helped to boost legal training contracts and undefined contracts to

workers until 30 years old. And in 2013 Reforma del Real Decreto-ley 16/201 strength partial

time contracts (García 34 & 35). Also, the Real Decreto Ley de Reforma del Sistema de

Protección por Desempleo, support companies to be more adopt more flexibility through a

financial assistance when they hire young employees under undefined contracts (Ortíz 97).

Additionally, the government has created the “Plan prepara” for those persons who have

exhausted their unemployment benefits. This plan of 6 months includes an economic stimulus

and a customized training to reincorporate individuals in the labor market (Spain a

60534).Furthermore, the OECD report on “Labor Market programmes” (OECD Statistics a,

n.p.), the Spanish government has invested more on training policies, and there has been an

increase in government expends on labor policies since the beginning of the crisis. Although,

the government reduced the budget in 2011 from 4.10% to 3.77 % (ibid. n.p.). Nevertheless,

this percentage is higher than other countries where NN group is present, for example

Luxembourg invested 1.27% and the Netherlands presents 2.90% of their GDP in 2011. Thus,

Spain presents a high degree of active labor policies that aim to integrate young employees to

the labor market.


In 2013, the Ley Orgánica para la mejora de la calidad educativa (LOMCE) was promulgated

with the aims to improve the quality of education at all levels, but such an initiative has been

criticized for being inconsistent with the reduction in the reduction government spending in

education. Focusing on tertiary education, the most recent policy of Real Decreto 967/2014,


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signed the 25 November 2014, is focused on simplifying the validation of higher education in

Spain in coordination with the EU standards (Córdoba 25 & 26). This decree do not mention a

direct improvement in the quality of tertiary education. Nevertheless, the recent policies follow

the European Qualifications Framework EQF-MEC as a measure to maintain Spanish

universities in the expectation of the continent (Córdoba 29). Secondly, this year the Spanish

government inaugurated the "Estrategia Universidad 2015". This is a program with the goal to

modernize and improve the universities, public and private, in order to achieve the standards of

the best universities in the EU and worldwide (Ministro de educacion 14 & 15). However, the

success of this resent project and the policies that foster high quality education will depend on

how the Spanish government measure their austerity philosophy. Although the crisis has

affected the development of education, at all levels, it seems that the government is

strengthening policies that foster high quality education and NN group can take advantage of

this measures.

Degree of willingness (i.e., degree of participation, cooperation) of government to develop a

flexible labor market

Flexibility has been perceived as a measure to stop unemployment and increase productivity.

Already in 2004, Spain release the Declaración para el Diálogo Social where the government

and the private sector aim to facilitate and spread flexibility in the labor market and within the

companies (García 30). When the crisis of 2008 arrived, a government with socialist tendencies

in the 2000s continued to boost a flexible labor market to overcome unemployment. After the

crisis of 2008, the Spanish government has presented a controversial willingness to develop a

flexible labor market. On the one hand, Spain government has shown direct interest in allowing

and facilitating companies to adopt a more flexible labor structure (Banyuls, 82). In addition,

since 2002 the Ministry of Health, Social Services and Equality has supported national and

regional awards to the most flexible companies, named "Premios Empresas Flexibles"

(Comunidad de Valor Añadido n.p.). This initiative has had a good answer because more than

17,000 companies have participated (ibd. n.p.). Moreover, the recent reforms deducts the

traditional importance of worker unions in Spain, giving the companies the leadership in the

labor market (Banyuls 84 & 85). In summary, the Spanish government has had a constant

willingness to create a flexible labor market since the 1980s and their most recent policies mark

its path to a more flexible environment.


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The crisis of 2008 has been handled through strong austerity measures of the Spanish

government. Although the state has been actively promoting reforms to stimulate flexibility in

the labor market and inside companies, Spain ranks as a difficult country to start a company

due to permits and licenses (OECDa 32). However, the OECD analysis point out the efforts of

the Spanish government to improve the openness of the market, together with a flexible labor

market (Mejora de la Regularicazion 52). Besides, the Comisión Nacional de la Competencia

(CNC) is in charge of notifying legislation that obstructs the competitiveness and creates ideas

to "remove restrictions in the market" (Ibid. 132). This analysis is reflected in the Product

Market Regulation Statistics of the OECD (OECD Statistics n.p.). The OECD statistics (Ibid

n.p) describes the "measures of state control of business enterprises; legal and administrative

barriers to entrepreneurship and barriers to international trade and investment" (Ibid. n.p.);

where Spain shows a decrease of intervention in each aspect from the 1990s to 2013.

Economic


Spain has never developed a strong welfare state, together with an inefficient public sector, the

government has been unable to solve the crisis and the high rate of unemployment. Only from

2008 to 2010 there was a limited governmental intervention with Keynesian philosophy. In

2011, the entrance of a conservative government with austerity policies has aggravated the

social security system (Banyuls, 86). In 2012, as an answer to the crisis, the government

announced a reduction in the benefits to the unemployed population (Spain 6). However, the

OECD (OECDa 20) report of 2014, contradicts the Presidential report saying that the expending

in social security raised to 59,1% in 2007 to 64,5% in 2012 due to the unemployment and

inequality levels. Unfortunately, the crisis continues to challenge the social security system of

this nation, where the high unemployment cannot be completely covered by the social system.

In this aspect, Guillén and Petmesidou (17) highlight that "four out of ten unemployed people

do not receive unemployment benefit and safety-net benefits amount to about half of the income

level constituting the poverty line". In consequence, Spain remains as the most unequal country

of Europe (OECDa 20) and as the second country with most youth unemployment in the OECD

data (OECDb n.p.).


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Degree of real labor cost flexibility and adaptability

According to the labor reform in 2010 and 2013 (García 34 & 35), the Spanish government has

set a wide margin of facilities for companies to lower wages and change contrast in order to

benefit the flexibility of the labor market. Governmental institutions such as the Fondo de

Garantía Salarial and the Spanish welfare state aim to support the mobilization of the labor.

This was confirmed by the national and regional research of Moral-Arce and Maza (2010),

where they found a direct relation between the high unemployment, and the Spanish wages.

This paper mentions that the increase in unemployment has lowered significantly the wages

and allowed more flexibility. Additionally, in 2012 the National Bank of Spain recommended

to facilitate the flexibility of wages, together with undefined jobs, as a measure to overcome

unemployment (Ortíz 97).

Degree of human capital

Despite a decrease in government expenditure on education, there has been an increase of

almost 4% in the number of graduates from tertiary education in Spain (Spain b 8). For instance,

there is a slight decline in the Masters graduates, but there is a raise in PhD graduates (ibid. 30)

together with an important number of foreigners at every level of the tertiary education (ibid.

39). Governmental reports have pointed out that the crisis, especially the unemployment among

the youth, as the main cause of the increase in graduates because young Spaniards need to be

more prepared in order to overcome the hostile labor market (Córdoba 14 & Spain b 8).

Following this argument the OECD presents Spain with 41.08% of the population with tertiary

education. This number is just above the OECD average and represents the higher rank in the

history of Spain. The rise on graduates of tertiary education portrays a positive sign of the high

quality of human capital available in Spain that NN group could attract in order to implement

their model.

Socio-cultural

High degree of worker's participation in the company's decision-making process

Historically, Spain has a legacy of poor worker´s participation, although the Constitutions

explains in the article 129, part 1 and 2 that the national law most promote and protect the active


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participation of workers in a company as well as allowed the creation of workers unions

(Albalate 41). Additionally to the constitution, the Ley Organica de Libertad Sindacal (ibid.

92) of the 1980s and the "Guia Laboral", stipulated by the Spanish Ministry of Employment

and Social Security, enable every worker to have the freedom to create and join a work union.

In both sources, it seems clear that the participation of workers is managed through worker

unions (Guía Laboral 23.4 n.p.). Nevertheless, Abalate highlights the gap between the law and

the practice (91-92), as Spain has a weak legislation to protect the participation of workers and

the Spanish government has blocked the initiative of the European Commission to advocate for

the workers benefit. In terms of power distance, The Hofstede Center catalogues Spain as

clearly hierarchical society, which implies inequality at company levels with the boss as a

central power (Hofstede Center, Spain n.p.).

High degree of trust-relations between companies

There is a shortage of information, surveys or academic, that describes the trust relation between

companies in the Spanish market. Notwithstanding, there are two interesting examples of

companies that have successfully promoted trust in the market. For instance Shipilov, in his

research about the benefit of partnership, quote the example of Correos, the mail service of

Spain, who joined Luis Krug and created one of the largest e-platforms in this nation (2014).

Another interesting example is Co-Society, created by Alfons Cornella. This company has

diffused the advantages of cooperation between companies based on trust (Eduarne 2013). They

combine several firms to create the best teams with knowledge from different sectors ("Who"

& “How”, Co-society n.p). Both examples do not ensure that Spain is a country with strong

trust among companies, nevertheless, this two initiative exemplify that it is possible to build

confident relations between firms in this society.

High degree of willingness of companies to develop a flexible labor system

It is hard to find a source that clarifies the exact willingness of companies to implement a

flexible model. On the other hand, Bayona and others (1290) performed an empirical study of

1,652 Spanish companies to test the willingness to participate in research and development

(R&D) cooperation between 1994 and 1996. The mentioned article point out that Spanish firms

prioritize lower cost and risk of technological innovation and research when there is mutual


126

cooperation. In addition, Bayona found that Spanish companies that have already implemented

R&D cooperation to improve their quality, and therefore have already a structure to support

cooperation, are they are more open to work with other companies. Especially the largest firms,

with stronger technology and experience, are the leaders in cooperation (Ibid. 1305). The study

of Beyona (1289-1307) explains that several Spanish companies are willing to be more flexible

and share employees, information and commitment in order to overcome the crisis. It is

important to stress that cooperation does not necessarily means flexibility as the model of NN

Group demands, however, one can argue the NN group model is an option to lower risk and

promote innovation as the rotation of workers. Thus, it is possible that large Spanish companies

find this proposal as an attractive model and they may be willing to cooperate through a more

flexible path.

Legal

Low degree of rigidity of employment contracts

Spain introduced flexibility in the labor market in 1984 with the a Reforma Laboral allowing

temporary contracts in order to relieve the high unemployment. Temporal contracts cheapened

the firing cost of employees, but it only affected new workers, respecting the older members

(Martínez 399). After the crisis of 2008, the rigidity of employment contracts has lower down

in benefit of more flexibility. Companies have won more autonomy and freedom to shape

contracts, including working hours and conditions. Moreover, since the reforms of 2010, the

Fondo de Garantía Salarial gives economic support to companies willing dismiss their

employees (García 34 & 35). As a consequence, the Spanish government has created a division

of the labor between those with stable contracts, and the increasing population, especially

among youth, with temporary contracts (Martínez 399-400 & Álvarez-Carrasco 217). It is

important to highlight that the openness of Spanish law to flexible contracts is mainly directed

to temporary and low wage jobs, with a week security for the employees. This is not the case

of the NN group model that proposes a full-time contract based on social security, but this

information describes a background of low rigidity of employment contacts in Spain.


127

Discussion

One interesting factor in the context of Spain is the willingness of the youth to participate in a

flexible mode. According to Centro Reina Sofía sobre Adolescencia y Juventud (2014), the high

unemployment among the population from 18 to 24 years old has built a discontent with the

current situation and blame on the Spanish government. Likewise, the study point out the

pessimism of the youth about the present and the future; for instance, 71% of the interviewed

do not hope to find a job in the first year of their search and 48.6% admits that they will take a

job anywhere, even at low wages (Centro Reina Sofía n.p.). This information can be used to,

firstly, recognize the degree of the unemployment and the lack of effective policies to overcome

the crisis. Secondly, it is important to visualize the pessimism in the young population about

the labor market. The high percentage of youth willing to take any job may suggest that young

graduate talents would not hesitate to join NN group model, as they do not have a wide range

of options.

Conclusion

Spain presents several factors that favor the implementation of the model of NN group. In the

first place, the Spanish government has actively introduced flexibility in the labor market. Since

the 1980s until today, Spain is characterized by policies that allow flexibility in contracts and

wages, in order to make the workforce more attractive to companies. With especial regard in

the young population, the government facilitates and even award flexible companies. Also,

looking at the evolution of the policies and willingness, the preference for a flexible labor

market is increasing, which would give legal support to NN group in the future. Secondly,

Spanish companies have combined the legal framework of flexibility to improve their quality.

For example, Co-Society in Barcelona has successfully developed an exchange of talents

between companies. Even if it is hard to measure the levels of trust and willingness of

companies, the mentioned case demonstrate that there is an initiative to overcome the crisis

among Spanish entrepreneurs with flexible models. In addition, the human capital in Spain

seems to rise as unemployment encourages young Spaniards to study tertiary education and the

high number of graduates provide a good market for a new flexible labor model However, NN

group most carefully understands the openness to flexibility in a context of economic crisis and

austerity. The duality if the labor market, the poor participation of workers, high unemployment

and lack of social security are negative factors for a successful flexible model. Therefore, one

can conclude that the model of NN group cannot be implemented in Spain as it is now. NN


128

group would need to modify their model and adapt to the circumstances of Spain if it is willing

to enforce a new mode of labor.

Nevertheless, a few recommendation can be made. NN group should proceed with the

Spanish laws that promote and benefit the internal and external flexibility in the companies.

The active promotion of the youth sector as cheap labor and the context of unemployment make

the NN group model an attractive opportunity for graduates to train and received better benefits

than temporary jobs. Focusing on the companies, it is preferable to cooperate with large

companies that have experience in the flexible labor market. These types of companies are more

likely to have the internal structure and the economic strength to try a new flexible model. For

instance, Co-Society has already expanded its border to other continents and they could be used

as an example, or even as an advice to NN group concerning the cooperation and trust between

Spanish firms. Finally, NN group most invest in the social security of their employees. Because

the model is willing to hire young talents, NN group needs to considerate that the Spanish

graduates are well prepared but they have low or zero security. The company most understand

that flexible job without social security may not be attractive to the Spaniards in the long-term

because the Spaniards prefer a stable contract with high protection in times of economic crisis.

It is recommended for NN group to analyze carefully the cost of the social security and if it is

sustainable to invest in a country with high openness to flexibility but a weak welfare state.

Appendix 19: Turkey

Political


To increase flexible working forms in Turkey, Labor Act No: 4857 was introduced in 2003

which regulates part time work, on call work, temporary and permanent employment contracts.

Furthermore, the new act allowed for flexible working, and working time has also been re-

designed with the new labor act (Yenılmez 126). In line with this labor code, Turkey has also

reconstructed active labor market programs in the past years, whose institutional capacity has

been strengthened through EU-funded projects (Bolukbasi and Ertugal 243). However,

compared to other OECD and European countries, Turkey does not have experience in applying

active labor market policies (Yenılmez 127). Although the coverage of these active labor market


129

programs has been expanded with increasing amounts of recipients of these programmes, their

scale, financial resources and coverage nonetheless continue to be insufficient (ETF 65–66).

The Turkish active labor policies are inadequate to support the movement of workers between

jobs on the one hand, and to facilitate employees’ changeovers from inoperativeness and

unemployment to employment on the other hand (Bolukbasi and Ertugal 243).


In Turkey, prospects for training after formal education continue to be inadequate. The only

existing way to improve skill insufficiencies in the Turkish labour force is to put the youth into

vocational schools, since no other mechanism is present that aims to provide lifelong learning

(Bolukbasi and Ertugal 243). Although Turkey has an widespread organization of vocational

training schools, due to the weak supply of, and demand for, these schools, the system continues

to be incompetent in reacting to labour market requirements (Bolukbasi and Ertugal 243).

Despite some steps of reform, the country still lacks an cohesive and all-inclusive strategy to

high quality education which would keep the labour force employable throughout their careers

(Bolukbasi and Ertugal 243).


From the late 1990s onwards after the granting of EU-candidacy status to Turkey, Turkish

officials were more and more under the influence of the normative and perceptive policy idea

of flexible labor markets spread by the EU (Bolukbasi and Ertugal 249). In particular, current

Turkish president Erdogan’s Justice and Development Party has exhibited its commitment to a

neoliberal agenda. As such, this regime endorsed the implementation of labour market reforms

such as de-unionization, suppression of collective bargaining rights, deregulation, restrictions

on social security and pension systems, and moreover, flexibilization (Duman 369). As a result,

the concept of flexible labor, is so profoundly deep-rooted in the Turkish policymaking system

that it is used as a referential tremendously among all bureaucrats and in all official government

documents, in particular due to the fact that Turkish policymakers and employers broadly think

of flexible labor as a general solution to the unemployment in the country (Bolukbasi and

Ertugal 249).


130


In “economically free societies, governments allow labor, capital, and goods to move freely,

and refrain from coercion or constraint of liberty beyond the extent necessary to protect and

maintain liberty itself” (“About the Index”). For more than 20 years, The Heritage Foundation,

in partnership with The Wall Street Journal, has examined the degree of economic freedom

worldwide with the prominent Index of Economic Freedom. From the 178 countries analysed

over the year 2014, the Index of Economic Freedom ranks Turkey at the 70th place (“Turkey”).

More specifically, while its economic freedom is based on relatively steady but fragile grounds,

Turkey’s judiciary is also “subject to government influence and government procurement may

favor domestic firms” (“Turkey”). Moreover, compared to other countries where NN Group is

active, Turkey ranks almost lowest; only Greece experiences according to the index lower

economic freedom (“Country Rankings”). Likewise the Index of Economic Freedom, the

OECD provides statistical information on all its member states with regards to state control in

market. This indicator, as part of the variable product market regulation, measures the degree

to which the government exercise policies that could provide barriers to entrepreneurship

(“Product Market Regulation 2013”). In 2013, Turkey ranked the lowest (“Product Market

Regulation 2013”), which means there is a very high degree of government intervention in in

comparison other OECD countries – countries in which NN Group is also active to a great

extent.

Economic


In 1999, an unemployment assurance system was presented for the first time in the history of

the Turkish social welfare scheme (Bolukbasi and Ertugal 243). Yet, compared to other OECD

countries, Turkey still has an insufficient social security system to implement a successful

flexible labor model (Yenılmez 127). Low replacement ratios, tough entitlement procedures,

and constricted and inconsistent coverage fail to deliver income security “even for the working

masses where the burden of adjustment falls disproportionately on the supply side through

flexibilised labour contracts” (Ceritoğlu 110). The social security system also is unsuccessful

to provide an affirmative response to the government’s active labor policies, “as the passive

benefits (such as unemployment insurance), however meagre, are not conditional on activation”


131

(Bolukbasi and Ertugal 244). The Turkish social security system is not able to assist flexible

labour market mobility/transitions nor does it offer suitable income security during absence

from the labour market (Bolukbasi and Ertugal 244; Ceritoğlu 110).


The OECD claims in their report on employment over the year 2014 that minimum wages have

a propensity to decrease the flexibility of wages for both incumbent workers and new hires,

and, moreover, to support reducing the degree of wage adjustments among low-paid workers

(OECD “Employment” 71). In the case of Turkey, this country set the legal minimum wage

much higher relative to the median wage than all other OECD countries (OECD “Employment”

68). Furthermore, due to the economic crisis, there has been an upsurge in the amount of

nominal wage cuts and wage freezes, and “wage rigidities have tended to become more

binding” (OECD “Employment” 57, 69). As such, there is a low degree of labor cost flexibility

and adaptability at the Turkish national economy-wide level.


As NN Group is searching for possibilities to restructure its labor force of graduates in Turkey,

the Turkish Statistical Institute (TURKSTAT) have the means to express the degree of human

capital with a minimum of graduate background. TURKSTAT shows that a total of 333,052

students were enrolled in Turkey at a graduate level in the academic year 2013/2014 (“Number

of Students”). Furthermore, the institute makes clear that this numbers consists of 0,44 percent

of the total Turkish population (“Population”). In comparison, 89,791 students were enrolled at

a graduate level in the same academic year in the Netherlands, NN Group’s country of main

residence, compromising 0,53 percent of the total Dutch population (“Aantal Studenten”;

“Bevolkingsteller”). In other words, Turkey has relatively 1,2 times less people enrolled at a

graduate level compared to the Netherlands – not an extremely significant difference. However,

while the average of tertiary graduation rates at the second degree (i.e., Masters) in 2012 of all

countries where NN Group is active is 24 percent, Turkey only has a two percent tertiary

graduation rate at the second degree (OECD “Education” 81). As such, it is plausible to state

that Turkey has a relatively low degree of human capital at the graduate level at the national

economy-wide level.


132

Socio-cultural


Research has shown that employment contentment among Turkish companies is facilitated by

paternalism, and even proposes that delegation may not be an effective management tool in

Turkey at all (Pellegrini and Scandrua 264). Indeed, other research has found out that the most

dominant characteristic in Turkish organisation culture is paternalism; the leader of the

company takes care of the followers (Pasa, Kabasakal and Bodur 585). Superiors are regularly

unapproachable and the perfect chief is a father figure; power is centralized, while managers

trust on their superiors and on procedures, and employees are expected to be told what to do

(“Turkey”). As such, it is reasonable there is a low degree of participation of workers in the

company’s decision-making process in Turkey.


The relationship in and between Turkish companies has a moral fundament and this always has

precedence over task realization; time must be invested firstly to establish a relationship of trust

(“Turkey”). Turkish companies centre their inter-firm relations on informal institutional

arrangements as an forerunner of a trust-relationship (Oba and Semerciöz 179). Also, trust is a

low-cost substitute for formal agreements; companies create trustworthy relations and trust each

other as they recognize that indications about malfeasance will be spread quickly, good or bad

activities will be communal knowledge and those who fail will have a hard time performing

their business activities (Oba and Semerciöz 179). In other words, “trustworthy behaviour is a

rational choice” (Oba and Semerciöz 179). Nonetheless, the industrial relations system in

Turkey is not very cooperative and the social partners rarely reach to joint solutions over

dialogue, as there is a great lack of trust-relations between Turkish companies (Anıl 97).


Due to Turkey’s candidacy for EU-membership, the EU had a significant impact on the Turkish

policymaking capacity with regards to the labour market (Bolukbasi and Ertugal 247). Although

this meant that Turkish companies were increasingly under influence of the Turkish

government’s commitment to develop a flexible labor market in order to battle unemployment,

Turkish companies and their employees are not fully committed to introduce this new set of


133

reforms (Duman 359; Bolukbasi and Ertugal 249). Because of the huge informal labour sector

on which many companies prosper, implementing new flexible labor agreements would result

in granting these informal employees benefits that would diminish returns (Anıl 97; Yenılmez

131). As such, there is not much willingness among a wide extent of companies to introduce

flexible labor agreements, though it should be noted that no source has be found that investigate

the degree of willingness of Turkish companies in the insurance/banking sector sector in which

NN Group operates.

Legal


Turkey appears to be more flexible when certain executions of labor policies are taken into

consideration. Indeed, there have been several adjustments under the Labor Code, which

increased the flexibility of employment contracts in theory (Anıl 96). Nevertheless, Turkish

legislature on job protection is rather rigid, and terms for temporary jobs and subcontracting

continue to be strict, “as the rigidities mainly emanate from the little usage of temporary

contracts and high severance pay for tenured workers” (Anıl 98). Moreover, Turkish labor law

is inadequate to simplify flexibilization in temporary work, and thus to support both employers

and employees in flexibilization of firing and hiring regulations (Bolukbasi and Ertugal 244)

Discussion

In line with the mentioned factors that would determine the successful implementation of NN’s

proposed flexible labor model in Turkey, conducted research towards these factors has found

out there has been another variable of which one could argue that it is of importance when

assessing the success of the model. After all, government undertakes a foremost position in

Turkey when it comes to negotiating with employees and employers, and “hence directly affects

the labor market outcomes, sometimes at the expense both of the social partners” (Anıl 96).

Thus, in addition to the enlargement of unions’ organizational rights, utilizable exploitation of

existing institutions such as the Economic and Social Council could enhance the cooperation

between employers and employees (Anıl 96) – thereby creating ground for success of

implementing flexible labor. As such, plausibly an independent variable for determining the


134

success of NN’s flexible labor model in Turkey is the degree of the social partners’ negotiating

role on labor market matters.

Conclusion

Overall, when assessed against the factors that determine a successful implementation of NN’s

flexible labor model, the Turkish labor market proves to be inflexible and insecure, which is

the least wanted composition as neither the employees nor the employers can take advantage

from this combination. The rigidities in Turkey derive largely from the low degree of active

labor policies and rigidity of employment contracts, although the low degree of human capital

at the national economy-wide level and the high degree of government market-intervention

certainly contribute to the inflexibility in the Turkish labor market. The causes for insecurity

range from the low degree of social security to the low degree of policies that foster high quality

education, while cooperation necessary for the implementation of NN’s model is severely

constrained due to, for instance, low degree of trust-relations between companies and a low

degree of willingness to these companies to develop a flexible labor market. As such, it is not

recommended for NN Group to implement its proposed flexible labor model in Turkey.

Therefore, if NN Group wants to implement its model in Turkey, this country needs to

engage its weaknesses and create strategies that rightly aim at flexibility, security and

cooperation in the Turkish labor market. Alter the model in such a way that there is low

dependence on government regulations with regards to, for instance, social security or high

quality education. By designing NN Group’s own social benefit system or educational training

programs for those employees participating in the model, NN Group should be able to overcome

the shortcomings of the Turkish labor market that would prevent a successful implementation

of the model. Certainly, the financial expenditures of this strategy should be assessed, and have

to be evaluated against the possible paybacks that would arise by implementing NN’s flexible

labor model in Turkey. This assessment requires more research, and thus provides a good

starting point for further study.


135

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final project - internexus - nn group

Documents

flexible labor models

future of labor

labor force

proposed model

internexus nn group

executive summary nn

case study research

research questions