The sustainability of labor markets

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About the author: Marijke Verbruggen is professor and head of the Department of Work and Organisation Studies, KU Leuven (Belgium). You can contact her at marijke.verbruggen@kuleuven.be

In recent years, the demand for a more sustainable way of living has grown substantially in multiple domains. This movement became highly visible in the past year, with millions of people around the globe taking the streets to raise awareness of environmental sustainability and demand climate action from politicians and companies. Sustainability has not only reached momentum in the environmental field, it has also gained importance as a lens in other areas, such as careers and, more broadly, the labor market. Looking at the labor market from a sustainability perspective triggers us to widen our focus from the ‘here and now’ to include considerations about the future. In a sustainable labor market, organizations can find the talents they need, while people have the physical and psychological capacity, the competencies as well as opportunities to find or keep work they enjoy, not only now but also in the future.

How sustainable are our labor markets?

But… how sustainable are our labor markets? One basic indicator to assess this is the employment rate. A high employment rate is not only a signal that our companies are doing well and that households are earning an income, it is also an important requisite for the sustainability of a country’s social security and welfare system. When we look at the EU-28, the employment rate (among the 20-64 year old ) amounts to 73%. This is a rise of 3 percent compared to ten years ago, which suggests that – at least in Europe – labor markets are becoming more sustainable. However, global figures mask important differences between regions and groups. For instance, the employment rate in certain countries (e.g., Greece, Italy) as well as among certain groups (e.g., women, immigrants, older workers and lower educated people) are significantly below average. So, our labor markets may be sustainable for some, but definitely not for all. Relatedly, almost all countries are confronted with a qualitative mismatch on the labor market (Behan & McGrath, 2016): the competencies that companies are looking for do not always match the competencies of people searching for a job. Especially the many bottleneck vacancies in the ICT, medical and engineering sector are worrisome from a sustainable labor market perspective, because these sectors are expected to grow in the future.

In addition, not all people who are officially employed are actually working. On average 3% to 6% of the people in employment are absent due to (short- or long-term) sickness or disability. The estimated cost of these absences is around 2.5% of the GDP – a cost which is estimated to be more than twice as high as the costs of unemployment (Eurofound, 2010; OECD, 2009). Although such absences can be due to a multitude of reasons (e.g., flu, disability), research has also found a link with how jobs are designed. In particular, highly stressful jobs as well as too passive jobs have been related with an enhanced risk of long-term absenteeism and with early retirement thoughts. Given that more than 50% of the US workers experiences high stress in their jobs (Statista, 2019), we have to seriously question the sustainability of our jobs and our labor markets today.

Towards more sustainable labor markets

As many issues are challenging the sustainability of our labor markets, policy makers and other stakeholders may want to take action. The questions is: how?

One pathway that could lead to a more sustainable labor market is improving the quality of jobs. Improving the quality of work could not only improve people’s health, reduce absenteeism and lower early retirement rates, it may also enhance workers’ happiness and motivation and could in that way contribute to organizations’ productivity. Job design is likely to be a crucial factor here. The current trend towards ‘new ways of working’ entails both opportunities and risks in this respect. Although new ways of working (e.g., telecommuting, using ICT to work after hours) may be highly stressful for some because disconnecting from work becomes more complicated, others may welcome these changes as they increase flexibility which can help to combine work and home responsibilities (Delanoeije, Verbruggen & Germeys, 2019). For instance, an employee who works from home can stop early to pick the kids up from school, but may continue to work in the evening to finish up some work responsibilities. But even for employees who welcome blurred boundaries, new ways of working may have negative effects when people feel forced to act in a certain way, for instance when there is an ‘always on’-culture in the organization or when the supervisor pressures employees to keep on working after hours (e.g., Gadeyne, Verbruggen, Delanoeije & De Cooman, 2018). Improving the quality of jobs is hence not limited to job design, but also requires attention to the organizational culture and broader leadership issues.

A second way that could enhance the sustainability of our labor markets is stimulating labor market transitions. According to the ‘transitional labor market model’, a labor market will function better when people make more job-to-job changes and/or temporary transitions out of the labor market for caring or educational reasons. This is because every time a person makes such a transition, there is a new job opportunity for people looking for work. In addition, transition out of the labor market for educational reasons may help to address competency mismatches on the labor market. However, labor market statistics suggest that transition rates in almost all countries are very low. Figures from the OECD for instance show that only 1% of the employees in 2018 had less than one year of tenure, so: only 1% of the workers switched organizations or started working (again) in the past year. In addition, this figure has remained stable over the past 18 years. From an individual perspective, making a labor market transition is not easy. There are many inertial forces that keep people stuck in the status quo (Verbruggen & De Vos, 2019). For instance, making a job change entails a lot of risks (e.g., ‘Will I find a new job?’, ‘Will I like my new job?’) and requires a lot of short-term effort and costs (e.g., screening vacancies, writing motivation letters). These risks and short-term costs tend to have a stronger impact on people’s decisions than potential longer-term gains, even if these gains are in total higher than the estimated costs. Making the risks, efforts or costs of transitions smaller for individuals (e.g., via a system of education leave in which people have the right to return to their organization) could therefore help to stimulate more mobility on the labor market.

But of course, not only individual factors affect the likelihood of labor market transitions. For people to make a successful job transition, it is also important that they get the opportunity to do so. For instance, if we want to reorient people to bottleneck professions, it is important that people who are willing to change also get the chance to do so. This requires organizations to be open to candidates who do not have any working experience in the field, but who do have the potential and the motivation to learn. However, this is where the shoe pinches: job seekers who seek flexibly (e.g., for jobs that are less in line with their previous work experience) report more reemployment barriers and have a lower likelihood of getting a job offer (e.g., Vansteenkiste, Verbruggen & Sels, 2016). As such, if we want to enhance job mobility rates, initiatives may be needed that target both individuals and organizations.

Concluding remarks

Sustainability is about making choices to ensure that our world remains livable – and our jobs workable – not only now, but also in the future; not only for ourselves, but also for the next generation. Let us, as career researchers, policy makers, individuals or organizations, therefore use this perspective to enrich our thinking about how jobs and labor markets can – or should – look like in the future to benefit individuals, organizations as well as societies.

 

References

Behan, J., McGrath, J. (2016). Bottleneck Vacancies 2015. Report for the European Commission.

Delanoeije J., Verbruggen M., Germeys L. (2019). Boundary role transitions: A day-to-day approach to explain the effects of home-based telework on work-to-home conflict and home-to-work conflict. Human Relations, in press.

Eurofound (2010). Absence from work. European Foundation for the Improvement of Living and Working Conditions.

Gadeyne N., Verbruggen M., Delanoeije J., De Cooman R. (2018). All wired, all tired? Work-related ICT-use outside work hours and work-to-home conflict: The role of integration preference, integration norms and work demands. Journal of Vocational Behavior, 107, 86-99

OECD (2009). Sickness, disability and work: Keeping on track in the economic downturn. Background paper, 2009.

Vansteenkiste S., Verbruggen M., Sels L. (2016). Flexible job search behaviour among unemployed jobseekers: antecedents and outcomes. European Journal of Work and Organizational Psychology, 25 (6), 862-882.

Verbruggen, M., De Vos, A. (2019). When People Don’t Realize Their Career Desires: Toward a Theory of Career Inaction. Academy of Management Review, in press.

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