4. Labor Market
In economics, a market describes a means by which different actors are enabled to approach one another as buyers and sellers in order to exchange goods and services. As such, it is heavily guided by the interaction of supply and demand (which are further explained in the economic part of the booklet). Similarly, the labor market is the economic sphere in which workers offer to sell their labor power (providing the supply side) while employers request labor and create job vacancies (providing the demand side). Like every market, the labor market falls under certain regulations with different schools of thought advocating for a varying degree of them. This creates an antagonistic relationship: While traditionally workers are interested in enhancing their rights, for example through expanded social protection, increased level of wages, or secure employment conditions, employers typically seek to lower labor costs to retain profitability and competitiveness. Additionally, employers compete against one another for the most efficient workforce.
Socialism
In general, socialists regard the capitalist labor market as the main source of exploitation as, according to them, workers offer their labor power in exchange for wages which are lower than the value that it produced while the employers skim off the resulting surplus value. Therefore, socialists propose that workers in a socialist system would be compensated through their share of the total production of the economy which would also encompass a reformulation of labor relations and, hence, the labor market. The state has to provide employment opportunities for everybody, for example, by enhancing cooperative employment schemes. Hence, this framework would eradicate the antagonisms described above which are persistent features of a “classic” labor market. As now the state is in control of the two main elements of the market, its supply and demand, and is tasked to create the balance of those two (its equilibrium), the labor market becomes a concept that could be termed as a “quasi labor market”.
Social Democracy
In a social democracy, labor rights and the protection of employees are secured through state policies. The state in a social-democratic framework provides high levels of social protection, proposes a high level of minimum wages, as well as unemployment benefits and measures for employment reintegration. The underlying logic is to alleviate some of the social and economic imbalances created by the free market. This, in turn, is supposed to ensure the existence of a broad mass of (working) people with a high purchasing power which can keep the aggregate demand high and, hence, render additional state interventions superfluous. Thus, the labor market is highly regulated and strives to enable the dialogue between employers and employees with trade unions having a significant say in it.
Neoliberalism
In neoliberalism, labor markets must be flexible so that employers can utilize labor as efficiently as possible. Proponents of neoliberalism favor labor market deregulation, decreased employment protection, and flexibility. Also, neoliberal governments strongly limit the influence of trade unions and abolish collective agreements through their policies as their negotiations would distort the labor market and make companies less profitable. Minimum wages must be low or non-existent as the level of wages must be regulated by the market as otherwise, according to neoliberals, businesses that cannot cope with a higher wage level get excluded and unemployment rises as unskilled workers might get excluded as well. Lastly, they argue, strict regulations in the labor market interfere with entrepreneurial activities and curb competition and profits.
Debate on the Labor Market
As socialists completely re-conceptualize labor relations in the production process, the debate surrounding labor market policies mainly plays out between social democrats and neoliberals and concerns the degree of regulations imposed upon it. For socialists, the capitalist labor market is primarily a field of exploitation and alienation and is designed to prevent democratic labor relations and to enrich the capitalist class through the extraction of surplus value. As such, they argue that both neoliberal and social-democratic proposals are insufficient to ensure social and economic justice and, instead, advocate for an entire rethinking of the production process.
Social democrats assert that neoliberalism leads to the weakening of workers´ rights while the dialogue between employers and employees gets destroyed through the state-led crackdown on trade unions. According to them, these kinds of policies create vast inequalities while hindering economic and social development. Additionally, social democrats regard a minimum wage as crucial for the provision of a decent standard of living for every working person.
On the contrary, neoliberals argue that strict labor market policies stifle competition, lower economic growth, and generally decrease the profitability of enterprises. Additionally, they claim, minimum wages prevent young companies from setting their desired level of wages which limits their chances of survival and development. Therefore, neoliberals assert that social-democratic regulations lower the pace of economic development and productivity while empowered trade unions disrupt the internal functioning of businesses.