Answer to Question #203278 in Macroeconomics for SANDILE

Question

why flexible labour markets are such an important element in supply side policies?

Answer 1

Solution:

Flexible labor markets refer to the willingness and ability of labor to respond to the changes in the market conditions, including changes in the demand for labor and the wage rate.

Flexible labor markets are a critical aspect of how labor markets function to adjust supply to demand. It is essential to the supply side of the macro-economy and its overall performance in attaining macro-economic goals.  

The flexibility of labor markets can reduce trade union's powers, setting up minimum wages and regulations such as deregulating the labor markets. Employers or companies can make changes to their labor market based on factors such as compensation and benefits, employee hiring and termination, and working hours and conditions. Employers can make changes in response to supply and demand issues and other market conditions.