Restructuring and employment

Restructuring is a phenomenon that is an ever-present part of business life. Organisations must modernise and adapt continuously in order to remain competitive in a globalised and ever-changing market. However, there are also peaks and troughs in restructuring activity, depending on the economic context.

There are a number of possible ways in which restructuring can have an impact on the proportion of unemployed people in the labour force. There may be a direct effect of layoffs and redundancies. Workers are made redundant and are registered as unemployed, thus leading to an increasing rate of unemployment in the labour market. However, depending on the measures available to transfer workers into new jobs, job loss may be only a temporary state and workers may be transferred in a relatively short period into a new job.

This does not mean, however, that restructuring will not lead to increasing unemployment rates.

Redundancies may lead to unemployment for those categories of workers who are about to enter the labour market or have for various reasons been temporarily out of the labour force owing to parental leave, military service, sick leave, and so on. This is due to the fact that employers have a tendency to value workers with work experience.

A third mechanism can be found in reduced job creation in the economy due to employers’ hesitation to recruit labour when future market opportunities are uncertain.

In sum, the relationship between restructuring and unemployment can take various forms and consequently measures to respond to restructuring may have different effects. For example, in a situation of increasing unemployment policy-makers need to understand the nature of the problem and the measures available to resolve it. Thus, the critical issue revolves around who will be affected by restructuring, especially who will be facing redundancy, rather than merely whether unemployment will result per se.

► Here is the link to European Strategy re to Restructuring and employment : http://ec.europa.eu/social/main.jsp?catId=103&langId=en