Abstract
This paper critiques the case for flexibilisation of labour markets. It evidences that influential claims for this in terms of an insider-outsider thesis by former Nobel economics committee member Assar Lindbeck and the British economist Dennis Snower were purely theoretical without offering any evidence, or recognising contrary evidence. It cites a recent admission by the IMF that there is no basis for claiming that protection of employee rights inhibits economic efficiency and cites also a questioning of structural reforms and an obsession with competitiveness by Benoît Coeuré, an Executive Director of the ECB. It illustrates that the achievement of some of the most competitive companies in the world, in Japan, has been based on reinforcing insider rights through commitment to lifetime employment for core employees and how this has enabled high levels of efficiency and process innovation through continuous improvement. It relates this to theories of psychological and social contracts, and evidences the influence of this flexible production rather than flexible labour market model on the recommendation of innovation-by-agreement in the 2000 Lisbon Agenda of the European Council including the right to work-life balance which has not been integral to flexible production in Japan. It then summarises some implications.