The second is that the significant fall in lending rates with a marginal decline in rates on deposits has been achieved at the expense of financial institutions’ profits. This point is closely related to the first one, in that the policy effects on lending rates will also depend on financial institutions’ lending attitudes.
A key element in creating this environment is flexible labor markets. Many working people equate labor market flexibility with job insecurity. Despite that perception, flexible labor policies appear to promote job creation. An increased capacity of management to discharge workers without excessive cost, for example, apparently increases companies' willingness to hire without fear of unremediable mistakes.