عملکرد مشاغل موقت، امنیت شغلی و بازار کار

The simultaneous use of strong employment protection and temporary jobs observed in many European countries seems contradictory since the former aims at limiting job destruction while the latter intensifies it. We analyze the combined impact of those two instruments using a matching model. We find that it may be the willingness of a majority of workers to support the combination of two instruments with opposite effects on job destruction and job creation that increases unemployment and reduces efficiency. Moreover, while inefficient, this combination may be supported by a majority of workers, depending on firm ownership concentration. Laissez faire is the preferred point of a majority of workers when firm ownership is dispersed, whereas a combination of job protection and temporary jobs is preferred by workers when it is concentrated.

In response to the dramatic rise in unemployment faced since the end of the 1970s, many European governments made a simultaneous use of two apparently diverging policy instruments. The first one clearly pushed in the direction of a more stringent labor market regulation: It consisted of maintaining or even sometimes reinforcing generally already strong legislation on employment protection, with the idea of slowing down job destruction. Meanwhile, the second one was a definite step toward more flexibility: It consisted of introducing the possibility of hiring workers on flexible, fixed-duration contracts, aiming at fostering job creation. At the end of the 1970s, labor market regulations required that temporary jobs were directed to specific tasks, characterized by large variations in productivity, due to important seasonal variations in demand for instance. But those regulations have changed somewhat since the 1980s, and it is now possible in a number of European countries to hire workers on a temporary basis even on jobs that are not subject to large variations in productivity. For instance, in Spain (Cabrales and Hopenhayn, 1997), in Germany (Rogowski and Schöman, 1996) and in France (Barthelemy and Jaulent, 1997), the use of temporary jobs is authorized quasi-unconditionally for certain groups of workers (such as youths, seniors, long-term unemployed), and restrictions on the use of such contracts for other categories of labor have been slackened. As a result, in some of those countries, the bulk of recent hires have been on temporary jobs (about 80% in France and over 90% in Spain), even though it is hard to believe that the share of newly created jobs for which the use of a worker for a short period only is ‘objectively’ justified is that high. As Bentolila and Dolado (1994), Saint-Paul (1996) and Cabrales and Hopenhayn (1997) emphasized, this evolution toward a more flexible labor market has started to bring down unemployment without harming the so-called ‘insiders’ who are protected by high job security. Does introducing flexibility in this particular way actually help increase employment? The literature on job security provisions delivers no clear-cut answer. The impact of firing costs on employment and labor market flows has been thoroughly analyzed in a number of important contributions, which generally show that a more stringent employment protection has an ambiguous impact on the level of overall employment, but reduces labor flows (Bentolila and Bertola, 1990, Bertola, 1990, Bentolila and Saint-Paul, 1992, Bentolila and Dolado, 1994 and Garibaldi, 1998; Hopenhayn and Rogerson, 1993; Ljungqvist, 1998, Millard and Mortensen, 1997, Mortensen and Pissarides, 1994, Mortensen and Pissarides, 1999a and Mortensen and Pissarides, 1999b). The impact of fixed-duration contracts on unemployment also seems to be unclear. Empirical papers of Goux and Maurin (2000) for France, and Güell (2000a) for Spain, find that the spread of temporary contracts increases inflows and outflows from unemployment to employment. It is generally concluded that the introduction of fixed-duration contracts is equivalent to a reduction in firing costs and that its impact on unemployment is therefore ambiguous Bentolila and Saint-Paul, 1992, Bentolila and Dolado, 1994, Saint-Paul, 1996, Cabrales and Hopenhayn, 1997, Aguirregabiria and Alonso-Borrego, 1999, Boeri, 1999, Wasmer, 1999, Garibaldi and Violante, 1999, Blanchard and Landier, 2000, Güell, 2000a and Güell, 2000b. In this paper, we focus on two common features shared by many European labor markets: (1) firms can create both permanent and temporary jobs and (2) firms convert a certain share of the latter to permanent contract at their expiration (the rest being terminated at no cost). Our paper explicitly analyzes the consequences of this specific combination of temporary and permanent jobs. This is, as far as we are aware, a novelty, as it is generally assumed either that firms can create both permanent and temporary jobs, the latter being necessarily destroyed when they expire ( Bentolila and Saint-Paul, 1992; Bentolila and Dolado, 1994, Saint-Paul, 1996 and Wasmer, 1999), or that firms only create “entry-level” jobs, which can be either converted or destroyed after a given time period Garibaldi and Violante, 1999, Goux and Maurin, 2000 and Blanchard and Landier, 2000. Our approach allows for a precise analysis of job creation and destruction when a distinction between temporary and permanent jobs exists through labor market legislation, a situation often met with in Europe. Our concern is the consequences of employment protection regulations on unemployment, welfare and income distribution. We thus need to embed the above enumerated two features into an equilibrium model of the labor market. As will appear in the paper, the Mortensen and Pissarides (1994) matching model with endogenous job destruction is a good candidate. In this framework, we find that more flexible regulation on fixed-term contracts may actually destroy jobs, increase unemployment, and reduce aggregate welfare, especially when firing costs are high. Facilitating the creation of more temporary jobs fosters job creation but also triggers an increase in job destruction, the latter effect having a larger impact on unemployment when firing costs are large. The intuition for this result becomes clear if one realizes that firms transform temporary jobs into permanent jobs. For instance, in France, between 1987 and 1991, approximately one third of short-term employment contracts were converted to long-term contracts at their expiration (Abowd et al., 1999), which implied a share of temporary jobs in total employment of around 15% in this period. Obviously, the higher the firing costs, the lower the share of temporary jobs transformed into permanent jobs, because large firing costs are an incentive for employers to use temporary jobs in sequence rather than converting them to long-term contracts, which are subject to the firing costs. Consequently, a policy that permits the opening of more temporary jobs fosters both job creation and destruction, the latter effect being strengthened when firing costs are large. This implies that the spread of temporary jobs is more likely to raise unemployment when it comes on a labor market already regulated by stringent permanent job security provisions. 1 In fact, theory predicts that allowing for more temporary jobs to be created while imposing positive firing costs fosters both job creation and job destruction, with a consequently ambiguous overall impact on equilibrium unemployment. But simulations of a calibrated version of our model for a typical European labor market nonetheless suggest that the effect on job destruction is stronger, resulting in a higher unemployment rate for economies with both stringent firing restrictions and a widespread use of fixed-duration contracts. Finally, simulations show that the net present value of future aggregate net production flows—which is a consistent measure of aggregate welfare when individuals are assumed to be risk-neutral—is typically reduced by the combined use of firing restrictions and fixed-term contracts. Given those preliminary results, the main question we want to address in this paper is that of the causes that led some European governments to use those inefficient combinations of temporary jobs and stringent dismissal restrictions. An answer to this question, which also is the main result of this paper, is given by further welfare and income distribution analysis.2 Our benchmark case is a situation where profits are not redistributed to workers. In that case, the abovementioned simulations show that a measure that facilitates the creation of temporary jobs, which raises the unemployment exit rate, improves the welfare of every worker whose status (unemployed, employed either on a permanent or on a temporary job) does not change as a direct result of that measure. Accordingly, only those workers whose jobs are directly threatened by the change of policy can bear losses when temporary jobs are made easier to create. Moreover, it appears that workers employed on long-term jobs prefer higher firing costs than unemployed workers and workers on temporary jobs. Overall, both the aggregate discounted income of workers and the welfare of employees with permanent jobs reach a maximum in a situation in which firms are allowed to create as many temporary jobs as they want and have to pay firing costs that amounts to about 3 months of the average production of a worker. As a consequence, in the world that we describe in our benchmark case, starting from a laissez-faire situation without employment protection or temporary jobs, a small simultaneous increase in the share of temporary jobs and firing costs is always supported by a vast majority of workers, even though it is inefficient. Our analysis thus suggests that unemployment and labor market inefficiency do not originate from the sole political support of insiders to employment protection, but could rather be the result of a consensus among a very large majority of workers in favor of a “dual” labor market. Surprisingly, it is found that temporary jobs diminish aggregate profits. Indeed, loosening the restrictions imposed on the creation of temporary jobs has two counteracting effects on profits: On the one hand, it facilitates the creation of more profitable jobs, but on the other, by increasing the job finding rate, it also increases wage pressure, which is detrimental to profits. We find that the second effect dominates for a wide range of parameter values, and that aggregate profits are (slightly) decreased in equilibrium when firms are allowed to create more temporary jobs. Obviously, firing costs are also bad for profits and, overall, aggregate profits are lower when there is a combination of temporary jobs and firing costs. Those results suggest that the distribution of firm ownership is likely to influence labor market regulations. The share of profits earned by workers was zero in our benchmark case, which would be the case in an economy where equity ownership is concentrated among a few shareholders who do not participate in the labor market. The opposite case of extreme dispersion in firm ownership is a situation where profits are evenly distributed to all workers. We show in this last case that the preferred point of workers is a very flexible labor market, with virtually no restriction on dismissals. This contrast between the two exercises is consistent with the stylized view that corporate ownership is more dispersed in Anglo-Saxon economies than in continental Europe (see, e.g., La Porta et al., 1999), since another stylized view (which will be documented later in the paper), is that Anglo-Saxon labor markets are less regulated and more flexible than in continental Europe. The paper is organized as follows: Section 2 briefly documents the importance of fixed-duration jobs and firing costs in some European economies. Section 3 exposes the theoretical framework we use to address the question at hand, and characterizes its steady state. Section 4 studies both qualitatively and quantitatively the effects of labor market policy—that is, the combined use of firing restrictions and fixed-duration contracts—on the values of some variables of interest. Section 5 concludes.

The search and matching model used in this paper shows that the combined effects of stringent dismissal restriction policies and the spread in temporary jobs may be very different from those usually expected. Facilitating hires on temporary contracts is generally thought of as a means to foster job creation and cut unemployment. Our model shows that, while it indeed fosters job creation, its beneficial impact on employment can be offset by the increase in job turnover when there are positive firing costs. Trying to achieve more labor market flexibility through spreading temporary jobs without reducing firing costs may thus be both inefficient in terms of aggregate welfare and a poor weapon to fight unemployment. In spite of its aggregate inefficiency, the combination of temporary contracts and firing restrictions on permanent jobs may be beneficial to a majority of individual workers. In particular, this is the case if corporate ownership is sufficiently concentrated, implying that the share of profits distributed to workers is small. We believe the structure of firm ownership in continental Europe to be suitably stylized by this assumption. Taking this for granted, we thus find that, contrary to what is often argued, the culprit for high European unemployment rates is not so much the political support to firing restrictions per se: It is now well known, and again confirmed in our model that firing restrictions may or may not cut unemployment, their impact being very limited in either direction. Rather, our analysis suggests that it is the support to the combination of two instruments with opposite effects on job destruction and job creation—namely, job security provisions and determined duration jobs—that increases unemployment and reduces welfare.