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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Labour Economics, Available online 16 April 2014
In a context of population aging, reducing early exit from the labor force is a major challenge. In this domain, the role of unemployment insurance (UI) is probably underestimated and its statistical assessment remains insufficient. And yet, when considering a possible separation, it is likely that workers who are close to retirement, and thus their employers if they wish to reduce their workforce, care about UI. In particular, they are likely to care about whether or not, potential benefit duration is long enough to cover the time until retirement. This paper provides evidence in support of this hypothesis for some worker profiles. The analysis is conducted using data from the French employment agency over the period 2001 to 2005. It is based on a natural experiment: on January 1, 2003, the potential benefit duration of UI entrants was sharply reduced. Econometric analysis of the age patterns of UI inflow reveals that the age incentives provided by UI rules greatly influence labor market behaviors: dismissals of insiders close to retirement are often scheduled so that they can receive benefits until retirement. We estimate that the reform increased the mean age at job termination of workers dismissed close to retirement by 4 months. Our findings confirm that UI rules have an impact on inflow into unemployment and that UI is viewed by some employers and/or some workers as an early retirement scheme rather than as insurance against the risk of job loss. Thus, addressing the issue of older workers' participation in the labor market requires consideration of the joint impact of UI and retirement system rules.
In the context of increasing longevity, OECD countries are finding it difficult to ensure the future of their pension systems. In order to encourage later retirement, the number of quarters of contributions required to receive a full pension and the statutory pension age have been increased in several countries. Effects have often been lower than expected. For instance, Bozio (2008) shows in the case of the 1993 French pension reform, that requiring one additional quarter of contributions for a full pension led to an average increase of only 1.5 months in retirement age, and encouraged individuals to claim more disability pensions.1 In fact, a large proportion of older workers leave employment before their statutory retirement age: in 2010 in France, the employment rate among 55–64 year olds was 40%, which is below the average for the 27 EU countries (46%) and far from the 50% EU target set by the Lisbon strategy (Dares, 2011). Some measures were enacted to address the problem of insufficient participation of older workers in the labor force. One of them, which relied on special employment protection for older workers (called “contribution Delalande”, see Appendix C), had very little effect in preventing dismissals (Behaghel et al., 2008) and was finally canceled. A more lasting measure was to reduce entries into public early retirement or disability programs, which had become very widespread in the 1980s (Ben Salem et al., 2010). The role of unemployment insurance (UI) in exit from the labor force is sometimes forgotten, or at least underestimated, and its statistical importance has not been well assessed. And yet, French UI rules are particularly favorable, especially to older workers. For all workers, the level of benefits is determined by previous wages with a good replacement rate: on average UI recipients get 69% of their previous net salary and the maximum benefit is more than €6000 (Unédic, 2013). Potential benefit duration (PBD) depends on the worker's previous work history and age at the date of job termination. PBD is quite long compared to many other countries: the maximum benefit duration over the period in question was 5 years for older workers with a continuous work history (it is 3 years today.) The rules are such that older workers, who often have high tenure and high wages, automatically receive higher benefits for longer periods than younger workers. Moreover, the French UI system includes more generous specific provisions for older workers. First, they have access to specific entitlement classes with longer PBD. Second, until recently, they could apply for exemption from active job search (see Appendix C). Third, and this point is particularly important in this paper, under certain conditions, workers over 59.5 years of age (or 60 from 2003) can continue to receive benefits until they reach the statutory retirement age, even if their PBD is exhausted. Given these favorable terms, there is a strong incentive for older workers dismissed before eligibility for a full pension to draw UI benefits rather than means-tested benefits because the latter are much lower in most cases and because compensated unemployment is taken into account in contribution record required to receive a full retirement pension. Thus there is good reason to suspect that UI can be used as a pathway to retirement for older workers (Hairault, 2012), especially those employed by firms with many older workers or firms facing economic difficulties. For these firms, dismissing older workers first, particularly those close to retirement, may appear more socially acceptable than placing the burden of job loss on other employees. There may even be a coincidence between the interests of firms which want to reduce a costly segment of their workforce while avoiding social conflict and the interests of older employees who are happy to stop working before the legal retirement age. In this paper, the hypothesis that UI is used as an early retirement scheme is tested. If such is the case, it should be visible empirically: the age at which older workers begin to draw UI benefits should be consistent with PBD in such a way to enable them to bridge the gap until eligibility for a full pension. Therefore, changing PBD (or the statutory retirement age) should impact the age at which older workers begin to receive UI benefits. The analysis is based on a change in UI rules which occurred in France on January 1, 2003. At that time, because the UI system was facing financial difficulties, UI entitlement durations were reduced for new entrants, especially for those aged 50 or over. For the latter, PBD was reduced by 20 months on average (see Table 1). However, employment record (ER) requirements themselves did not change, which means that the new UI rules induced no direct selection effects. It is thus possible to test the effect of the reduction in potential benefit duration on age-related workforce management practices.2 The data used come from the FHS registry of the French agency in charge of UI (Pôle emploi) which provides information about spells of compensated unemployment over the past 10 years; it enables us to study in detail the age pattern of UI inflow. One other advantage of this administrative data source is that it specifies the type of job termination: this enables us to make inferences about firm's workforce management practices and about the bargaining power of dismissed workers. However only spells of unemployment are observed, so it is not possible to estimate individual probabilities of entering unemployment.Econometric analysis of the distribution of inflow into UI benefits by age confirms hypothetical predictions for workers who are dismissed close to retirement: their UI inflow age pattern is consistent with the age incentives embodied in UI rules and responds to changes in these incentives. Three main types of behavior are identified as a response to UI rules: “entitlement effects,” “job search exemption effects” and “distance-to-retirement effects.” “Entitlement effects” correspond to a propensity of the parties to an employment contract to schedule job termination so that the worker gains access to longer PBD. “Job search exemption effects” concern the tendency to schedule job terminations so that workers will be exempt from the UI active job search requirement. Finally, “distance-to-retirement effects” concern the tendency to schedule job terminations so that workers can receive UI benefits until they are eligible for a full pension. The existence and magnitude of these effects are found to be heterogenous. They vary depending on the type of employment relationship considered. The effects are strongest for workers with a long ER whose job termination takes the form of a “layoff for personal reasons”; they barely exist for workers ending a fixed term contract with an unstable previous work history (shorter ER). These findings provide the basis for quantifying the impact of the reduction in PBD on the mean age at job termination of workers who are dismissed close to retirement using a difference-in-differences approach: the average effect is estimated to be + 4 months, i.e. workers who were dismissed close to retirement were on average 4 months older after the reform than before. This paper adds to the existing literature in several ways. First, it contributes to the literature on the interaction between UI and other policies (e.g. Pellizzari, 2006 and García-Pérez et al., 2013. Kyyrä, 2010) by providing explicit and detailed evidence of how the institutions involved – UI, the pension system and employment protection – interact in shaping labor demand and supply behaviors. Second, new evidence of the impact of UI rules (PBD) on inflow into unemployment is provided, a subject that has been studied less that outflow in the literature on UI. Third, the findings presented below are useful for public policy since they highlight the role of UI rules in explaining the low level of older workers' participation in the labor force in OECD countries such as France; a quantification is provided of the effects of an UI reform which can be compared to changes in other programs, such as the pension system. Lastly, the rich administrative data source (which identifies in particular the legal categories of job terminations), combined with the complexity of French UI rules (which distinguish several categories of entitlement) makes it possible to identify the factors at work and highlights the importance of the distance to retirement. Like some other recent analyses (e.g. Rebollo-Sanz, 2012), we argue that the effects of UI on the labor market cannot be attributed to workers' reactions alone, and that employers' behaviors are also important. The paper is organized as follows. Section 2 gives an overview of previous studies on the relationship between potential benefit duration and inflows into unemployment. Section 3 describes the institutional background of the French UI and pension systems and discusses the incentives linked to their rules (incentives analysis). Section 4 presents the data and the descriptive analysis. Section 5 presents an econometric analysis of the age pattern of UI inflow before and after the reform. In Section 6, the effect of the reduction in PBD on the age at the date of UI admission is estimated. Section 7 concludes.
نتیجه گیری انگلیسی
This paper investigates the influence of UI rules on practices concerning management of the older workforce. We test whether the age thresholds that determine potential benefit duration make a difference as regards the age pattern of UI inflow. Our main result is a displacement of the spike in inflow from age 55 before the reform to age 57 after. The broad picture is remarkably consistent with UI incentives. Three reasons for scheduling dismissals at specific age thresholds are identified: (1) to give workers access to UI benefits over a longer period of time (“entitlement effect”32); (2) to qualify workers for exemption from job search requirements; (3) to qualify workers to receive unemployment benefits until they have access to a full pension (“distance-to-retirement effect”). Spikes in inflow are the largest at age thresholds that combine “entitlement” and “distance-to-retirement” incentives. These findings have direct methodological implications as regards the use of regression discontinuity based on age thresholds to assess the effect of PBD on unemployment duration, a common practice in the literature. Firms and employees manipulate age at job termination: some workers are dismissed just below a relevant age threshold and others are dismissed just above. Such manipulation can invalidate the regression discontinuity assumption that average unemployment duration for individuals just below an age threshold captures information on the counterfactual duration without treatment for individuals who have just reached the age threshold (Lalive, 2008). Our analysis affords insights into the factors that explain our results. When different variables are taken into account (wage, job termination category, employment record, sociodemographic characteristics), a clear pattern of difference between insiders and outsiders emerges. The job termination category gives a particularly good indication of workforce management practices. Laying off an older worker who has been employed by a firm for a long time (an insider, with a long ER and a high previous wage) damages the reputation of the firm among its current and potential workforce. Offering the same worker early separation under good financial conditions through unemployment insurance, is a way for the firm to avoid damage to its reputation (Lalive, 2008 and Winter-Ebmer, 2003). Such considerations are less important for workers who have been employed by firms for a shorter time and for firms that do not have an internal labor market. A complementary interpretation is that the job termination category indicates whether a separation has given rise to bargaining or not and, if so, it indicates the relative bargaining strength of the employer and the worker. The higher the risk of legal challenge (which is higher for a layoff for personal reasons than for an economic redundancy and practically non-existent for termination of a fixed term contract), the better the conditions that the employer must offer in the form of an early retirement option in order to avoid a legal challenge. Our results can be interpreted in the light of these considerations. When separation takes the form of a layoff for personal reasons, the age pattern of UI inflow systematically reflects the advantages available under proper timing. When the employer can use economic difficulties to justify the separation (which translates into an economic redundancy), it is more difficult for a worker to challenge the dismissal and the employer has less leeway in the timing of the separation. Nonetheless, the age pattern of UI inflow for economic redundancy reflects age incentives generated by UI rules, although to a lesser extent. This indicates that firms first dismiss workers who would be less penalized because they are sure to receive UI benefits until they qualify for a full retirement pension. The incentives created by UI rules are reflected even less in the age pattern of UI inflow for end-of-contract dismissals (and for employees with an intermediate ER) but small jumps in inflow are observed, especially at age 50. One interpretation of this result could be that these workers defer entry into UI by getting temporary jobs long enough to reach age 50 in order to be entitled to longer PBD. Going beyond these issues of interpretation, we estimate a quantification of the effect of the 2003 PBD reduction on the average age at job termination of older workers eligible for UI. A significant positive effect is found for workers dismissed close to retirement, estimated to be + 4 months (on average, these workers lost 20 months of potential benefit duration). This impact on age is quite large compared to the changes associated with other policy reforms regarding older workers in France. The fact that behaviors regarding insiders who are far from retirement (between 50 and 54 years of age) do not respond to the reform suggests that distance to retirement is crucial. UI is apparently used as a bridge to retirement for older workers in France (as suggested by Hairault, 2012), as in Germany (Grogger and Wunsch, 2013). Some employers seem ready to schedule dismissal of older workers so that PBD will be long enough to cover the time until eligibility for a full pension. The present statistical analysis confirms case studies suggesting opportunistic use of UI (Seignour et al., 2007), and shows that corresponding behaviors are quantitatively significant and result in large costs for the unemployment insurance fund, since these practices especially concern high wage workers. However, translating the findings of this study into policy recommendations requires caution. If labor demand is the most important factor in early retirement, reducing unemployment benefit duration may simply increase hardship among those older workers who are not in a position to negotiate when they leave the labor force. This measure alone would certainly not be sufficient to reverse the trend of early exits from the labor market, which relies on a kind of perverse complicity between employees and employers – at least in France – and on factors that go beyond financial incentives such as social norms or peer effects (Manoli and Weber, 2014). There is evidence that comprehensive reforms are more successful than piecewise policy changes (Belot and van Ours, 2004, Inderbitzin et al., 2013 and OECD, 2014). Hence, a reduction in unemployment benefit duration should be linked to other measures such as improvements in training and in job search services for older unemployed workers.