اصلاحات حفاظت از اشتغال، استخدام و بروز مشاغل موقت در اروپا : 1996-2001

This paper uses longitudinal data on individuals from the European Community Household Panel over the 1996–2001 period to investigate the impact of reforms of employment protection systems in nine countries on the incidence of employment and of temporary jobs for wage and salary workers. Important features of the research design include the use of individual fixed effects models as well as the inclusion of country-specific trends in the dependent variable. A robust finding is that policies making it easier to create temporary jobs on average raise the likelihood that wage and salary workers will be in temporary jobs. This effect is felt primarily when the regional unemployment rate is relatively high. However, there is no evidence that such reforms raise employment. Thus, these reforms, while touted as a way of jump-starting individuals' careers in the job market, appear rather to encourage a substitution of temporary for permanent work.

A considerable volume of economic research has been devoted over the last two decades to explaining and suggesting remedies for the stubbornly high unemployment rates in a number of European countries. Among the suggested policy remedies for reducing joblessness is the relaxation of systems of employment protection by reducing the mandated costs to firms of firing workers. Some have argued that such reforms encourage job creation by reducing future downsizing costs or the costs of firing unproductive workers; however, the reforms may also raise the number of employee discharges, potentially undoing the reforms' effects on unemployment (OECD, 2004). While some reforms lower the costs of firing workers from permanent jobs, most reforms in recent years have been directed at easing restrictions on the use of temporary employment contracts. These reforms presumably reflect a desire to maintain protections for workers in permanent jobs while giving firms an incentive to create new, temporary jobs, which may ultimately become permanent.1 However, such policies may instead encourage firms to substitute temporary for permanent jobs, and, if so, the overall exit rate from jobs may increase. The resulting higher turnover may even lead to higher equilibrium unemployment than before (Blanchard and Landier, 2002 and Cahuc and Postel-Vinay, 2002). Moreover, temporary jobs are known to pay less, offer less training, and be less satisfying than regular jobs (Booth et al., 2002b and Kahn, 2007). Thus, reforms that encourage the creation of temporary jobs may not lower unemployment and also may not unambiguously raise employed workers' utility (Blanchard and Landier, 2002 and Cahuc and Postel-Vinay, 2002). This paper studies the effects of employment protection system reforms in nine European countries during the 1996–2001 period. The countries are Belgium, Finland, France, Germany, Italy, the Netherlands, Portugal, Spain and the United Kingdom. During the post-1990 period, the most common reform of employment protection laws (EPL) among these and other OECD countries has been to relax restrictions on the use of temporary contracts. For example, in some cases, firms were allowed to renew their temporary employment contracts additional times. This type of reform may be the easiest to accomplish politically since it leaves intact any basic protections on permanent employment (Brügemann, 2007). However, as shown below, there were also some reforms in which protections on permanent jobs were relaxed as well as some where protections on permanent jobs or restrictions on temporary jobs were increased. This diversity of change will provide us with some useful variation in order to estimate the impact of these reforms. To examine the effects of EPL reforms, I use longitudinal data from the European Community Household Panel (ECHP) for the nine countries mentioned above. Microdata are helpful in estimating the impact of reforms since they allow one to control for composition effects. For example, groups in the labor force that typically work disproportionately in temporary jobs such as the young, women or immigrants may be increasing their labor force share at the same time as reforms are being enacted. If so, then macroeconomic comparisons of the incidence of temporary jobs before and after reforms may confound these compositional effects with the true effects of the reforms. In addition, previous theoretical and empirical research suggests that the impact of employment protection on the incidence of temporary jobs will be felt disproportionately by the young, women, immigrants, and the less skilled (Kahn, 2006 and Kahn, 2007). Having microdata will allow one to test these hypotheses as well. The longitudinal nature of the ECHP sharpens one's tests of the impact of the reforms. Specifically, by estimating individual fixed effects models, one can observe outcomes for the same individual in an environment without and one with labor market reforms. Such a research design can alleviate possible biases due to non-random changes in the composition of the population at the time of the reforms, even controlling for its measured characteristics. For example, new cohorts of women may have different attitudes toward temporary work (compared to previous cohorts) around the time of reforms. Again, the incidence of temporary work among women may be changing for these compositional reasons rather than due to the reforms. However, by observing the same worker over time, we can provide a more valid test. Of course, individuals' attitudes may be changing at the time of reforms, making even the fixed effects approach suspect. I will address such concerns by including country-specific trends in some models. Moreover, this design can in principle at least partially account for the potential endogeneity of reforms. For example, to the extent that reforms reducing workers' protection become more politically viable during expanding labor markets (a possible outcome in political economy models of reforms such as those of Saint-Paul (2002) and Brügemann (2007)), failure to control for country trends may lead us to mistakenly credit reforms for creating jobs. On the effect of temporary job reforms, I find that not controlling for country-specific trends, making it easier to create temporary jobs does not affect employment but raises the incidence of such jobs among the employed; these findings hold up even controlling for country-specific trends. Thus, making it easier to create temporary jobs does appear to cause a greater relative incidence of such jobs, although the lack of a positive aggregate employment effect of such reforms suggests that firms are induced to substitute temporary for permanent jobs. Moreover, the positive effects of liberalizing temporary employment reforms on the relative incidence of temporary employment are primarily observed at high unemployment. I pose a model for the impact of such reforms that attributes such a result to two factors. First, in the model, the gain to hiring a worker directly into a temporary rather than a permanent job stems from the firm's right to weed out unproductive workers at low cost under a temporary contract. The value of this option is greater when average productivity is low, i.e., when unemployment is high. Second, the unemployment insurance (UI) system in effect subsidizes the temporary employment strategy, and this subsidy is greater during periods of high than low unemployment. Regarding permanent protection reforms, I find that, not controlling for country-specific trends, reducing restrictions on firing workers from permanent jobs appears to raise employment and to raise the incidence of permanent work among the employed, as the reforms were intended to do. However, these effects become small and insignificant on average when I control for country-specific trends. The impact of controlling for country-specific trends suggests that countries are most likely to enact reforms liberalizing their permanent job protection regulations when the incidence of employment and permanent employment is rising.

This paper has used longitudinal data on individuals from the ECHP for nine countries over the 1996–2001 period to investigate the impact of reforms of employment protection systems on the incidence of employment and of temporary jobs for wage and salary workers. Important features of the research design included the use of individual fixed effects models as well as the inclusion of country-specific trends in the dependent variable. Both the possibly changing labor force composition as well as the possible endogeneity of the reforms are at least partially addressed by these design features. In particular, I observe employment outcomes for the same individuals under different laws, and I control for changes in employment or temporary employment that could directly affect legislatures' willingness to enact reforms. A basic finding that is robust to virtually all specifications is that policies making it easier to create temporary jobs raise the likelihood that wage and salary workers will be in temporary jobs. However, there is no evidence that such reforms raise employment. Thus, these reforms, while touted as a way of jump-starting individuals' careers in the job market, appear rather to encourage a substitution of temporary for permanent work. I also found that such reforms have their largest effect on raising the incidence of temporary jobs when the unemployment rate is high. This impact is consistent with an underlying model of the firm's choice between offering a temporary or a permanent job. In a model analyzing these issues, I find that two factors explain this outcome. First, the benefits of temporary jobs come about by giving the firm the option to terminate substandard workers at low cost, much as in Autor's (2001) model of temporary help firms. This option is more valuable when productivity is low, as in a recession. Second, UI systems subsidize such strategies more during periods of higher unemployment. Regarding the impact of reforms of permanent employment protection mandates, not controlling for country-specific trends, reducing restrictions on firing workers from permanent jobs appears to raise employment and to raise the incidence of permanent work among the employed, as the reforms were intended to do. However, these effects become small and insignificant on average when I control for country-specific trends. The impact of controlling for country-specific trends suggests that countries are most likely to enact reforms liberalizing their permanent job protection regulations when the incidence of employment and permanent employment is rising.