EC/OECD seminar, Brussels,

27-28 November 2014

REDUCING THE LABOUR MARKET DIVIDE

JOB SECURITY, EPL AND SEGMENTATION

2

Background and motivation

Expansion of new forms of flexible forms of employment in many OECD countries over the last decades

Introduce the concept of non-regular employment (temporary employment, casual employment, dependent self-employed workers)

Assess to which extent different those forms produce disparities in terms of quality (security) across groups & whether those are likely to persist over time

3

Temporary employment widely used in many

OECD countries

0

5

10

15

20

25

30

35

40

Temporary Employment (% of dependent employment), 2013

4

Temporary employment in EU countries,

1987-2013

0

10

20

30

40

EU 28 EU 15 Germany Spain France Italy Poland

5

… fixed-term contracts are increasingly used for

new hires

AUT

BEL

CZE

DNK

EST

FIN

FRA

DEU

GRC HUN

ISL

IRL

ITA

LVA

LTU

LUX

NLD

NOR

POL PRT

SVK

SVN

ESP

SWE

CHE

GBR

0

10

20

30

40

50

60

70

80

90

0 10 20 30 40 50 60 70 80 90

2011-12

2006-07

Fixed-term contracts among new hires, 2006-07 and 2011-12

Percentage of employees with no more than three months of tenure

Source: OECD calculations based on microdata from the European Union Labour Force Survey (EU-LFS).

6

Share of DSE as % of dependent workers,

2010

0

1

2

3

4

5

6

% Whole economy Non-agricultural private sector

Source: Eurofound, 2010, 5th EWCS.

7

Non-regular jobs still disproportionately held

by younger

0

10

20

30

40

50

60

70

80

% All Youth (15-24) Prime age workers (25-54) Older workers (55-64)

0

10

20

30

40

50

60

70

80

% All Youth (15-24) Prime age workers (25-54) Older workers (55-64)

Temporary employment by age group , 2o11-12 All fixed-term contracts (share of employees with a FT contract)

Source: OECD calculations based on microdata from the European Union Labour Force Survey (EU-LFS)..

8

In depth review of statutory employment protection across contracts shows that non-regular workers generally less protected by EP than regular workers (De Jure)

Cross-country heterogeneity in termination rules between permanent and temporary contracts:

Termination of fixed-term contracts before the end date is more difficult and costly than terminating contract with indefinite duration only in a few countries. In the majority of OECD countries no significant differences

Termination of fixed-term contracts at the end date is usually easier than terminating permanent contracts and almost at zero cost in most countries

Regulation on hiring: usually effective in preventing excessive use of fixed-term contracts but can be counterproductive

No or minimal restrictions on the type of work for which fixed-term contracts are allowed in almost 2/3 of OECD countries (1/2 for TWAs).

…De facto…The comparison across contract types of different measures of job security suggests that non-regular workers (FT and TWA) feel much more insecure than permanent employees as regard to the risk of job loss and the probability of re-employment after job loss (OECD, EmO, 2014)

Non-regular workers exposed to greater job

insecurity

9

Average percentage of workers with high perception of

job insecurity, by type of contract, 2010

A. High perceived risk of job loss

0

10

20

30

40

50

60

Permanent Fixed-term contracts TWA workers

%

C. High perceived risk of costly job loss

0

5

10

15

20

25

30

35

40

45

Permanent Fixed-term contracts TWA workers

%

Source: EWCS

10

They face a wage penalty, about 6-10% for temporary workers once unobservables are taken into account (OECD, 2014a)

They receive less training (on average probability of receiving employer-sponsored training – 14%)

Non-regular workers tend to cumulate

unfavourable conditions

*** *** ***

*****

*** **** ***

**

***

-30

-25

-20

-15

-10

-5

0

5

10

%

Estimated percentage effect of temporary contract status on the probability of receiving employer-

sponsored training, 2012

11

…temporary employment not an automatic

stepping-stone to permanent work

0

10

20

30

40

50

60

NLD GRC EST FRA ESP IRL ITA AUT BEL POL ALL PRT SWE LUX CZE SVN GBR FIN HUN SVK NOR ISL

%

Three-year transition rates from temporary to permanent contracts Share of temporary employees in 2008 that were employed as full-time

permanent employees in 2011

12

Reduce gaps between permanent and temporary workers and alleviate (contractual) segmentation in the labour market

Equity issue, but not only

Efficiency as well

Depress productivity growth (Dolado et al., 2012; Bassanini et al., 2009)

Excessive adjustment at the margin (volatility): impact of a downturn on job losses is greater among those atypical jobs. OECD, 2014c (Spain)

Avoid “excessive” use of non-regular employment

POLICY OBJECTIVE

13

Non-Regular workers have lower job security than permanent workers (De jure)

Evidence found that this also holds de facto (OECD, 2014)

Gaps in employment protection should be reduced (in line with theoretical arguments):

Asymmetric liberalisation of temporary contracts in Europe lead firms to substitute temporary for permanent workers--increase in the % of workers on fixed-term contracts (Boeri and garibaldi, 2007; Bentolila et al., 2008)

Gaps between the EP provisions applying to the two types of contracts reduce the conversion rate of fixed-term contract into permanent ones (Boeri, 2011)

Hiring and Firing rules matter…

14

Make hiring on temporary contracts more difficult & costly ?

Restricting renewals, duration and/or scope of use of FTCs (incl. TWA employment)

Reduce the wedge between termination costs of permanent and temporary contracts ?

By introducing a single or unified Contract

This involves overcoming implementation difficulties and requires complementary reforms to be effective

Enhance convergence of termination costs across contracts where possible?

However…convergence will not eliminate all forms of duality

Policy options

15

Thank you

Contact: sandrine.cazes@oecd.org,

OECD Employment Outlook, via www.oecd.org/employment/outlook

OECD Employment Database, via www.oecd.org/employment/database

OECD EPL Database www.oecd.org/employment/protection

16

OECD indicator of employment protection

for temporary contracts

2008 and 2013 (where available)

0.0

1.0

2.0

3.0

4.0

5.0

6.0

CA

NU

SA

GB

RZ

AF

IRL

SW

EA

US

RU

SN

ZL

CH

EN

LD

JP

NIS

LIS

RD

NK

CZ

EC

HN

DE

UH

UN

AU

TS

VK

ES

TP

OL

FIN

BE

LC

HL

SA

US

VN

ITA

KO

RP

RT

IND

IDN

NO

RG

RC

BR

AF

RA

ES

PL

UX

ME

XT

UR

Temporary work agency employment, 2008

Fixed-term contracts, 2008

Temporary forms of employment, 2013