“Job Quality, Labour Market Performance and Well-Being” 27-28 November 2014, Brussels

1. EC/OECD seminar, Brussels,
27-28 November 2014
REDUCING THE LABOUR MARKET DIVIDE
JOB SECURITY, EPL AND SEGMENTATION

2. 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. 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. 4
Temporary employment in EU countries,
1987-2013
0
10
20
30
40
EU 28 EU 15 Germany Spain France Italy Poland

5. 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. 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. 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. 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).
Non-regular workers exposed to greater job
insecurity

9. 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. 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. 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. 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. 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. 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. 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. 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
CAN
USA
GBR
ZAF
IRL
SWE
AUS
RUS
NZL
CHE
NLD
JPN
ISL
ISR
DNK
CZE
CHN
DEU
HUN
AUT
SVK
EST
POL
FIN
BEL
CHL
SAU
SVN
ITA
KOR
PRT
IND
IDN
NOR
GRC
BRA
FRA
ESP
LUX
MEX
TUR
Temporary work agency employment, 2008
Fixed-term contracts, 2008
Temporary forms of employment, 2013