In December 2014 Professor Jason Heyes, along with Dr Paul Lewis from the University of Birmingham, co-hosted a one-day workshop on ‘Regulating work and employment: recent changes/future prospects’. The event was attended by representatives of ACAS, the Department of Business, Innovation and Skills (BIS), the CIPD and the Gangmasters Licensing Authority (GLA), as well as leading academics and early career researchers. The workshop was the culmination of a two-year project, funded by the British Academy and Leverhulme Trust, which has assessed the consequences of labour market policy reforms in the EU since the start of the economic crisis in 2008. During the workshop, Jason Heyes, Paul Lewis and Mark Beatson – chief economist at the CIPD – discussed the implications of employment rights reforms for workers and employers while Dr Tim Vorley (Sheffield), Professor Ute Stephan (Aston) and Professor Simon Down (Anglia Ruskin) spoke about the impact of employment regulations on small businesses. Mark Heath from the GLA and Professor Linda Dickens from the University of Warwick assessed long-standing and emerging challenges facing government agencies responsible for ensuring compliance with employment rights while Tony Thomas and Paula Lovitt provided insights into BIS’ review of employment status. We are hosting many slides from this event on Slideshare. Find out more about the Work, Organisation & Employment Relations Research Centre (WOERRC) here: http://www.woerrc.group.shef.ac.uk/

1. TakingstockofchangesinEPL:
trends,causesandconsequences
Jason Heyes, University of Sheffield, WOERRC
Paul Lewis, University of Birmingham

2. Context
Labour market and industrial relations reforms are central to governments’ attempt to restart
growth following the ‘Great Recession’
Advocates argue that weaker employment rights (increased labour market ‘flexibility’) will
stimulate growth and job creation
Employment protection legislation (EPL) is being reformed. Employment protections are
being weakened in many EU member states
Sceptics doubt that this will stimulate an increase in decent, high quality jobs and
competitiveness and point to the potential negative consequences for employer-worker
relations and the economy

3. The impact of EPL in theory
The case against
EPL creates labour market rigidity
Increases unemployment (reduces hiring activity)
Exacerbates ‘insider-outsider’ divide
The case for
EPL encourages investment in skills and efficiency
Co-operation between labour and management
Productivity growth

4. Mixed evidence
On aggregate employment and unemployment
Supporting reductions in EPL (Elmeskov et al., 1998; Bertola et al., 2001; Botero et al., 2004)
Finding little evidence (Baker et al., 2005; Oesch, 2010; Cazes, 2012; Avdagic and Salardi, 2013)
On youth employment and unemployment
Supporting reductions in EPL (Allard and Lindert, 2007; Bertola et al., 2007)
Finding little evidence (Noelke, 2011)
On productivity growth
Positive association with EPL (Buchele and Christiansen, 1995, 1999; Storm and Naastepad, 2009)
On skill development
Positive association with EPL (Harcourt and Wood, 2007)
On product and process innovations
Use of non-standard contracts negatively associated (Michie and Sheeehan, 2003)

5. Debate within the EU
Economic integration and employment rights
Support for ‘flexibility at the margins’ during the 1980s and 1990s
Launch of the European Employment Strategy
Support for greater flexibility in respect of regular contracts has increased over time (2005
relaunch of the Lisbon Agenda)
Development of the Flexicurity agenda: emphasis on ‘employment security’ rather than
‘job security’
Hardening of position since the start of the crisis

6. ChangesinEPLscores, 1990-2008
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
1990 2008
Austria
Belgium
Czech Republic
Denmark
Finland
France
Germany
Greece
Hungary
Ireland
Italy
Netherlands
Poland
Portugal
Slovakia
Spain
Sweden
UK

7. Countriesgrouped byEPLscore
EPL EPL score 200808
Low Medium High
Denmark 1.91 Austria 2.41 France 3.00
Ireland 1.39 Belgium 2.61 Greece 2.97
Sweden 2.06 Finland 2.29 Luxembourg 3.39
UK 1.09 Germany 2.63 Portugal 2.84
Italy 2.58 Spain 3.11
Netherlands 2.23

8. Tendencies since the crisis
Weaker EPL is regarded as a way of addressing high unemployment and restarting growth
The EC is scrutinising members states’ economic and social policies more closely and issuing ‘country
specific recommendations’
The European Commission, European Central Bank and IMF have insisted on EPL reforms in return for
providing financial assistance
Several EU member states (e.g. Spain, Portugal, Italy, Hungary, Romania, Slovakia, Slovenia, Lithuania,
Czech Republic, UK) have diluted Employment Protection Legislation. Common reforms include:
Extension of ‘probation periods’ (i.e. Extending the time before an employee can claim unfair dismissal)
Reduced severance pay and compensation for unfair dismissal
Weakened trade unions’ consultation rights
Increase in employers’ freedom to determine the criteria for dismissals

9. EPL in the initial crisis period
Evidence that EPL had a cushioning effect in the initial stages of the crisis
Combined with short-time work programmes, EPL encouraged adjustment via
internal flexibility (hours reductions) rather than dismissals
Germany’s ‘success story’ : 1.5 million workers involved in short-time working in 2009

10. EmploymentratechangesintheEU,q32008-q32009

11. EU-15ScatterplotofEPL2008andChangeintherateofEmployment,q4
2009–q42011

12. What has happened to unemployment
in those countries that have cut EPL?

13. Quarterlychangesinlong-termunemploymentforworkersaged25-64years,2008-13
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013Q2 2013Q3 2013Q4
Czech Republic Greece Spain France Italy Hungary Portugal Slovenia Slovakia United Kingdom Estonia

14. Quarterlychangesinlong-termyouthunemployment,2008-2013
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
Czech Republic Greece Spain France Italy Hungary Portugal Slovenia Slovakia United Kingdom

15. From job security to employment security?
Reductions in social welfare benefits and allowances (Germany, Spain, Portugal
Greece, Hungary, Czech Republic, Ireland, Sweden, UK, Latvia), reflected in reductions
in net replacement rates.
Participation by employed persons in education and training has increased since
2001, but the increases generally occurred prior to the crisis.
With the exceptions of Sweden and Portugal, where there has been a substantial
recent increase, the participation rate of unemployed workers in education and
training have changed relatively little since the start of the crisis.
Government spending on ALMPs (per unemployed person) has not increased
substantially and has fallen in some of the worst hit economies. Support for ALMPs is
particularly low in CEEs.

16. Expenditureonactivelabourmarketmeasuresperpersonwantingtowork
0.00
500.00
1,000.00
1,500.00
2,000.00
2,500.00
3,000.00
3,500.00
4,000.00
4,500.00
2005 2006 2007 2008 2009 2010 2011
Czech Republic Estonia Spain France Italy Hungary Portugal Slovenia Slovakia

17. Conclusions
Emphasis on EPL reductions in the EU has increased since the start of the economic crisis
Reductions in EPL are most in evidence in countries that have approached the EU institutions for financial assistance
Reasons to be cautious:
1. EPL cushioned the impact of the economic shock on jobs. Protections probably encouraged employers to look to
internal solutions to reducing labour costs, such as work-sharing, as opposed to laying off workers
2. It is unclear young people will benefit. Young workers in countries with weak employment protections (e.g. UK) have
also suffered. International differences in EPL shed little light on differences in the labour market prospects of young
European workers.
3. What about job quality and enduring problem of under-employment? What about the consequences for long-term
economic performance?
4. Farewell to flexicurity?