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Employed 40 Hours or Not-Employed 39: Lessons from the 1982 Mandatory Reduction of the Workweek

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  • Crépon, Bruno

    ()
    (CREST)

  • Kramarz, Francis

    ()
    (CREST (ENSAE))

Abstract

We use longitudinal individual wage, hours, and employment data to investigate the effect of the February 1, 1982 mandatory reduction of weekly working hours in France. Just after François Mitterrand’s election in May 1981, the government decided to increase the minimum wage by 5%. Then, as promised in its electoral program, the socialist government reduced the workweek from 40 to 39 hours. At the same time, it mandated stable monthly earnings for minimum wage workers and recommended the stabilization of monthly earnings for other workers (recommendations followed by 90% of the firms). We show that workers directly affected by these changes—those working 40 hours in March 1981 as well as those working overtime at the same date —were more likely to lose their jobs between 1981 and 1982 than workers not affected by the changes—those working 36 to 39 hours in March 1981. Moreover, because the decree enforcing the new standard was issued faster than earlier promises, some firms had no time to complete negotiations and their workers were still working 40 hours after February 1, 1982. We show that these workers were also strongly affected by the reduction in standard hours. Our estimates of the impact of this one-hour reduction of the workweek on employment losses vary between 2% and 4%, depending on the methodology or the data used. Furthermore, we show that minimum wage workers were most affected by the changes. This result, consistent with our model, is due to the impossibility of adjusting their monthly wage, which results in excess job destruction and creation. These results should help us understand the possible effects of the upcoming mandatory reduction of hours in France, where the maximum weekly working hours declined from 39 to 35 hours beginning in January 2000. Similar programs are envisaged in other European countries, which hope that hours reductions will be an efficient policy for reducing unemployment.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 416.

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Length: 42 pages
Date of creation: Jan 2002
Date of revision:
Publication status: published in: Journal of Political Economy, 2002, 110 (6), 1355-1389
Handle: RePEc:iza:izadps:dp416

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Keywords: wages; Hours reduction; unemployment;

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References

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  1. James Heckman & Hidehiko Ichimura & Jeffrey Smith & Petra Todd, 1998. "Characterizing Selection Bias Using Experimental Data," NBER Working Papers 6699, National Bureau of Economic Research, Inc.
  2. Heckman, James J. & Lalonde, Robert J. & Smith, Jeffrey A., 1999. "The economics and econometrics of active labor market programs," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 31, pages 1865-2097 Elsevier.
  3. Kramarz, Francis & Philippon, Thomas, 2000. "The Impact of Differential Payroll Tax Subsidies on Minimum Wage Employment," IZA Discussion Papers 219, Institute for the Study of Labor (IZA).
  4. Jennifer Hunt, 1999. "Has Work-Sharing Worked In Germany?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 117-148, February.
  5. Abowd, John M. & Kramarz, Francis & Margolis, David N. & Philippon, Thomas, 2000. "The Tail of Two Countries: Minimum Wages and Employment in France and the United States," IZA Discussion Papers 203, Institute for the Study of Labor (IZA).
  6. Abowd, J.M. & Kramarz, F. & Margolis, D.N., 1998. "Minimum Wages and Employment in France and the United States," Papiers du Laboratoire de Microéconomie Appliquée 1998-12, Université Panthéon-Sorbonne (Paris 1).
  7. Guido W. Imbens, 1999. "The Role of the Propensity Score in Estimating Dose-Response Functions," NBER Technical Working Papers 0237, National Bureau of Economic Research, Inc.
  8. John M. Abowd & Francis Kramarz & David N. Margolis, 1994. "High-Wage Workers and High-Wage Firms," CIRANO Working Papers 94s-23, CIRANO.
  9. David Card & Francis Kramarz & Thomas Lemieux, 1995. "Changes in the Relative Structure of Wages and Employment: A Comparison of the United States, Canada, and France," Working Papers 734, Princeton University, Department of Economics, Industrial Relations Section..
  10. Ehrenberg, Ronald G., 1971. "Heterogeneous labor, the internal labor market, and the dynamics of the employment-hours decision," Journal of Economic Theory, Elsevier, vol. 3(1), pages 85-104, March.
  11. Lechner, Michael, 1999. "Identification and Estimation of Causal Effects of Multiple Treatments Under the Conditional Independence Assumption," IZA Discussion Papers 91, Institute for the Study of Labor (IZA).
  12. Trejo, Stephen J, 1991. "The Effects of Overtime Pay Regulation on Worker Compensation," American Economic Review, American Economic Association, vol. 81(4), pages 719-40, September.
  13. Simmons, R. & Schank, Thorsten & Andrews, Martyn J., 2004. "Does Worksharing Work? Some Empirical Evidence from the IAB Panel," Discussion Papers 25, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
  14. Bell, David N.F. & Blanchflower, David G., 2011. "Youth Unemployment in Europe and the United States," IZA Discussion Papers 5673, Institute for the Study of Labor (IZA).
  15. Olivier Marchand & Etienne Turpin & Daniel Rault, 1983. "Des 40 heures aux 39 heures : processus et réactions des entreprises," Économie et Statistique, Programme National Persée, vol. 154(1), pages 3-15.
  16. Calmfors, Lars & Hoel, Michael, 1988. " Work Sharing and Overtime," Scandinavian Journal of Economics, Wiley Blackwell, vol. 90(1), pages 45-62.
  17. John M. Abowd & Francis Kramarz & Thomas Lemieux & David N. Margolis, 1997. "Minimum Wages and Youth Employment in France and the United States," NBER Working Papers 6111, National Bureau of Economic Research, Inc.
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Cited by:
  1. Giannelli, Gianna Claudia & Braschi, Cristina, 2002. "Reducing Hours of Work: Does Overtime Act as a Brake Upon Employment Growth? An Analysis by Gender for the Case of Italy," IZA Discussion Papers 557, Institute for the Study of Labor (IZA).
  2. M. J. Andrews & T. Schank & R. Simmons, 2005. "Does Worksharing Work? Some Empirical Evidence From The Iab-Establishment Panel," Scottish Journal of Political Economy, Scottish Economic Society, vol. 52(2), pages 141-176, 05.
  3. Gebhard Kirchgässner, 2009. "Critical Analysis of Some Well-Intended Proposals to Fight Unemployment," University of St. Gallen Department of Economics working paper series 2009 2009-17, Department of Economics, University of St. Gallen.
  4. Machikita, Tomohiro, 2006. "Career Crisis? Impacts of Financial Shock on the Entry-Level Labor Market: Evidence from Thailand," IDE Discussion Papers 83, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  5. Chang, Juin-jen & Huang, Chun-chieh & Lai, Ching-chong, 2007. "Working hours reduction and wage contracting style in a dynamic model with labor adjustment costs," Journal of Economic Dynamics and Control, Elsevier, vol. 31(3), pages 971-993, March.
  6. Kuroda, Sachiko, 2009. "Do Japanese Work Shorter Hours than before?: Measuring Trends in Market Work and Leisure Using 1976-2006 Japanese Time-Use Survey," PIE/CIS Discussion Paper 419, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
  7. Daiji Kawaguchi & Jungmin Lee & Daniel S. Hamermesh, 2012. "A Gift of Time," NBER Working Papers 18643, National Bureau of Economic Research, Inc.
  8. Philippe Askenazy, 2013. "Working time regulation in France from 1996 to 2012," Cambridge Journal of Economics, Oxford University Press, vol. 37(2), pages 323-347.
  9. Hamermesh, Daniel S., 2007. "Fun with Matched Firm-Employee Data: Progress and Road Maps," IZA Discussion Papers 2580, Institute for the Study of Labor (IZA).
  10. Altavilla, Carlo & Garofalo, Antonio & Vinci, Concetto Paolo, 2005. "Evaluating the effects of working hours on employment and wages," Journal of Policy Modeling, Elsevier, vol. 27(6), pages 647-664, September.
  11. Pierre Boisard, 2004. "Working time policy in France," Post-Print halshs-00400703, HAL.
  12. Tomohiro Machikita, 2005. "Career Crisis? The Impacts of Financial Shock on Entry-Level Labour Market: Experimental Evidences from Thailand in 1997," Hi-Stat Discussion Paper Series d04-79, Institute of Economic Research, Hitotsubashi University.
  13. Skans, Oskar Nordstrom, 2004. "The impact of working-time reductions on actual hours and wages: evidence from Swedish register-data," Labour Economics, Elsevier, vol. 11(5), pages 647-665, October.

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