Does Employment Protection Inhibit Labor Market Flexibility? Lessons from Germany, France, and Belgium
AbstractLaws in most Western European countries give workers strong job rights, including the right to advance notice of layoff and the right to severance pay or other compensation if laid off. Many of these same countries also encourage hours adjustment in lieu of layoffs by providing prorated unemployment compensation to workers on reduced hours. This paper compares the adjustment of manufacturing employment and hours in West Germany, France and Belgium, three countries with strong job security regulations and well-established short-time compensation systems, with that in the United States. Although the adjustment of employment to changes in output is much slower in the German, French and Belgian manufacturing sectors than in U.S. manufacturing, the adjustment of total hours worked is much more similar. The short-time system makes a significant contribution to observed adjustment in all three European countries. In addition, we find little evidence that the weakening of job security regulations that occurred in Germany, France and Belgium during the 1980s affected employers' adjustment to changes in output. These findings suggest that. given appropriate supporting institutions. strong job security need not inhibit employer adjustment to changing conditions.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4390.
Date of creation: Jun 1993
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Publication status: published as Katharine G. Abraham, Susan N. Houseman. "Does Employment Protection Inhibit Labor Market Flexibility? Lessons from Germany, France, and Belgium," in Rebecca M. Blank, "Social Protection versus Economic Flexibility: Is There a Trade-Off?" University of Chicago Press (1994)
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Other versions of this item:
- Katharine G. Abraham & Susan N. Houseman, 1994. "Does Employment Protection Inhibit Labor Market Flexibility? Lessons from Germany, France, and Belgium," Book chapters authored by Upjohn Institute researchers, in: Rebecca M. Blank (ed.), Social Protection Versus Economic Flexibility: Is There a Trade-off?, pages 59-93 W.E. Upjohn Institute for Employment Research.
- Katharine G. Abraham & Susan N. Houseman, 1994. "Does Employment Protection Inhibit Labor Market Flexibility? Lessons from Germany, France, and Belgium," NBER Chapters, in: Social Protection versus Economic Flexibility: Is There a Trade-Off?, pages 59-94 National Bureau of Economic Research, Inc.
- Katherine G. Abraham & Susan N. Houseman, 1993. "Does Employment Protection Inhibit Labor Market Flexibility? Lessons from Germany, France and Belgium," Upjohn Working Papers and Journal Articles 93-16, W.E. Upjohn Institute for Employment Research.
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
- J65 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment Insurance; Severance Pay; Plant Closings
- J83 - Labor and Demographic Economics - - Labor Standards - - - Workers' Rights
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Anderson, Patricia M, 1993. "Linear Adjustment Costs and Seasonal Labor Demand: Evidence from Retail Trade Firms," The Quarterly Journal of Economics, MIT Press, vol. 108(4), pages 1015-42, November.
- Burdett, Kenneth & Wright, Randall, 1989. "Unemployment Insurance and Short-Time Compensation: The Effects on Layoffs, Hours per Worker, and Wages," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1479-96, December.
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