Labour Productivity of Young and Adult Temporary Workers and Youth Unemployment: a Cross-country Analysis

The latest crisis has exacerbated two negative macroeconomic phenomena, particularly in Southern Europe. The size and persistence of youth unemployment has become unacceptable after 2010. Stagnation in labour productivity instead goes back to the ‘90s, but it has not improved since then and even worsen with the crisis. In this paper we analysed these two macroeconomic features, using aggregate data, in relation to labour market characteristics. Reforms of regulation, in many countries over the past twenty years, introduced a set of newly designed job contracts that allowed the use of temporary work. At the same time, Employment Protection Regulation encompassed temporary workers too. The availability of new contracts and EPLT changed the incentives of firms to vary their labour needs, and to invest in new technology. Eventually, this should have an impact on labour productivity and unemployment. We distinguished between temporary young and adult workers and, conditional to the level of employment protection, we estimate their labour productivity and the correlation with the rate of youth unemployment. We use macroeconomic data for countries within groups (former Euro zone countries, Euro-zone plus Russia, OECD, G7, G8). Preliminary evidence shows that the share of adult temporary workers clearly and negatively affects labour productivity, no matter the group of countries.