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The Impact of Employment Protection on the Industrial Wage Structure

Author

Listed:
  • Heywood, John S.

    () (University of Wisconsin, Milwaukee)

  • O'Mahony, Mary

    (King's College London)

  • Siebert, W. Stanley

    () (University of Birmingham)

  • Rincon-Aznar, Ana

    (National Institute of Economic and Social Research (NIESR))

Abstract

This paper tests whether the job security offered by stricter employment protection legislation (EPL) undermines positive compensating wage differentials that would otherwise be paid. Specifically, we ask whether industries with relatively more need for layoffs and labour flexibility have lower wages in countries where stricter EPL protects workers from layoffs. We find this generally to be true for a large sample of industries in the major OECD countries over 1984-2005, particularly for wages of unskilled workers. However, we also find that where workers are well organised, they can take advantage of EPL to secure higher wages.

Suggested Citation

  • Heywood, John S. & O'Mahony, Mary & Siebert, W. Stanley & Rincon-Aznar, Ana, 2018. "The Impact of Employment Protection on the Industrial Wage Structure," IZA Discussion Papers 11788, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp11788
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    More about this item

    Keywords

    employment protection legislation; labour regulation; compensating wage differentials; education and inequality; labour organisation; layoffs;

    JEL classification:

    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J83 - Labor and Demographic Economics - - Labor Standards - - - Workers' Rights
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • M50 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - General

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