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Moving Towards a Single Labour Contract: Pros, Cons and Mixed Feelings

Author

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  • Nicolas Lepage-Saucier

    (Sciences Po, Paris)

  • Juliette Schleich

    (Sciences Po, Paris)

  • Etienne Wasmer

    (Sciences Po, Paris)

Abstract

This paper discusses the pros and cons of a single labour contract. After reviewing the current state of dualism in labour markets and the recent labour reforms in Europe, we discuss the various proposals to eliminate dualism. Next, we emphasise the costs of dualism and discuss whether they would be addressed by introducing a single labour contract. We notably introduce a distinction between reforms based on introducing a single contract with progressive seniority rights (CPSR) or a single contract with long probation periods (CLPP).We argue that their gains and costs are very different, especially with regards to the stigma effects and dualism. We also consider alternative reforms: the introduction of a single labour contract as such, and alternative reforms independent of the labour contract but addressing the issue of dualism (training, access to housing and to credit) and compare their costs and benefits. We then build a simple model where both temporary and permanent contracts are available to firms. We use it to describe the demand for temporary contracts and the potential consequences of removing them and reach the following conclusions. First, employment protection has a moderate negative impact on employment, which can be mitigated when temporary contracts are available. Second, the elimination of temporary contracts decreases total employment (by 7 percentage points according to our calculations). Offsetting this effect would require an ambitious reform of employment protection laws of permanent contracts (in this specific setup, amounting to a cut in layoff costs by two thirds). Finally, the coexistence of temporary and permanent contracts may also have negative effects on social norms within the firm and workers' motivation and eliminating temporary contracts could therefore enhance productivity in this context. We conclude that while there are costs to dualism, these are not as obvious and well established as the ones triggered by employment protection itself. Further, the single employment contract may partly be a qui pro quo (misunderstanding) Instead, more clarity on the objectives of a labour reform is needed. Vers un contrat unique, vraiment ? : Les avantages et les inconvénients Ce texte discute des avantages et des inconvénients du contrat de travail unique. Après une discussion du dualisme et des réformes récentes du marché du travail en Europe, nous décrivons les différentes propositions visant à éliminer le dualisme. Nous soulignons ensuite les coûts du dualisme et tentons de comprendre si la création d'un contrat unique les supprimerait. Nous introduisons notamment une distinction entre les réformes basées sur un contrat unique à droits progressifs (CUDP, ou CPSR pour l'acronyme anglais), ou sur un contrat avec une période d'essai allongée (CPEA ou CLPP pour l'acronyme en anglais). Les gains et les coûts sont très différents selon l'hypothèse retenue, en particulier par rapport aux effets de stigmatisation des travailleurs et par rapport à la persistence du dualisme. Nous envisageons aussi d'autres réformes: outre celle de l'introduction d'un contrat unique, nous discutons de différentes réformes indépendantes du contrat de travail mais modifiant les conséquences du dualisme du marché du travail (accès à la formation, au marché du crédit, au logement) et en comparons les coûts et avantages. Nous élaborons ensuite un simple modèle où les contrats permanents et temporaires sont tous deux à disposition des entreprises et coexistent en leur sein. Nous utilisons cette structure théorique pour décrire la demande de contrats temporaires et les conséquences potentielles d'en supprimer l'usage. Nous en concluons: premièrement, que la protection de l'emploi a un impact négatif mais modéré sur l'emploi total, qui est précisément atténué par l'existence de contrats temporaires; deuxièmement, que l'élimination des contrats temporaires diminue l'emploi total (de 7 points de pourcentage selon notre modèle); pour anihiler cet eet négatif, il faudrait une réforme radicale des contrats permanents (qui dans le cas d'espèce diminuerait des deux tiers les coûts des licenciements associés aux contrats permanents); enn, la coexistence de contrats temporaires et permanents peut aussi avoir des conséquences négatives au niveau des normes sociales au sein de l'entreprise et sur la motivation des salariés; éliminer les contrats temporaires serait alors une amélioration de la productivité des entreprises. Nous concluons sur le fait que si les coûts du dualisme sont réels, ils sont moins évidents et moins bien démontrés que ceux engendrés par la protection de l'emploi elle-même. De plus, le contrat unique pourrait être en partie un qui pro quo. Il serait au contraire utile de clarifier les objectifs fondamentaux des réformes du marché du travail.

Suggested Citation

  • Nicolas Lepage-Saucier & Juliette Schleich & Etienne Wasmer, 2013. "Moving Towards a Single Labour Contract: Pros, Cons and Mixed Feelings," OECD Economics Department Working Papers 1026, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:1026-en
    DOI: 10.1787/5k4c0vvc4zxv-en
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    Cited by:

    1. Berson, Clémence & Ferrari, Nicolas, 2015. "Financial incentives and labour market duality," Labour Economics, Elsevier, vol. 37(C), pages 77-92.
    2. Guillaud, Elvire & Marx, Paul, 2013. "Preferences for Employment Protection and the Insider-Outsider Divide," IZA Discussion Papers 7569, Institute of Labor Economics (IZA).
    3. Cabrales, Antonio & Dolado, Juan J. & Mora, Ricardo, 2014. "Dual Labour Markets and (Lack of) On-the-Job Training: PIAAC Evidence from Spain and Other EU Countries," IZA Discussion Papers 8649, Institute of Labor Economics (IZA).
    4. José Ignacio García-Pérez & Josep Mestres Domènech, 2019. "The Impact of the 2012 Spanish Labour Market Reform on Unemployment Inflows and Outflows: a Regression Discontinuity Analysis using Duration Models," Hacienda Pública Española / Review of Public Economics, IEF, vol. 231(4), pages 157-200, December.
    5. Samuel Bentolila & Juan Jose Dolado & Juan F. Jimeno, 2019. "Dual Labour Markets Revisited," CESifo Working Paper Series 7479, CESifo.
    6. Jan J. Rutkowski & Claudia Oriolo & Iva Tomic & Sanja Madzarevic-Sujster, 2016. "Addressing Labor Market Duality in Croatia," World Bank Publications - Reports 33399, The World Bank Group.
    7. J. Ignacio García Pérez, 2015. "Should severance pay be consistent for all workers?," IZA World of Labor, Institute of Labor Economics (IZA), pages 174-174, August.
    8. repec:ilo:ilowps:481497 is not listed on IDEAS
    9. Le Barbanchon, Thomas. & Malherbet, Franck., 2013. "An anatomy of the French labour market : country case studies on labour market segmentation," ILO Working Papers 994814973402676, International Labour Organization.
    10. Elsa Fornero, 2013. "Reforming labor markets: reflections of an economist who (unexpectedly) became the Italian Minister of Labor," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-18, December.
    11. Orbeta, Aniceto Jr. C. & Lanzona, Leonardo & Paqueo, Vicente B., 2016. "The Impact of Legal Minimum Wages on Employment, Income, and Poverty Incidence in the Philippines," Discussion Papers DP 2016-54, Philippine Institute for Development Studies.

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    More about this item

    Keywords

    chômage; contrat unique; contrats de travail; dualism; dualisme; employment contracts; labour market reform; réforme du marché du travail; single labour contract; unemployment;
    All these keywords.

    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J80 - Labor and Demographic Economics - - Labor Standards - - - General

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