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For anybody thinking about labor market policy, France is a basket case of how you should not give in to the pressure from the street and rigidify the labor market to almost everyone's disadvantage. With such extreme job protections, do then labor market status transitions look markedly different from other countries?
Jean-Olivier Hairault, Thomas Le Barbanchon and Thepthida Sopraseuth use administrative and labor market survey data to build time series for job separation and job finding rates. While their analysis is somewhat limited by the fact that they cannot capture a third state, "not in the labor force," the results are strong enough to conclude that contrarily to, say, the US the job finding rate is the major driver in changes to the unemployment rate. In other words, employment protection is effective and the job separation rate fluctuates little with economic activity. However, hiring fluctuates a lot, and given the high average unemployment rate, it is a clear indication that employers are scared to hire workers they could not get rid of if necessary. This is a clear indictment of excessive employment protection.
Jean-Olivier Hairault, Thomas Le Barbanchon and Thepthida Sopraseuth use administrative and labor market survey data to build time series for job separation and job finding rates. While their analysis is somewhat limited by the fact that they cannot capture a third state, "not in the labor force," the results are strong enough to conclude that contrarily to, say, the US the job finding rate is the major driver in changes to the unemployment rate. In other words, employment protection is effective and the job separation rate fluctuates little with economic activity. However, hiring fluctuates a lot, and given the high average unemployment rate, it is a clear indication that employers are scared to hire workers they could not get rid of if necessary. This is a clear indictment of excessive employment protection.
2 comments:
According to Shimer (RED, 2012), in the US it's also the finding rate which causes most movement in unemployment.
http://www.sciencedirect.com/science/article/pii/S1094202512000063
Of course labor protection does not improve labor markets efficiency. It is by design, the objective is redistribution (equity) not efficiency.
The equity part works for those who have a job "in the establishment", they are well paid and should not be afraid of losing their job easily.
Can we have the equity without hurting the efficiency ? I believe the answer is yes. Just remove regulations on work, and replace them by a basic income.
This way everybody has a guaranteed income whatever happens on the job market, and at the same time you let the powerful market allocate jobs and so one.
Of course I am not saying something completely realistic, we can't to that overnight. I am stating a long term objective, not how to implement the transition. But we should at least think about it. Governments should pay researches to work on this issue.
If you agree with that and are European, check the following European citizens initiative asking the EC to promote studies about basic income: http://basicincome2013.eu/ubi/en
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