(2000) find evidence suggesting that, across countries, restrictive regulatory environments in the product market tend to be associated with restrictive employment protection policies. Data range from 0 to 6 with higher scores representing stricter regulation. Whereas EPL may have not a significant effect on unemployment, strict EPL gives incentives to the firms to resort to other sources of flexibility like overtime, which, as shown by Abraham and Houseman (1994),[17] indeed tends to be used much more in Continental European countries, where the variability of hours per worker is significantly higher than in the Anglo-Saxon labour markets. The term is common among circles of economists. [citation needed] This latter group is mainly constituted by youths, women, racial minorities and unskilled workers. July 2020: "Recent trends in employment protection legislation", 2013 Edtion of the OECD Employment Outlook, © They suggest that in the case of Italy an EPL reform in 1990 had as effect to reduce entry wages by 6 percent, implying that firms tend to transfer the increase in the cost of firing (due to EPL) onto workers. The indicators have been compiled using the Secretariat’s own reading of statutory laws, collective bargaining agreements and case law as well as contributions from officials from OECD member countries and advice from country experts. In the author's opinion, this means that there are economic complementarities between labor and product market policies in their model, in the sense that the effectiveness of one policy depends on the implementation of the other policy. Employment protection legislation (EPL) includes all types of employment protection measures, whether grounded primarily in legislation, court rulings, collectively bargained conditions of employment, or customary practice. In his article he claims that the best estimates suggest that moving from no required severance pay to three months of required severance pay to employees with ten years of service would reduce the employment-population ratio by about one percent. This indicator measures additional costs and procedures involved in dismissing more than one worker at a time (compared with the cost of individual dismissal). maximum number of successive fixed-term contracts allowed); or. The rationale for this is that the collective dismissals indicator only reflects additional employment protection triggered by the collective nature of the dismissal. Therefore, EPL reduces both job creation and job destruction, so that the net effects on average employment and unemployment are not identifiable a priori. Some forms of de facto regulations are likely to be adopted even in the absence of legislation, simply because both workers and firms derive advantages from long-term employment relations.[2]. Organisation for Economic, 2020 Edition of the OECD Employment Outlook, Strictness of dismissal regulation for workers on regular contracts (both individual and collective dismissals), Strictness of regulation of individual dismissals of workers on regular contracts, Strictness of regulation of collective dismissals of workers on regular contracts, Strictness of hiring regulation for workers on temporary contracts, OECD indicators of employment protection database: summary indicators and items, detailed description of employment protection legislation in OECD countries, 2019, Protecting jobs, enhancing flexibility: A new look at employment protection legislation, Non-regular employment, job security and the labour market divide, 2014 Edition of the OECD Employment Outlook, OECD Employment Protection incators published in 2013, OECD Employment Protection indicators published in 2009, Find below a description of employment protection in individual countries. Economists considering that EPL has no effect on unemployment include Blanchard and Portugal (2000). On the other hand, if firms For each year, indicators refer to regulation in force on the 1st of January. Select one or more items in both lists to browse for the relevant content, Browse the selectedThemes and / or countries. For example, Pissarides (2001) and Alvarez and Veracierto (2001) show that employment protection can play an important role in the absence of perfect insurance markets. The 18 first-digit inputs are then expressed in either of the following forms: Then, these different scoring is converted into cardinal scores that are normalized to range from 0 to 6, with higher scores representing stricter regulation. [1] The term is common among circles of economists. Moreover, summary measures for collective dismissals are only available since the late 1990s. Employees whose duties and conditions of employment are such that they may be The University of Chicago Press, (1994), This page was last edited on 8 December 2019, at 15:45. Critics have also raised doubts about the accuracy of the OECD’s Employment Protection Legislation Index, which is the principal method EU agencies use to target so-called high-protection … The OECD employment protection indicator 4. [3], Whether EPL has any effect on unemployment is an issue of contention between economists. [6] In their article they compare two opposite countries as regards their EPL stance: Portugal with one of the more strict legislations in the world and the US with one of the more flexible ones. Lazear argues that the young could bear a disproportionate amount of the burden. The OECD indicators of employment protection are synthetic indicators of the strictness of regulation on dismissals and the use of temporary contracts. While more restrictive than the previous one (so-called Version 2), this alternative measure of the overall EPL strictness allows comparisons over a longer period of time (since the late 1980s compared with the late 1990s). [15] Similar results are obtained by Koeniger and Vindigni (2003).[16]. OECD Employment Outlook, June 1999, Chapter 2. Strictness of regulation for regular contracts, KG Abraham and SN Houseman (1994): Does Employment Protection Inhibit Labour Market Flexibility? [14], Kugler and Pica (2003) find similar results in the case of the Italian economy. Several authors have found that EPL has significant effects on wages. Units of time (e.g. Employment Protection Act (1982:80) Amendments: up to and including SFS 2007:391 Introductory provisions Section 1 This Act applies to both public and private employees. According to Barone (2001) with the acronym EPL economists refer to the entire set of regulations that place some limits to the faculties of firms to hire and fire workers, even if they are not grounded primarily in the law, but originate from the collective bargaining of the social partners, or are a consequence of court rulings. Section 4 presents an overview of the state of play across Member States. The dataset contains the indicator for temporary employment that measures the strictness of regulation on the use of fixed-term and temporary work agency contracts. the product market and EPL also suggests that their influence may have compounded effects on labour market outcomes, making regulatory reform in only one market less effective than simultaneous reform in the two markets. As a score on an ordinal scale specific to each item (0 to 2, 3, 4 or simply yes/no). Although employment protection legislation is only one aspect of the wide range of regulatory interventions in the labour market, Nicoletti et al. An alternative overall index, so-called Version 1, has been thus calculated as an unweighted average of the summary measures for regular and temporary contracts only. The indicators have been compiled using the Secretariat’s own reading of statutory laws, collective bargaining agreements and … The OECD indicators of employment protection are synthetic indicators of the strictness of regulation on dismissals and the use of temporary contracts. Other important features of EPL, like for example the willingness of labour courts to entertain appeals by fired workers, or how judges interpret the concept of “just cause” for termination, are much more difficult to quantify. What is instead agreed among economists, is that more stringent EPL lowers the fluctuations in the quantity of labour demanded over the business cycle, leading to smoother dynamic patterns of those aggregates.[3]. redundancy procedures, mand… The strong correlation between regulatory regimes in redundancy procedures, mandated prenotification periods and severance payments, special requirements for collective dismissals and short-time work schemes). For each year, indicators refer to regulation in force on the 1st of January. Approval was partially successful, following selected items could not be processed due to error, http://instance.metastore.ingenta.com/content/thematicgrouping/lfs-epl-data-en, South Georgia and the South Sandwich Islands, OECD Employment and Labour Market Statistics. They cover both individual and collective dismissals. OECD Indicators of Employment Protection. is the online library of the Organisation for Economic Cooperation and Development (OECD) featuring its books, papers and statistics and is the knowledge base of OECD's analysis and data. employment protection legislation. These two effects would neutralize each other, explaining why overall, EPL has no effect on unemployment. To the contrary, Bertola and Bentolila (1990)[10] found evidence supporting the idea that firing costs have a larger effect on firms' propensity to fire than to hire, and therefore (slightly) increase average long-run employment. rules favouring disadvantaged groups, conditions for using temporary or fixed-term contracts, training requirements) and firing (e.g. Employment protection refers both to regulations concerning hiring (e.g. In fact, in their study they find that 25 percent of the firing cost was shifted onto lower wages in the case of Italy. Because of EPL, firms engage themselves in labour hoarding practices, which lead them to employ a lower quantity of workers during upswings, while keeping inefficient levels of employment in downturns. Employment protection of regular workers against individual dismissal; Specific requirements for collective dismissals; and. Leonardi and Pica (2006) found evidence supporting this claim. (ed.) Data range from 0 to 6 with higher scores representing stricter regulation. delays before notice can start, or months of notice and severance pay); As a number (e.g. These mandates and the regulations that implement them cover many workplace activities for about 150 million workers and 10 million workplaces. EPL would reduce job flows (from employment to unemployment: employers are less willing to fire, given that they must pay indemnizations to workers) therefore reducing unemployment but would increase unemployment duration, increasing the unemployment rate. operated in a context of efficiency wages, by inducing more stable relationships with the workers and reducing their job and income insecurity, EPL could allow them to pay lower wages, without reducing the effort provided by the labour force employed, with beneficial effects on profits.