in France and its consequences Vah Nafilyan OECD, Paris School of - - PowerPoint PPT Presentation

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Job displacement in France and its consequences

Vahé Nafilyan OECD, Paris School of Economics

Motivation



Job displacement: major concern in France



Little is known about the consequences of displacement on labour market prospects



Main question: What is the cost of job displacement in terms of earnings and job quality?

Outline I – Institutional Context II- Data III- Displacement Risk IV- Re-employment prospects V- Cost of job loss

I- French Labour Legislation

 Two ways to dismiss an employee with open-ended

contract:

• Dismissal for economic reason (Licenciement pour motif

économique)

• Dismissal on personal grounds (Licenciement pour motif

personnel)

 Introduction (Q4 -2008) of the rupture conventionnelle:

termination of contract on joint employee/employer initiative.

Dismissal for Economic Reason

 Dismissal for economic reasons strongly regulated  Aiming to prevent employers to target specific employees  An order of dismissals (ordre de licenciements) must be

defined according to objective criteria that are set by collective agreements

 The Labour Code defines 4 criteria:

• the family situation
• job tenure
• individual characteristics that hinder re-employment prospects

(age, disability)

• professional qualifications

Job displacement and dismissal for economic reason

 High cost of dismissal for economic reason  Other ways to adjust the workforce:

• voluntarily separation plan
• decreasing the number of temporary workers

 Only part of the job separations due to economic

reasons are captured when looking at dismissals for economic reason

II- Data

 Enquête Emploi (Labour Force Survey) 2003-2011  Sample to individuals surveyed up to six consecutive

quarters

• N=1,308

 Combining retroactive questions and the panel

dimension of the data, individuals can be tracked for up to 10 quarters

• N=2,533

Potential data issues

 Attrition: only 60% of the individuals are surveyed 6

times

 Measurement error: reasons for job separation may

be uncorrectly reported

Quarterly displacement rates : administrative vs. survey data

0.0% 0.1% 0.2% 0.3% 0.4% 0.5% 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 2003 2004 2005 2006 2007 2008 2009 2010 2011 Administrative data (MMO-DMO) Enquête Emploi

Note: displacement rate is computed as a share of the employees working in companies with 10 employees or more

III- Risk of job displacement

Model: X includes: Age; Gender; Education level; Family situation; Nationality; Occupation; Industry; Job tenure; Crisis. + region and year fixed effects

Older workers have a higher incidence of displacement

0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 25 30 35 40 45 50 55 60 and more Age After the crisis Before the crisis

Lower displacement rates for tertiary educated workers

0.0% 0.2% 0.4% 0.6% 0.8% Upper tertiarry Short-cycle tertiary education Upper secondary Vocational secondary Lower secondary No degree Before the crisis After the crisis

Industry and construction workers are more at risk

0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% Agriculture Industry Construction Wholesale/retail Transport, utilities Finance/business Other services Pre-crisis Post-crisis

Short tenured workers are more likely to be displaced

0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% less than 5 years 5 to 10 10 to 20 More than 20 Pre-crisis Post-crisis

IV-Re-employment prospects of displaced workers

0% 10% 20% 30% 40% 50% 60% 70% 1 2 3 4 5 6 7 8 9 Quarters following displacement

Labour market status following displacement

Employed Unemployed NILF

Which characteristics matter for re-employment?

Model: X includes: Age; Gender; Education level;Family situation; Nationality; previous job characteristics; Crisis. + region and year fixed effects

Lower re-employment rates after the crisis

0% 10% 20% 30% 40% 50% 60% 70% 80% 1 2 3 4 5 6 7 8 9 Quarters following displacement Pre-crisis Post-crisis

Older workers face lower re-employment rates

0% 20% 40% 60% 80% 100% 25 30 35 40 45 50 55 60 and more Age within one year within two year

Only half of the displaced workers find a permanent job

10 20 30 40 50 60 70 Permanent contract Regular fixed- term contract Other temporary contracts Self employed

Within one year

Pre-crisis post-crisis

%

10 20 30 40 50 60 70 Permanent contract Regular fixed- term contract Other temporary contracts Self employed

Within two years

Pre-crisis post-crisis

%

V- The Cost of Job Loss

1- Wages 2- Job insecurity 3- Working time 4- Paid holidays

Estimating the earnings loss

 Estimation strategy:  Information on wages collected only at the first and last

interrogation

 Control group: those employed on a permanent contract

• ne year before the first interrogation and who have not

been dismissed.

Wage loss

• 1600
• 1400
• 1200
• 1000
• 800
• 600
• 400
• 200

200 400

• 4
• 3
• 2
• 1

1 2 3 4 5 6 7 8 9 Euros Quarters before and after displacement

23

Earnings loss

• 1600
• 1400
• 1200
• 1000
• 800
• 600
• 400
• 200

200 400

• 4
• 3
• 2
• 1

1 2 3 4 5 6 7 8 9 Euros Quarters before and after displacement Wage Wage+unemployment benefits

Monthly wage loss for re-employed displaced workers

Slightly higher than what is found by Lefranc (2003)

Causal impact?

 Are we capturing the causal impact of displacement

• n earnings?

 The set of β coefficients is unbiased if displacement

is uncorrelated with the error term.

 The legal framework regulating dismissal for

economic reason provides some reasons to believe that selection is made on observables.

Increased job insecurity

 A substantial share of re-employed displaced workers

are employed under temporary contract.

 Re-employed displaced workers are 8 times as likely

to experience an involuntary job separation as those who have not been dismissed over the past year

Quartely involuntary job loss rate Made redundant

• ver the past year

No involuntary separation over the past year 6.85% 0.87%

Increased part-time work

• 3%
• 2%
• 1%

0% 1% 2% 3% 4% 5% 6% 7%

• 3
• 2
• 1

1 2 3 4 5 6 7 8 9

Part-time work differential

Note: the dependent variable is an indicator equal to one if the individual is working part-time. Linear probability model with individual fixed effects

• 1.2
• 1
• 0.8
• 0.6
• 0.4
• 0.2

0.2 0.4

• 3
• 2
• 1

1 2 3 4 5 6 7 8 9 Number of weeks Quarters before and after displacement

Note: the dependent variable is the number of weeks of paid leave . Model with individual fixed effects

Fewer paid holidays

Conclusion and Policy Implication

 The cost of job loss is driven by :

1) Long non-employment spells 2) Lower quality jobs

 Policies need to address both issues

Thank you for your attention!

Appendix

Pre vs. post displacement wages

 Information on wages collected only at the first and last

interrogation

 First estimation of wage loss: before/after (Fixed effect model)  Problem: do not capture foregone earnings growth

1 2 3 Dependent variable Wage (including 0 values) Wage (excluding 0 values) log of wage Displaced

• 1008.4
• 111.6
• 0.088

(32.2)*** (41.1)*** (0.024)*** Job characteristics No Yes Yes N 165,616 157,611 157,611 F 127.09 21.4 64.1

Control group: workers employed on permanent contract in the first interrogation and not dismissed