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Job displacement in France and its consequences Vah Nafilyan OECD, Paris School of Economics 1 Motivation Job displacement: major concern in France Little is known about the consequences of displacement on labour market


  1. Job displacement in France and its consequences Vahé Nafilyan OECD, Paris School of Economics 1

  2. 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?

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

  4. 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.

  5. 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

  6. 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

  7. 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

  8. Potential data issues  Attrition: only 60% of the individuals are surveyed 6 times  Measurement error: reasons for job separation may be uncorrectly reported

  9. Quarterly displacement rates : administrative vs. survey data Administrative data (MMO-DMO) Enquête Emploi 0.5% 0.4% 0.3% 0.2% 0.1% 0.0% 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 Note: displacement rate is computed as a share of the employees working in companies with 10 employees or more

  10. 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

  11. Older workers have a higher incidence of displacement After the crisis Before the crisis 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% 25 30 35 40 45 50 55 60 and more Age

  12. Lower displacement rates for tertiary educated workers Before the crisis After the crisis 0.8% 0.6% 0.4% 0.2% 0.0% Upper tertiarry Short-cycle tertiary Upper secondary Vocational Lower secondary No degree education secondary

  13. Industry and construction workers are more at risk Pre-crisis Post-crisis 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% Agriculture Industry Construction Wholesale/retail Transport, utilities Finance/business Other services

  14. Short tenured workers are more likely to be displaced Pre-crisis Post-crisis 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% less than 5 years 5 to 10 10 to 20 More than 20

  15. IV-Re-employment prospects of displaced workers Labour market status following displacement Employed Unemployed NILF 70% 60% 50% 40% 30% 20% 10% 0% 1 2 3 4 5 6 7 8 9 Quarters following displacement

  16. 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

  17. Lower re-employment rates after the crisis Pre-crisis Post-crisis 80% 70% 60% 50% 40% 30% 20% 10% 0% 1 2 3 4 5 6 7 8 9 Quarters following displacement

  18. Older workers face lower re-employment rates within one year within two year 100% 80% 60% 40% 20% 0% 25 30 35 40 45 50 55 60 and more Age

  19. Only half of the displaced workers find a permanent job Within one year Within two years % % Pre-crisis post-crisis Pre-crisis post-crisis 70 70 60 60 50 50 40 40 30 30 20 20 10 10 0 0 Permanent Regular fixed- Other Self employed Permanent Regular fixed- Other Self employed contract term contract temporary contract term contract temporary contracts contracts

  20. V- The Cost of Job Loss 1- Wages 2- Job insecurity 3- Working time 4- Paid holidays

  21. 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 one year before the first interrogation and who have not been dismissed.

  22. Wage loss 400 200 0 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 -200 -400 Euros -600 -800 -1000 -1200 -1400 -1600 Quarters before and after displacement

  23. Earnings loss Wage Wage+unemployment benefits 400 200 0 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 -200 -400 Euros -600 -800 -1000 -1200 -1400 -1600 Quarters before and after displacement 23

  24. Monthly wage loss for re-employed displaced workers Slightly higher than what is found by Lefranc (2003)

  25. Causal impact?  Are we capturing the causal impact of displacement on 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.

  26. Increased job insecurity  A substantial share of re-employed displaced workers are employed under temporary contract. Quartely involuntary job loss rate No involuntary Made redundant separation over the over the past year past year 6.85% 0.87%  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

  27. Increased part-time work Part-time work differential 7% 6% 5% 4% 3% 2% 1% 0% -3 -2 -1 0 1 2 3 4 5 6 7 8 9 -1% -2% -3% Note: the dependent variable is an indicator equal to one if the individual is working part-time. Linear probability model with individual fixed effects

  28. Fewer paid holidays 0.4 0.2 0 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 Number of weeks -0.2 -0.4 -0.6 -0.8 -1 -1.2 Quarters before and after displacement Note: the dependent variable is the number of weeks of paid leave . Model with individual fixed effects

  29. 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

  30. Thank you for your attention!

  31. Appendix

  32. 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) 1 2 3 Control group : workers Wage Wage employed on permanent Dependent variable (including 0 (excluding 0 log of wage values) values) contract in the first interrogation and not Displaced -1008.4 -111.6 -0.088 dismissed (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  Problem: do not capture foregone earnings growth

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