Job security, employment and wages

Better Protected, Better Paid: Evidence on How Employment Protection Affects Wages * This paper empirically establishes the effect of the employer's term of notice on the wage level of employees. The term of notice is defined as the period an employer has to notify workers in advance of their up-coming dismissal. The wages paid during this period are an important element of firing costs and hence employment protection. To find a causal effect, I exploit the exogenous change in the term of notice that resulted from the introduction of a new Dutch law in 1999. Strong evidence is found that a longer 'dormant' term of notice leads to higher wages. In my sample, an additional month of notice increases wages by three percent, ceteris paribus.

Section: Empirical Literaturecontrasting

confidence: 74%

Section: Theoretical Literaturementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Better protected, better paid: Evidence on how employment protection affects wages

Wiel¹

2010

“…Nevertheless, we know from empirical literature that an increase of firing costs decreases dismissal probability (reservation productivity) and job creation (market tightness). 3 Also, most theoretical works, as, e.g., Bertola (1990), Garibaldi (1998), Mortensen and Pissarides (1999) or Pissarides (2001) approve this result. In the above model framework, this can only be the case if the equilibrium is located on the upward sloping part of the JD, because only there both terms in brackets of equations (11) and (12) are positive, while D < 0.…”

Section: Increasing Firing Costs Tmentioning

confidence: 85%

Firing costs, severance payments, judicial mistakes and unemployment

Stähler

2008

Zusammenfassung:In the discussion about employment protection, little attention has been given to judicial mistakes. In most countries, only in the case of dismissals due to economic reasons, the employee is entitled to a severance payment. Given judicial mistakes when reviewing a dismissal, shirkers might falsely receive a severance payment while non-shirker might not. At fighting unemployment, increasing the level of severance payments can increase employment for small judicial mistakes and effectively dominate the pure firing costs which leave ambiguous effects on employment. For large judicial mistakes, the opposite can hold and severance payments can decrease employment. JEL Klassifikation: AbstractIn the discussion about employment protection, little attention has been given to judicial mistakes. In most countries, only in the case of dismissals due to economic reasons, the employee is entitled to a severance payment. Given judicial mistakes when reviewing a dismissal, shirkers might falsely receive a severance payment while non-shirker might not. At fighting unemployment, increasing the level of severance payments can increase employment for small judicial mistakes and effectively dominate the pure firing costs which leave ambiguous effects on employment. For large judicial mistakes, the opposite can hold and severance payments can decrease employment. Theme: Labour Market Policy

“…Studies by Nickell (1978), Bentolila and Bertola (1990) and Bertola (1990) show that firms may respond to the presence of positive firing costs by reducing both the level of hirings and firings. 1 Kugler and Pica (2008) provide empirical evidence on the negative relationship between EPL and the hiring rate, while Trevisan (2008) shows that the effect is strongest for hirings in permanent positions since firms may decide to hire fewer workers in permanent jobs and replace those by apprenticeships as to circumvent strict EPL.…”

Section: Job Quit Behaviormentioning

confidence: 99%

Quit behavior and the role of job protection

Gielen

Tatsiramos

2012

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