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Structural Challenges of the Slovenian Economy 8th July 2014. Recent labour market DEVELOPMENTS AND POLICY reforms. Sandrine C azes Senior Economist Employment, Labour and Social Affairs OECD. Outline. Latest developments in the labour market situation in OECD countries - PowerPoint PPT Presentation
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RECENT LABOUR MARKET DEVELOPMENTS AND POLICY REFORMS
Structural Challenges of the Slovenian Economy 8th July 2014
Sandrine CazesSenior Economist Employment, Labour and Social AffairsOECD
2
1.Latest developments in the labour market situation in OECD countries
2.A key challenge: growing labour market segmentation
3.Recent reforms to employment protection legislation
4.Policy options 5.Concluding remarks
Outline
3
The labour market impact of the crisis and recovery has been highly uneven across countries
Unemployment rate, percentage of the labour force
Source: OECD Short-Term Labour Market Statistics Database (Cut-off date: 5 March 2014).
Q4 200
7
Q1 200
8
Q2 200
8
Q3 200
8
Q4 200
8
Q1 200
9
Q2 200
9
Q3 200
9
Q4 200
9
Q1 201
0
Q2 201
0
Q3 201
0
Q4 201
0
Q1 201
1
Q2 201
1
Q3 201
1
Q4 201
1
Q1 201
2
Q2 201
2
Q3 201
2
Q4 201
2
Q1 201
3
Q2 201
3
Q3 201
3
Q4 201
33
4
5
6
7
8
9
10
11
12
13
Euro area Japan United States
%
4
Labour market conditions vary dramatically within the Euro area
Unemployment rate, percentage of the labour force
Unemployment rate, percentage of the labour force
Source: OECD Short-Term Labour Market Statistics Database (Cut-off date: 5 March 2014).
Q4 200
7
Q1 200
8
Q2 200
8
Q3 200
8
Q4 200
8
Q1 200
9
Q2 200
9
Q3 200
9
Q4 200
9
Q1 201
0
Q2 201
0
Q3 201
0
Q4 201
0
Q1 201
1
Q2 201
1
Q3 201
1
Q4 201
1
Q1 201
2
Q2 201
2
Q3 201
2
Q4 201
2
Q1 201
3
Q2 201
3
Q3 201
3
Q4 201
30
5
10
15
20
25
30
France Germany Greece
Italy Portugal Spain
%
5
Unemployment has been rising in Slovenia
Unemployment has been rising in Slovenia
Harmonised unemploy ment rate, percentage of the labour force
Source: OECD Short-Term Labour Market Statistics Database (Cut-off date: 7 April 2014).
0
2
4
6
8
10
12
14%
SVN:Slovenia OECD
European Union (28 countries) Euro area (18 countries)
6
Long-term unemployment account for more than one in three unemployed persons in the OECD areaa,b
Percentage of the unemployed
Note: Countries are shown by ascending order of the incidence of long-term unemployment in Q3 2013 .a) Data are not seasonally adjusted but smoothed using three-quarter moving averages. OECD is the weighted average of 32 OECD countries excluding Chile
and Korea.b) 2012 for Israel.Source: OECD calculations based on quarterly national Labour Force Surveys (Cut-off date: 5 March 2014).
Mexico
Canad
a
New Zea
land
Israe
l
Sweden
Austral
ia
Norway
Turkey
Finland
Denmark
Icelan
d
United S
tates
Austria
Switzerla
nd G7
Luxem
bourg
United K
ingdo
mOECD
Netherl
ands
Japan
France
Estonia
Czech R
epub
licPola
nd
German
y
Belgium
EU-28 Spain
Euro ar
ea
Sloven
ia
Hunga
ry Italy
Portug
al
Irelan
d
Greece
Slovak
Repub
lic0
10
20
30
40
50
60
70
80
90Q4 2007 Q3 2013
%
7
Youth unemployment has reached very high levels in some OECD countries
Percentage of youth (aged 15-24) labour force, Q4 2007a- Q4 2013b
Note: Countries shown in ascending order of the youth unemployment rates in Q4 2013.a) Q2 2007 for Switzerland.b) Q3 2013 for Estonia, Greece, Turkey and the United Kingdom.Source: OECD Short-Term Labour Market Statistics Database (Cut-off date: 5 March 2014).
Japan
German
y
Switzerla
nd
Norway
Israe
l
Mexico
KoreaAust
riaIce
land
Netherl
ands
Austral
ia
Denmark
Canad
a
United S
tates G7
OECD
New Zea
land
Estonia Chile
Turkey
Czech R
epub
lic
Finland
Luxem
bourg
United K
ingdo
m
Sweden
Europe
an Unio
n
Sloven
ia
Belgium
Euro ar
ea (1
8)
Hunga
ry
France
Irelan
dPola
nd
Slovak
Repub
lic
Portug
al Italy
Spain
Greece
0
10
20
30
40
50
60
70
Q4 2007 Peak Q4 2013
%
8
Temporary work has been growing in EU countries
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
0
10
20
30
40
EU 28 EU 15 Germany Spain France Italy Poland Slovenia
Shar
e of
Tem
pora
ry E
mpl
oym
ent (
In %
)Europe
9
Temporary workers tend to cumulate unfavourable conditions Less job protection and security Wage penalty Lower access/exclusion to social security schemes and
pensions or other working conditions (De Jure/de Facto) Temporary workers may not have access to credit,
housing, etc.
…and those disparities likely to generate persisting divides Lower transition to permanent contracts Temporary workers receive less training (on average
probability of receiving employer-sponsored training - 14%)
…reducing job quality
10
Equity issue, but not only Efficiency as well
Depress productivity growth Excessive adjustment at the margin (volatility)
Reduce the labour market divide and alleviate contractual labour market segmentation
Avoid “excessive” use of temporary (non-regular) employment
Costs of labour market segmentation
11
EPL & LM segmentation, Argument: Reform of EP via asymmetric liberalisation of temporary
contracts (e.g. while maintaining regular EP for permanent workers) leads firms to substitute temporary for permanent workers--increase in the % of workers on fixed-term contracts (Boeri and Garibaldi, 2007; Bentolila et al., 2008)
In addition, a large asymmetry between the EP provisions applying to the two types of contracts will reduce the conversion rate of fixed-term contract into permanent ones (Boeri, 2011)
A key structural reform response: employment protection legislation
12
Main focus is on reducing regulation on permanent contracts, contrast with “two-tier” reforms of the 1990s and early 2000s: – Reduction in up-front severance costs and compensation
for unfair dismissal – Expansion of definition of fair dismissal, alongside
improvements in functioning of courts should allow firms to make dismissals for economic reasons more easily
– Extension of trial period for new hires, likely to be an important measure for encouraging hiring of youth
Different approaches to the gap between temporary and permanent workers
Some countries (GRC, PRT and ESP) also reduced scope, cost or complexity of collective dismissals
Recent reforms to Employment Protection
13
Main elements of the EPL reforms in Greece, Portugal, Spain and Italy
GRC PRT ESP ITAReduce severance pay for permanent contracts
X X
Reduce red tape for individual dismissals X XExtend probation period for new hires X XExpand the definition of fair dismissal X XImprove functioning of courts in dismissal cases
X X
Reduce compensation for unfair dismissal X XReduce regulation on collective dismissals X X XReduce regulation on non-permanent contracts
X X X
Increase regulation on non-permanent contracts
X X
14
Make hiring on temporary contract more difficult & costly
Restricting renewals, duration and/or scope of use of FT.
Difficult to enforce May be counterproductive if too restrictive No evaluation yet
Reduce the wedge between termination costs of regular and non-regular contracts
Single Employment Contract or Unified contract proposals have been put forward (mostly in Europe)
Risk of introducing excessive rigidity in hiring decision, could even lead to employment losses & displacement on DSEWs (Single Contracts)
Important reforms of judicial review necessary (Single Contracts, Unified Contracts)
Difficult to implement
Policy options
15
Enhance convergence between contracts (more homogeneous employment protection, notably in terms of termination costs)
Few examples of countries with same termination costs
As well as in more protective countries
Convergence of EP regime likely to reduce duality without negatively affecting efficient reallocation of resources, but will not eliminate all forms of duality (e.g. differences across social security contributions create incentives to employ those under more favourable regime, DSEW)
Policy options
16
• Over the past decades, many OECD countries have introduced reforms to foster LM flexibility and “activate” the unemployed
• Several different options to reform EP as part of a comprehensive package
• Very important to evaluate the impacts of those recent reforms (for ex. 2012 Spanish labour market reform seems to be a significant step in the right direction according to preliminary assessment, but further monitoring will be necessary)
Concluding remarks
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Thank youContact: [email protected] Directorate for Employment, Labour and Social Affairs, via www.oecd.org/els
OECD Employment Outlook, via www.oecd.org/employment/outlookOECD Employment database, via www.oecd.org/employment/databasewww.oecd.org/site/piaac
18
Protection of permanent workers against individual and collective dismissals, 2008 and 2013
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Scale 0-6
2013 2008
OECD average
Stefano Scarpetta, OECD
Slide titleSlide title can be extended to two lines
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0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5US
ACA
NGB
RCH
EAU
SDN
KNZ
LIR
LIT
A GR
C 20
11HU
NBE
LPO
LJP
N ISL
ISR
AUT
NOR
MEX ES
TGR
C 20
08KO
RES
P 20
12 FIN
ESP
2008 SV
KTU
RCH
LFR
APR
T 20
13*
LUX
SWE
NLD
DEU
PRT
2012 SVN
CZE
PRT
2009
PRT
2008
Protection of permanent workers against individual dismissal
OECD average
0.00.51.01.52.02.53.03.54.04.55.0
CAN
GBR
USA IRL
SWE
AUS
NZL
SVK
NLD
CHE
JPN ISL
ISR
CZE
DNK
GRC
2011
DEU
CHL
GRC
2008
HUN
KOR
EST
FIN
AUT
POL
PRT
2013
*PR
T 20
12 SVN
ITA
PRT
2008
PRT
2009 BE
LNO
RFR
AES
P 20
08ES
P 20
12 LUX
MEX TU
R
Regulation on temporary forms of employment
OECD average
All data for 2008 unless otherwise noted. * PRT for 2013 is an estimate based on proposed changes.
20
• Estimation strategy: Regression-discontinuity model– joint effect of all the provisions included in the reform by
comparing labour market performance (wages, worker flows, etc) before and after February 2012 (discontinuous patterns occurring at the time of its enforcement)
– the business-cycle is modelled through observable controls and non-linear time trends.
• Robustness tests undertaken using fictitious placebo reforms taking place in a earlier date
• Not possible to distinguish the impact of the reform from other changes in February 2012 or from subsequent policy adjustments (underestimation?)
The labour market impact of the 2012 reform
