MICRO-LEVEL CONSEQUENCES OF FLEXIBILITY-ENHANCING REFORMS: WORK IN PROGRESS. 22 June 2015

Transcription

1 MICRO-LEVEL CONSEQUENCES OF FLEXIBILITY-ENHANCING REFORMS: WORK IN PROGRESS 22 June 2015

2 Looking beneath the positive net effects of flexibility-enhancing reforms OECD and other empirical work has documented that reforms that make product and labour markets more flexible have net aggregate benefits in many cases. The net benefits combine gross gains for some people and possible costs for others. The distribution of gains and losses probably explains much of the resistance to flexibilityenhancing reforms.

3 This project Analyses gains and losses for individuals and groups according to their characteristics. Using micro-level data. Cross-country evidence is scarce.

4 Studying effects on workers Changes in the likelihood of: workers to become unemployed or employed, changing jobs/sector; Changes in: labour income, hours worked Depending on age, gender, education, level of income and sector.

5 European data and country coverage Country Austria X X Belgium X X Czech Republic Denmark X X Estonia Finland X X France X X Germany Greece X X Hungary Iceland : European Community Household Panel (ECHP) : EU Survey of Income and Living Conditions (EU-SILC) Ireland X X X X X X X Country Italy X X Luxembourg Netherlands X X Norway Poland Portugal X X Slovak Republic Slovenia Spain X X Sweden X X Turkey United Kingdom X X X X X X X X

6 Country-specific data sources Australia (HILDA): Germany (SOEP): Korea (KLIPS): Switzerland (SHP): United Kingdom (BHPS & UKHLS): United States (PSID):

7 Outline Part 1: (using the 6-country sample) Sector-specific labour market effects of flexibility-enhancing reforms Part 2: (using the full sample) General labour market effects of flexibility-enhancing reforms

8 PART 1: SECTOR-SPECIFIC EFFECTS OF FLEXIBILITY-ENHANCING REFORMS

9 Motivation Study the effects of flexibility-enhancing reforms targeting specific sectors on workers in that sector Relates to the resistance to structural reforms especially by people directly affected Not possible to analyse the issue with the full dataset, which does not report sector of work

10 Empirical strategy effects on labour income in the sector 2 lllll isst = α i + θ s + τ t + βppp sss + γaaa iscc + ρaaa iiii + ε iscc PPP sss is the ETC regulation indicator: ETC = E (electricity & gas) + T (transport) + C (telecoms). Code ETC as 0 for sectors that are not network sectors. Identification comes from variations in a person s income depending on his sector s relative levels in PPP sss. Standard errors are clustered at the individual level.

11 Empirical strategy effects on the exit rate from the sector EEEEEEEEEE isst = α c + θ s + τ t + βppp sss + γx iscc + ε iscc A person can leave the sector (coded as 1) into either unemployment or a different sector (reallocation). Control variables x iiii : age, gender, education. Identification comes from variations in a sector s exit rate depending on the sector s relative levels in PPP sss. Standard errors are clustered at the sector level.

12 Effects of ETC regulation on labour income in the sector Annual income ETCR 0.022*** (0.006) Hourly income (0.004) Annual hours worked 0.018*** (0.006) - Age - Age squared Individual fixed effects Sector fixed effects Yes Yes Yes Yes Yes Yes Yes Yes Yes Year fixed effects Yes Yes Yes Observations

13 Effects of ETC regulation on exit rate from the sector Exit from the sector Exit into unemployment Exit into another sector ETCR * (0.003) - Age - Age squared - Gender - Education Country fixed effects Sector fixed effects (0.001) ** (0.003) Yes Yes Yes Yes Yes Yes Yes Yes Yes Year fixed effects Yes Yes Yes Observations

14 Effects on subjective well-being Job satisfaction Job satisfaction Life satisfaction ETCR 0.032* (0.017) Annual income *** (0.007) Exit from the sector Individual fixed effects Sector fixed effects *** (0.006) Yes Yes Yes Yes No No Year fixed effects Yes Yes Yes - Observations

15 Summary of the effects of easing ETCR ETCR reforms generate costs for people working in these sectors by reducing their annual incomes. They reduce workers job security, requiring some of them to move to jobs in other sectors. ETCR reforms further lower ETC workers wellbeing by reducing their job and life satisfaction.

16 PART 2: GENERAL EFFECTS OF FLEXIBILITY-ENHANCING REFORMS

17 Objective Document: The impact of reforms on individual-labour market outcomes: transitions U-E, E-U, Jobto-Job, labour income depending on indiviual characteristics: age, gender, education and level of income. The influence of the cyclical position. The role of framework conditions (existing policy settings and packages of reforms).

18 Flexibility-enhancing reforms The identification of reform shocks relies on OECD indicators (EPL, ETCR here) We focus on major reforms (shocks): the policy indicator in a given year diminishes by more than 2 standard deviations This strategy allows to capture short-term effects

19 Empirical strategy Specification: y iii = α c + τ t + β 1 X iii R cc + β 2 X iii R cc 1 + ρx iii + γz cc + ε iii Differences-in-differences estimation with: R cc reform indicator and R cc 1 year-after reform indicator X icc individual characteristics: age, education, gender, lagged income quartile, head, part-time Z cc country-level characteristics: output gap, population growth, government employment

20 Average effects of EPL and ETCR reforms Impact on probability of becoming unemployed 0.02 Year of the reform Year after the reform EPL regular EPL temporary ETCR Flows

21 Impact of reforms by group on the probability of becoming unemployed Reform on EPL regular contracts particularly benefits lower skilled, younger and lower-income people in the year after the reform. The impact of reforms to EPL temporary contracts occurs quickly and is particularly negative for low skilled, young and middle income workers. Lower skilled, older and higher income workers suffer higher risk of becoming unemployed in the year after ETCR reforms.

22 The cyclical position Probability of becoming unemployed EPL regular EPL temporary ETCR Output gap *** *** *** ( ) ( ) ( ) Reformt *** *** ( ) ( ) ( ) Reformt*Output gap *** *** ( ) ( ) ( ) Reformt *** *** ( ) ( ) ( ) Reformt-1*Output gap *** *** ( ) ( ) ( ) Reforms that increase product market competition: 0.01 Recession 0.00 Expansion Year of reform Year after

23 Package of reforms: EPL and ETCR Probability of becoming unemployed EPL regular *** ( ) ETCR one year before *** ( ) EPL regular*etcr one year before *** ( ) EPL regulart *** ( ) Reforms that increase product market competition followed by labour market reforms generally reduce the probability of becoming unemployed especially for the highest quartiles and older workers

24 Future work Continuing the work presented today. Analysing other reforms that affect different sectors differently: trade liberalisation, EPL or regimpact. Investigating the effects of other reforms on individuals, such as ALMPs or wage bargaining. Studying the effects of flexibility-enhancing reforms on households.

25 Average effect for labour market flows E-U U-E Job-to-Job Separations EPL regular This year *** *** *** Year after *** *** *** EPL temporary This year *** *** *** *** Year after *** ETCR This year *** *** *** Year after *** *** *** *** Go back

26 Disclaimers The opinions expressed and arguments employed in this document are the authors and do not necessarily reflect the official views of the Organisation or of the governments of its member countries. This document and any map included therein are without prejudice to the status of or sovereignity over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.