The social economics of job security

Using a social economics perspective, this essay examines the positive and negative effects of job security, insecurity and the perceptions thereof on the welfare of workers, organizations, and society, as well as policy options that could alleviate the negative socio-economic consequences of job insecurity. The essay questions perceived job insecurity as a device to increase worker effort, both on efficiency and ethical grounds. It also suggests that increased perceptions of job insecurity have adversely affected workers' well-being and have undesirable macroeconomic and social effects. Public policy makers and researchers should examine ways to minimize the negative consequences associated with involuntary job loss. They should also consider to what extent both limiting firms' ability to layoff workers and providing incentives to firms that downsize to use alternatives to layoffs are socially desirable. The authors thank two anonymous referees for comments, and Elizabeth Kirkwood and Deanna Behrens for outstanding research assistance. The authors invite others to e-mail them if interested in organizing a panel for a future ASE meeting.     

Does skill obsolescence increase the risk of employment loss?

In this article, we analyse whether technological change induces skill obsolescence and early labour market exit, and to what extent training participation and on the job learning reduce these risks. Using panel data on older workers, we find that workers report skill obsolescence more often when learning is a structural characteristic of the job. This perceived skill obsolescence is not related to a higher probability of losing employment. Instead, workers who experience skill obsolescence appear to learn more on the job and participate more often in training, which decreases the risk of losing employment. These results are consistent with the dynamic model of skill obsolescence and employment loss we develop in this article. Moreover, we find that when workers with long job tenures decrease their training participation, this is an early indicator of future job loss.     

The Czech Labour Market in Transition: Evidence from a Micro Study

In contrast to the other countries in eastern and central Europe, unemployment has so far increased only modestly in the Czech Republic. Results are reported from a panel survey of a sample of initially unemployed workers in the industrial centre of Ostrava, interviewed in three rounds during 1993. Results are reported regarding the wage in the former job, the reservation wage, the wage in a new job and the minimum acceptable wage in another job for those who have become employed during the panel study. Finally, results from estimating a hazard function for leaving unemployment are reported.     

Employment Status Persistence in the Japanese Labour Market

The growth of non‐standard employment has become a cause for concern for policy‐makers trying to boost output and keep unemployment low while also maintaining job security. This paper estimates a dynamic unobserved effects model using the Keio Household Panel Survey, an individual‐level panel data set, to investigate the effects on future employment opportunities of employment in Japan's non‐standard employment and regular employment sectors. I find strong evidence of persistence within the labour market, suggesting that past employment experience has a significant impact on future labour market outcomes.     

IMPACT OF THE MINIMUM WAGE ON THE INCIDENCE OF SECOND JOB HOLDING IN BRITAIN

The advent of any earnings boost, such as provided by the introduction of a minimum wage, might be expected to reduce the supply of low‐paid individuals wanting to hold a second job. This paper uses difference‐in‐differences estimation on a panel of individuals matched across successive Labour Force Surveys around the time of the introduction of the national minimum wage in the United Kingdom in order to estimate the impact of the minimum wage and its subsequent upratings on second job working. There is little evidence to suggest that the extra pay provided by the introduction of the minimum wage was sufficient to affect the incidence of second job holding significantly. However, hours worked in the main job by second job holders may have risen relative to those not covered by the minimum wage; and hours worked in second jobs may have fallen for those whose second job was initially below the minimum.     

Changes in Occupational Tasks and Their Association with Individual Wages and Occupational Mobility

This study provides novel evidence on the relevance of task content changes between and within occupations to wage dynamics of occupational changers and stayers. I use individual‐level, cross‐sectional data featuring tasks performed on the job to compute a measure of proximity of job contents. Then, I merge this measure to a large‐scale panel survey to show that occupational changers experience a wage growth that is declining when the accompanying alterations in task contents are big. For occupational stayers, alterations in task contents generate a positive wage component, beyond tenure effect. However, the results are not robust with respect to the choice of proximity measure and over time.     

The scarring effects of unemployment,low pay and skills under-utilization in Australia compared

There is a substantial literature on the scarring effects of unemployment on future employment prospects and a smaller one on the scarring effects of low pay, but the possibility that skills mismatch, in the form of skills under-utilization, may have similar detrimental effects has not been considered before. We use the Household, Income and Labour Dynamics in Australia panel to investigate the dynamics of unemployment, low pay and skills under-utilization, including differences by gender and education. We show that, in addition to earlier evidence on wage penalties and reduced job satisfaction, skills under-utilization scars future employment prospects in a way similar to that of low pay.     

Job Security,Financial Security and Worker Well‐being: New Evidence on the Effects of Flexible Employment

This paper uses panel data drawn from the Household, Income and Labour Dynamics in Australia (HILDA) survey to provide new evidence of the links between unemployment, wages, job security, financial security and workers' well‐being for workers in flexible employment. Our findings indicate that workers in flexible employment encounter more unemployment and experience increased job insecurity; unemployment is associated with wage penalties. Lower wages, job insecurity and financial insecurity affect well‐being. However, these negative outcomes are mitigated by longer job tenure. Our results have implications for moves towards a flexicurity model of employment     

Market Rigidities and Labour Market Flexibility: An International Comparison

The effects of product and labour market rigidities on labour market dynamics are analysed using a panel of two-digit ISIC level data for seven OECD countries. As expected, employment protection was found to slacken labour market flows. Centralized wage bargaining also reduced the degree of job turnover, although a priori the effect of centralized wage bargaining on labour market flexibility is not clear. Industry subsidies have a positive impact on job reallocation by increasing job creation. The labour market dynamics are also compared in detail for two economies regarded as extremes in terms of regulations, the U.S. and Norway.     

Sudden stops, financial frictions, and labor market flows: Evidence from Latin America

While the aggregate effects of sudden stops and international financial crises are well known, the disaggregated channels through which they work are not well explored yet. In this paper, using job flows from a sectoral panel dataset for four Latin American countries, we find that sudden stops are characterized as periods of lower job creation and increased job destruction. Moreover, these effects are heterogeneous across sectors: we find that when a sudden stop occurs, sectors with higher dependence on external financing experience lower job creation. In turn, sectors with higher liquidity needs experience significantly larger job destruction. This evidence is consistent with the idea that dependence on external financing affects mainly the creation margin and that exposure to liquidity conditions affects mainly the destruction margin. Overall, our results provide evidence of financial frictions being an important transmission channel of sudden stops and in the restructuring process in general.     

Do unemployment benefits promote or hinder job reallocation?

According to recent and largely untested theories, unemployment benefits (UBs) could improve the extent and quality of job reallocation even at the cost of increasing unemployment. In this paper, we use a new set of yearly panel data from a large number of countries to evaluate empirically the relationship between unemployment benefits and job reallocation. Unlike previous work assessing the effects of UBs on labor market stocks, we focus on flows and rely on policy “experiments,” notably the introduction from scratch of unemployment benefits in many countries. We exploit the longitudinal nature of our data to lessen the potentially important selection, endogeneity, and omitted variable problems. We find a positive, sizable, and significant effect of the introduction of UBs on job reallocation, arising mainly from the job destruction margin although this effect fades away over time. These findings appear to be robust to changes in the countries in the sample, control variables or estimation methods. We discuss to what extent our results are consistent with equilibrium matching models with or without endogenous sorting of workers into jobs providing entitlement to UBs and stochastic job matching.     

Immigrant job search assimilation in Canada

Immigrant assimilation is a major issue in many countries. While most of the literature studies assimilation through a human capital framework, we examine the role of job search assimilation. To do so, we estimate an equilibrium search model of immigrants operating in the same labour market as natives, where newly arrived immigrants have lower job offer arrival rates than natives but can acquire the same arrival rates according to a stochastic process. Using Canadian panel data, we find substantial differences in job offer arrival and destruction rates between natives and immigrants that are able to account for three quarters of the observed earnings gap. The estimates imply that immigrants take on average 13 years to acquire the native search parameters. Due to immigrants facing much lower on‐the‐job offer arrival rates than natives, the model predicts that earnings growth through job search is minimal for immigrants prior to their job search assimilation.     

Social comparisons of wage increases and job satisfaction

We combine status quo and social comparison considerations and investigate whether relative wage increases in the sense of differences between individual wage increases and wage increases of comparable employees are related to managers’ job satisfaction. Using a panel data set of managers in the German chemical industry, we indeed find first evidence. The relation between relative wage increases and job satisfaction is relevant for managers with lower absolute wage levels in particular.     

Workplace democracy and job flows

This paper investigates the relationship between workplace democracy and job flows by comparing the behavior of worker-managed firms (WMFs) and conventional firms (CFs). The empirical analysis relies on high frequency administrative firm-level panel data from Uruguay over the period April 1996–July 2009. The main findings of the paper are that (1) WMFs exhibit much more stable job dynamics than CFs; (2) both types of firms have decreasing in age and increasing in size gross job creation profiles; (3) there are heterogeneous employment regimes within WMFs: job creation and destruction rates are high for hired workers and very low for members. This paper contributes to the literature on the role of institutions in shaping job flows. Our results have important implications for the understanding of the allocative efficiency effects of worker participation.     

Overqualification: permanent or transitory?

This article analyses job mismatches in Switzerland based on a subjective measure of overqualification. According to job search and job matching theories, overqualification is a transitory problem. Other theories show that overqualification can also be of a permanent nature. We test the perpetuity of overeducation using panel data from the first eight waves of the Swiss Household Panel (SHP) covering the period 1999 to 2006. Our empirical analysis reveals little evidence for lasting rigidities that would cause permanent job mismatches. Rather, spells of overqualification are relatively short: about half of all individuals who were overqualified in a given year had an adequate job match 1 year later. While a short duration of overqualification would be consistent with job search and job matching theories, our observation that the probability of a job mismatch does not significantly decrease with experience is at odds with these theories. Our article provides an alternative explanation for this phenomenon: the constant accumulation of experience and qualifications throughout a worker's career implies that, for a good job match to be maintained, qualification-specific job requirements must increase as the worker ages. If this does not occur, even older workers face a risk of becoming overqualified.     

The earnings effects of health and health-related activities: a panel data approach

We investigate the effects of health and health-related habits on earnings in China using panel data to control for unobserved heterogeneity related to individual traits and job characteristics. Health-related habits include smoking cigarettes, drinking tea, frequency of drinking alcohol and physical exercising. We find a significant and large impact of health status on earnings, controlling for schooling, experience and the unobserved individual heterogeneity and job heterogeneity. We also find that smoking has a strong negative effect on earnings net of health status, while the estimated effects of other health-related activities are statistically insignificant.     

The returns to general experience,job and occupational tenure: a study using Australian panel data

This article uses Australian panel data for the years 2001–2009 to estimate returns to general experience, job and occupational tenure. We pay particular attention to issues of unobserved heterogeneity bias in our estimations. We find that both general experience and occupational tenure have statistically and numerically significant effects on wage outcomes, even after controlling for unobserved heterogeneity. Job tenure on the other hand only seems to matter in OLS regressions that do not control for heterogeneity biases. Once these biases are controlled for, only a modest effect from job tenure remains. The inclusion of occupational tenure in the estimating equation tends to negate even this modest job tenure effect. The only exception to this is for workers in large organizations. For these workers a small but statistically significant effect from job tenure remains, even once we have controlled for heterogeneity and included occupational tenure in the estimating equation. The results reported in this article have implications for the various theories of the labour market that predict upward-sloping wage-job-tenure profiles.     

OCCUPATIONAL PENSIONS, WAGES, AND JOB MOBILITY IN GERMANY

Pension‐covered workers in Germany are three times less likely to change jobs than workers not covered by an occupational pension scheme. This paper examines the effects of occupational pension coverage and pension portability loss on voluntary job changes using a sample selection model with endogenous switching. The model estimates, derived from western German panel data for 1985–1998, indicate that occupational pension coverage reduces worker mobility by imposing a capital loss on those leaving their job before retirement age. Moreover, pension‐covered workers receive a higher compensation, which discourages mobility. Making pensions portable increases mobility, but from a low initial level.     

Using job changes to evaluate the bias of value of a statistical life estimates

This paper presents a new approach to obtaining unbiased estimates of the value of a statistical life (VSL) with labor market data. Investigating job changes, we combine the advantages of recent panel studies, allowing us to control for unobserved heterogeneity of workers, and conventional cross-sectional estimations, which are less affected by measurement error. We find a VSL of 6.1 million euros from pooled cross-sectional estimation, 1.5 million euros from the first-differences panel model and 2.0 million euros from the job-changer specification. Thus, ignoring individual heterogeneity causes overestimates of the VSL, whereas the attenuation bias in panel data models leads to underestimates of the VSL. Our results are less biased than former results and can be used to perform cost–benefit analyses of public projects aimed at reducing fatality risks, e.g., in the domains of environmental, health, or traffic policy.     

Continuing Vocational Training Forms and Establishment Productivity in Germany

Abstract. This paper provides evidence of the productivity effects of different continuing vocational training forms in Germany. Using the waves 1997–2001 of the IAB establishment panel, it is found that formal external courses have the largest positive impact on productivity. Formal internal courses and quality circles have a smaller positive impact. Self‐induced learning, participation at seminars and talks and job rotation do not enhance productivity while training on the job has a negative productivity impact. Establishments with an inefficient production structure decide to offer training in order to boost productivity. This paper also shows that taking into account selectivity of the training decision, unobserved time‐invariant heterogeneity, human resource practices, as well as establishment and employee characteristics has an important impact on the measurement results.