Critiquing the OECD’s Employment Protection Legislation Index for individual dismissals: The importance of procedural requirements
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Key EU agencies have successfully urged member states to scale back employment protection legislation as a solution to unemployment. The economic arguments for this reform are mixed, with recent empirical evidence largely unsupportive. Critics have also raised doubts about the accuracy of the OECD’s Employment Protection Legislation Index, which is the principal method EU agencies use to target so-called high-protection regimes. This article supplements existing criticisms of the OECD index by arguing that it fails to account for procedural requirements in assessing the difficulties and costs of carrying out individual dismissals. Evidence from New Zealand, ostensibly a low-protection country, demonstrates procedural requirements can pose the main impediments to carrying out individual dismissals. This suggests the need for revision of the OECD Employment Protection Legislation Index or the use of other indices instead.Keywords:
Employment protection legislation
Empirical Research
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This article focuses on the relationship between employment protection legislation (EPL) and skill-specific unemployment risks. As a consequence of skill-biased technological progress, low- and high-skilled workers are expected to be affected differently. Moreover, the level of technological progress should moderate the relation between EPL and skill-specific unemployment risks. The analyses are based on data from the Labour Force Survey from the year 2008 and concentrate on the civilian labour force aged between 25 and 49 years in 20 European countries. The results show that stricter EPL strengthens unemployment risks between skill groups only when the level of technological progress is very advanced. In other countries, stricter EPL is related to less inequality in unemployment risks. However, there are two sides to a coin. While stricter EPL is related to lower unemployment risks for the low skilled in most countries, it leads to higher unemployment rates for the highly skilled at the same time.
Employment protection legislation
Eu countries
Flexicurity
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The article analyses the impact of employment protection legislation (EPL) on labour market outcomes. Despite widespread reforms that have reduced employment protection, the evidence on the effects of such reforms is inconclusive. Using data from sixteen European countries over the period 1985–2019, we analyse the impact of EPL on the dynamics of employment, employees and unemployment rates. In contrast to existing studies, we analyse both the existence of a linear relationship between EPL and labour market outcomes and the existence of a non-linear relationship, as well as interaction effects between EPL and economic growth. Our results show that employment protection does not explain the changes in employment, employees and unemployment rates. Therefore, labour reforms that have reduced employment protection by reducing dismissal costs and facilitating the use of temporary contracts have not had the presumed positive effects on employment and unemployment rates.
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