Labor Market Effects of Work-Sharing Arrangements in Europe

1. Labor Market Effects of Work-Sharing Arrangements in Europe Francis Kramarz Pierre Cahuc Bruno Crépon Thorsten Schank Oskar Nordström Skans Gijsbert Van Lomwel André Zylberberg

2. Outline • Forces for “work-sharing” everywhere • Expressions differ • Theory will help us understand potential reasons for differences • Germany: the role of unions • France: centralization, and productivity • Sweden: unions, and international trade • Holland: men, women, and children

3. Work-Sharing is everywhere • Germany: firms and industries negotiated with unions decreasing hours in the 90s in the face of business difficulties • France: unemployment “forced” hours reductions, first to 39 hours (1982), then to 35 hours at the end of the nineties • Sweden: Career breaks everywhere • Holland: the part-time economy

4. Theory (1) • Labor Demand:

5. Theory (2) • Reduction of working time when competition is perfect is worthless:

6. Theory (3) • In the real world, competition is imperfect: • Externalities (preferences, work norms, collective labor supply) • Collective bargaining; demand for shorter hours and effects depend on: • Bargaining power of trade unions • Degree of coordination in wage bargaining • Weight of employment in unions’ objectives • Degree of product market competition

7. Germany (1) • A strong tradition of bargaining between firms and unions, at the industry- and at the firm-levels • Increasing dispersion in the bargaining regimes (firm or industry) • Large dispersion in hours (west): 10% work 35 hours but 25% work 40, 50% work 37.5-38.5 • Reductions in working time had no impact on employment • Reductions in working time were accompanied by increases in hourly wages (almost full monthly wage compensation)

8. Germany (2) • Working time becomes flexible (opening clauses, working time accounts) • 42% of workers have working time accounts • Firms start to increase working time (Siemens, Daimler) “in exchange” for employment guarantees

9. Germany (3)

10. Germany (4)

11. Germany (5)

12. France (1) • High unemployment • Weak unions, large coverage, “paritarisme” • In 1982, from 40 to 39: full monthly wage guarantee, induced employment destruction • In the second half of 90s: reduction to 35 • Through laws forcing firms and unions to strike bargains (Aubry I, Aubry II) with different levels of subsidies and obligations • Full monthly wage compensation for workers in place; payroll tax subsidies plus “structural help” and other “incentivizations”

13. France (2)

14. France (3)

15. France (4)

16. France (5)

17. Sweden (1) • Low unemployment (except 90s) • Strong unions • Small open country • Reduction in hours without work-sharing • Unions never asked for work-sharing (competitiveness) • But unions asked for “career breaks” (welfare) • We examine one example

18. Sweden (2)

19. Sweden (3)

20. Sweden (4)

21. Sweden (5)

22. Holland (1) • Strong unions and government sets maxima • Attempts of work-sharing • Wassenaar agreement (1982): reduce working time against wage moderation • Lots of freedom in ways to implement it: • More holidays (1982-1985, around 1993) • Flexible hours after • Part-time starting in industries with women • Almost full wage compensation • No employment effects • Now, part-time is everywhere

23. Holland (2)

24. Holland (3)

25. Holland (4)

26. Conclusion • Work-sharing is everywhere with very diverse implementation • Not universally bad • Reducing hours to create employment does not work in the “real” life (wage compensation) • Reducing hours can be really bad and (or) costly (productivity, deaths,…) • Giving more time to citizens is not necessarily bad (academics enjoy sabbaticals) • The exact shape and financing of “career breaks” should be an outcome of negotiations