Labour Market Flexibility and Sectoral Productivity: A Comparative Study

1. Labour Market Flexibility and Sectoral Productivity: A Comparative Study John GrahlLondon Metropolitan UniversityJ.Grahl@londonmet.ac.uk Labour Market Flexibility ResearchSeminar, London, 15 December 2004

2. Overview of presentation • Introduction • Data Sets • Regression results • Interpreting the Results • Other considerations • Conclusion

3. Introduction: • Big sectoral differences in employment forms • - which may differ across countries • Do these sectoral differences impact on sectoral performance? • Are such impacts similar across countries?

4. Productivity Data British Underperformers: Textiles Wood products Activities auxiliary to financial intermediation Furniture and miscellaneous manufacturing Mineral oil refining, coke and nuclear fuel Financial Intermediation Research Printing and publishing Computer and related activities

5. Productivity Data • British High Performers • Inland Transport • Mining • Motor Vehicle Maintenance, Sale and Repair • Leather and Footwear • Other Community and Social Services • Scientific and other instruments • Construction • Electricity, Gas and Water Supply

6. Employment data: ELFS • Gender • Age (under 15; 15-24; 25-54; 55-64; 65 or over) • Education (lower secondary; upper secondary; third level) • Employment Status (employee; family worker; self-employed) • Employment duration (permanent; temporary; contract worker) • Working hours (full-time; part-time)

7. Regressions • Performed by country • Two outliers: electronic equipment and office equipment • Data 1994-2001 • Dependent variable: sector productivity (level or growth) • Independent variables: • Employment variables • Year dummies • Control: labour-shedding

8. Results • Employment variables have little explanatory power • But mostly significant • Male gender, Prime age, Educational status positively associated with productivity • Self-employment, part-time work, temporary work negatively associated with productivity

9. Results: exceptions • Temporary work and productivity level (France) • Part-time work and productivity growth (Sweden, excluding outliers) • Temporary work and productivity growth (Sweden, excluding outliers) • Self-employment and productivity growth (Britain, excluding outliers)

10. Other Exceptions • Gender effects different in Sweden from those in the other three countries • Anomalous results for education in Britain • Absence of usual strong “prime-age” effect in Germany.

11. Interpretation • Direct effects: often implausible (except perhaps educational status?) • Reverse causation – for example, gender? • Various types of crowding and segmentation effect? • For the outliers – little concern with labour productivity because TFP so dependent on technology

12. Interpretation: Limitations • No economy-wide effects • 1994-2001 • Workers not sectors • No productivity model

13. Other Considerations 1 • Germany: build a high-employment low productivity service sector – concern is total wage costs, not productivity • France: concern is that Aubry law has gone too far • Sweden: concern over employment has led to deregulation of temporary contracts

14. Other Considerations 2 • British concern with labour productivity may be abating • Is this result of supply or demand factors? • Self-employment positively associated with productivity growth in Britain • Positive privatisation effects – inland transport, utilities? Source: ######

15. Concluding remarks • Generally negative results for “flexible” forms of employment • Not necessarily to be seen as impact of employment form on productivity – could be segmentation/crowding processes • But likely to call these forms into question.