Short-time work: the ultimate flexibility measure or just a springboard to unemployment? Dimitris Pavlopoulos (Vrije Universiteit Amsteram) Katja Chkalova (University of Amsterdam and Statistics Netherlands) Dimitris Pavlopoulos

Short-time work: deeltijd-WW (temporary) Unilateral reduction of working hours Companies could use it for up to 39-65 weeks Workers could be set to deeltijd-WW for up to 52 weeks (4x13 or 2x26) Training agreements Consent of employment agency and works council was necessary Partly laid off workers could use unemployment insurance In the Netherlands: temporary measure (April 2009 - June 2011) for the unemployment effects of the crisis In other countries (e.g. Belgium): structural measure Internal flexibility measure Dimitris Pavlopoulos

Aim of short-time work in the Netherlands Reduce unemployment Part-time lay offs as an alternative! Help firms to preserve highly skilled workers in times of low demand Consequence: group of workers in short-time rather homogeneous: Prime age males, highly skilled/specialized in specific sectors (mainly metal industry, wholesale and retail) Dimitris Pavlopoulos

Some numbers The arrangement was used: By 7.836 companies For 77.430 workers, 0.99% of the workforce on average for 70% of their time The peak was 40.000 workers (October 2010) Cost for the government: €360 million Dimitris Pavlopoulos

Previous findings Research only at the company level (Hijzen and Venn, 2011; de Groot et al, 2012) ! Main results from estimation: Reduction of the unemployment rate by 0.1-0.2% To put this in perspective: 452.000 unemployed in February 2010 Perceptions: Different perceptions between employers and workers. 78% of employers (34% of workers) thought that there would have been more lay offs without deeltijd WW Dimitris Pavlopoulos

The whole story remains unknown… The arrangement was meant to save jobs But, how did it really work? How does it relate to the use of other flexible arrangements by the firm? Moral hazard – misuse was possible What if companies wanted to get rid of certain workers? Short-time work would be the first step Possible negative effects on the individual worker Dimitris Pavlopoulos

Aim of the paper Does participation in deeltijd-WW protect from unemployment or leads to job change? How is deeltijd-WW related to the use of flexible contracts by the company? Dimitris Pavlopoulos

Data and method Data from the CBS (2009-2011): 33,980 in the experimental group, 31,948 control group 1 and 26,345 in control group 2 Control group: (1) workers from companies using deeltijd-WW and (2) companies not using short-time Selection at the peak of short-time Stratified sample with firm size Method: competing risks discrete duration model Risk set: workers excluding companies that went bankrupt Short-time workers included only after leaving short time Competing risks: unemployment and job change Unobserved heterogeneity: 2 mass points Dimitris Pavlopoulos

Descriptives 12.4% 29.3% 20.5% 10.7% 35.7% 44.7% 1.4% 5.8% 3.3% 13.5%   Short-time workers Non-participant colleagues Non-participant non-colleagues Temporary contract 12.4% 29.3% 20.5% Female 10.7% 35.7% 44.7% younger than 26 1.4% 5.8% 3.3% 26-35 years 13.5% 16.8% 17.0% 36-45 years 28.4% 26.9% 26.8% 46-55 years 35.9% 29.9% 30.8% older than 55 20.8% 20.6% 22.1% Less than €1927 7.5% 29.4% 25.3% €1928-€2640 26.7% 18.0% €2641-€3138 30.6% 16.5% 15.4% €3139-€3984 21.1% 17.5% 19.0% More than €3984 14.1% 19.7% 22.2% Dutch 77.9% 81.1% 82.9% Europe, North America, Oceania, Indonesia or Japan 10.0% 9.6% 7.1% Africa, South America, Asia (rest) 8.2% 8.1% 9.0% Unknown 3.8% 1.3% 1.1% Dimitris Pavlopoulos

Results Model 1 Model 2 Unemployment Duration dependance (logarithmic) 0.338*** 0.354*** [0.019] Control group 1: same firm – no STW worker 0.010 -0.742*** [0.046] [0.082] Control group 2: firm not using STW 0.147* -0.745*** [0.081] [0.263] Control group 1 * 0.503*** 0.573*** Temporary contract [0.099] [0.098] Control group 2* 0.321** 0.423*** [0.126] [0.125] Average % of hours in short time in the firm 0.013** [0.006] Share of STW workers in the firm   -0.027*** [0.002] 0.001 0.019*** * significant at the 10% level, ** significant at the 5% level, *** significant at the 1% level Results Control variables: gender, age, age squared, wage, ethnicity, firm size, industry, revenue change Dimitris Pavlopoulos

Model 3: share of temporary contracts Duration dependance (logarithmic) 0.354*** [0.020] Control group 1: same firm – no STW worker -0.493*** [0.090] Control group 2: firm not using STW 1.422*** [0.265] Interactions with Control group 1 Control group 2 Low share of temporary contracts in the firm (ref almost zero) 0.482*** 0.180 [0.106] [0.164] Medium share of temporary contracts in the firm 0.409*** 0.111 [0.115] [0.170] High share of temporary contracts in the firm -0.120 -0.514*** [0.134] [0.191] * significant at the 10% level, ** significant at the 5% level, *** significant at the 1% level Results Control variables: gender, age, age squared, wage, ethnicity, firm size, industry, revenue change Dimitris Pavlopoulos

Model 3: share of temporary agency workers Results Model 3: share of temporary agency workers Duration dependance (logarithmic) 0.356*** [0.020] Control group 1: same firm – no STW worker -0.587*** [0.075] Control group 2: firm not using STW 0.984*** [0.271] Interactions with Control group 1 Control group 2 Low share of temporary agency workers in the firm (ref 0) 0.629*** 0.435*** [0.084] [0.144] Medium share of temporary agency workers in the firm (ref 0) 0.455*** 0.467*** [0.093] [0.149] * significant at the 10% level, ** significant at the 5% level, *** significant at the 1% level Control variables: gender, age, age squared, wage, ethnicity, firm size, industry, revenue change Dimitris Pavlopoulos

What do we learn? Short-time work has a more positive effect than we thought! A firm-level explanation is not enough STW participants are worse out within the firm The use of external flexibility is relevant Especially when talking about really external flexibility Positive effects of STW stronger when firm has external flexibility Negative (within firm) effects of STW smaller when firm has external flexibility Dimitris Pavlopoulos