Labour Market Flexibility and Sectoral Productivity: A Comparative Study John Grahl London Metropolitan University Labour Market Flexibility Research Seminar, London, 15 December 2004

Labour Market Flexibility Research Seminar, 15 December 2004 Overview of presentation Introduction Data Sets Regression results Interpreting the Results Other considerations Conclusion

Labour Market Flexibility Research Seminar, 15 December 2004 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?

Labour Market Flexibility Research Seminar, 15 December 2004 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

Labour Market Flexibility Research Seminar, 15 December 2004 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

Labour Market Flexibility Research Seminar, 15 December 2004 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)

Labour Market Flexibility Research Seminar, 15 December 2004 Regressions Performed by country Two outliers: electronic equipment and office equipment Data Dependent variable: sector productivity (level or growth) Independent variables: Employment variables Year dummies Control: labour-shedding

Labour Market Flexibility Research Seminar, 15 December 2004 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

Labour Market Flexibility Research Seminar, 15 December 2004 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)

Labour Market Flexibility Research Seminar, 15 December 2004 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.

Labour Market Flexibility Research Seminar, 15 December 2004 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

Labour Market Flexibility Research Seminar, 15 December 2004 Interpretation: Limitations No economy-wide effects Workers not sectors No productivity model

Labour Market Flexibility Research Seminar, 15 December 2004 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

Labour Market Flexibility Research Seminar, 15 December 2004 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: ######

Labour Market Flexibility Research Seminar, 15 December 2004 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.