flexible labor contracts and employment consequences_final
Post on 10-Apr-2018
215 Views
Preview:
TRANSCRIPT
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
1/31
Leonardo A. Lanzona, Jr.
April 28, 2008
Drake Room
Discovery Center
4/28/2008Final Version
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
2/31
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
3/31
Review f iter ture
PerverseRel ti shi s
sequences f theReducti n f is iss l sts
Gener l ssess ent
E irical nal sis
emand f r Flexible ntracts
Su l f W r ers in Flexible rrangements
nclusi n
Major constraint: availabilit of data
4/
/
Final Version
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
4/31
Main Thesis of thePaper: To theextent that otheralternatives, such as wor in the informal sector orabroad, exist, wor ers belonging toaparticular class ofs ills arenot li el toaccept offers below their personalvaluationof their productivit .
onsequences of Flexible ontracts, givena relativelounger wor force, are the following: dverse Selection: Thepool of wor ers may beof lower quality
as themoreproductive will look for better options abroadorin the informal sector. Employers on theother handarenotwilling to hire these workers at higher wages.
Violationof oase Theory: Notwithstanding thedistributionof
property rights, bargaining wouldproduceanoptimalallocationof resources as long as transactioncosts areinsignificant. However, given theprivilege to hire temporaryworkers, labor costs, including bargaining costs, will be lower.
Review of iterature
Empirical
nalysis
onclusion
4/
/
Final Version
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
5/31
Observednegativecorrelation betweenflexiblecontracts andemployment:
eading toa higher turnover of workers, as more
workers aredismissed. Firms seem to indicatethat workers in flexiblecontracts aremoreproductive.
ausing anartificial tightness in theentry leveljobs, leading to greater unemployment
More workers search for better high-paying options butfirms onlyoffer the flexiblecontracts.
Workers with moreexperience in flexiblecontracts areable toobtainemployment more thanother workerswith lesser experience in the labor market.
Review of iterature
Empirical
nalysis
onclusion
4/
/ ! !
Final Version
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
6/31
However, employment is observed toincrease if the following conditions aresatisfied:
The shareof long-term unemployment is reduced Moreentries thanexits of workers are realized
by the firms
Moreprivate sector investments are formed,leading tomore hired workers
n increase in the sizeof the formal sector
Review of" iterature
Empirical#
nalysis
$ onclusion
4/%
& /% ' '
&Final Version
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
7/31
Flexiblecontracts aremore suitable ineconomies whereahigh level of competition is involved. evels ofdevelopment maynot be thecrucial factor as somedeveloping countries seem to benefit flexiblecontracts
Flexiblecontracts should bematched byother forms of
deregulations, such in theproduct and the financialmarkets, since these will induce the firms toexpand theirscaleof production. To someextent flexibility in the labormarket eases thecosts of deregulation.
Flexiblearrangements by themselves arenot substitutesfor greater liberalization in theother markets.Imperfections in theother markets can hinder theexpectedoutcomes of flexiblearrangements.
In thepresenceof imperfect markets andasymmetricinformation, labor markets institutions can be used toaddress the issues of conflict betweenemployers andworkers.
Review of( iterature
Empirical)
nalysis
0 onclusion
4/1
2 /1 3 3
2Final Version
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
8/31
Review of4 iterature
Empirical5
nalysis
6 onclusion
Table 1. Number of Surveyed Established Reporting Non-Regular Workers, 1998 and 2000.
Type of Workers
1998 2000
No. % to Total No. % to Total
Total Surveyed 1,208 100 1,208 100
Part-time Workers 74 6.1 109 9
Casual Workers 283 23.4 366 30.3
Contractual Workers 262 21.7 333 27.6
Agency-Hired Workers 173 14.3 236 19.5
No non-regular workers 416 34.5 164 13.6
4/7
8 /7 9 9
8Final Version
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
9/31
Review of@ iterature
EmpiricalA
nalysis
B onclusion
Table 2. Number of Establishments Employing Non-regular Workers by Type of Industry, 2000.
Manufacturing Construction Wholesale & Retail
Trade
Transportation,
Storage &
Communication
Financial &
Business
Services
No. % No. % No. % No. % No. %
Total 514 100.0 117 100.0 220 100.0 83 100.0 110 100.0
Part-time Workers 58 11.28 9 7.69 23 10.45 5 6.02 14 12.73
Casual Workers 195 37.94 25 21.37 84 38.18 32 38.55 30 27.27
Contractual 146 28.40 74 63.25 53 24.09 26 31.33 34 30.91
Agency-Hired workers 115 22.37 9 7.69 60 27.27 20 24.10 32 29.09
Source: Bitonio (2004).
4/C
D /C E E
DFinal Version
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
10/31
Factors causing a higher demand for flexiblecontracts (Bitonio, 4) The uncertainties and theneed to respond
immediately to various forms of dislocations broughtabout bychanging external market conditions werecitedas thekey reason for the useof casual workers.
The importanceof external conditions suggests thatthecasual workers weremeant primarily to fill intemporary vacancies that occur during theperiods ofhigh demand.
In thecaseof part-time, contractual, andagency-hired workers, firms are looking mainly for theirspecialized skills in highly specificjobs.
Theneed to trainnon-regular workers for morepermanent positions and thequalityof the work theybring in werenotedas the least important reasons foremploying non-regular workers.
Review ofF iterature
EmpiricalG
nalysis
H onclusion
4/I
P /I Q Q
PFinal Version
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
11/31
Review ofR iterature
EmpiricalS
nalysis
T onclusion
Table 3.Percent Share OF Non-Regular Workers to Total Non-Agricultural Establishments Employment
by Ownership, Market Type, Market Reach and Unionism, 2003
Establishment Characteristics Percent of Non -Regular
Workers to Total
Employment (%)
Ownership
With Foreign Equity 21.0
Without Foreign Equity 26.1
Type of Market
Domestic Only 25.9
Export Only 28.4
Both Market 20.1
Market Reach
Multinational 22.6
Not a Multinational 25.7
Unionism
With Union 21.1
Without Union 26.8
Source: Bitonio (2004).
4/U
V /U W W
VFinal Version
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
12/31
Data fromPLFFS suggests that indeed the firms areable to limit their costs substantially (Bitonio, 4). cross various firms surveyed, non-regular workers are
paid lower wages than regular workers even if theyperform the sameor similar work. Higher payments are
foundonly in two to fivepercent of firms. Lower pay isespeciallynoticeable for casual, part-timeandcontractual workers.
In thecaseof benefits other thandirect wages, non-regular workers typically received lower than regularworkers. Only 6 % of firms pay their non-regular workersthirteenth month pay, compared to 9 . % for regularworkers, although this benefit is statutory.
Incases where benefits areprovided, non-regularworkers also receive lower medical benefits,employment accident anddisease benefits, maternity,paternity leave, transport allowanceor assistance, andmeal allowanceor assistance.
Review ofLiterature
EmpiricalX
nalysis
Y onclusion
4/
a /` b b
aFinal Version
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
13/31
Review ofLiterature
Empiricalc
nalysis
d onclusionTable 4. Number of Workers Employed in Specific Categories, Survey Years (In Thousands)
INDICATOR 1991a
1992 1993 1994 1995 1996 1997 2003 2004
EM e LOYMENT OF S e ECIFIC GROU e S
OF WORKERS
(Establishments employing 10 and over)
Total Establishment Employment b 2,292 2,504 2,561 2,493 2,692 2,606 2,865 2,603 2,413
Female Workers 892 1,018 1,010 933 1,028 973 1,077 1,031 962
Minimum Wage Earners 499 545 461 648 705 640 794 837 817
Time-rated Workers 2,136 2,347 2,376 2,289 2,553 2,465 2,691 2,500 2,295
Piece-rated Workers 97 91 95 91 90 69 89 52 55
Task or "Pakyao" Workers 17 35 35 28 43 32 40 10 7
Commission Workers 163 90 129 135 143 119 170 73 74
Part-time Workers 34 37 46 37 48 51 63 66 51
Casual Workers 95 102 87 108 119 108 134 158 141
Contractual Workers 161 250 250 197 319 320 401 307 298
Notes:aExcludes Agriculture, Forestry and Fishery
bEmployment based on the Survey Conducted, excludes agency-hired workers
Source: Bureau of Labor and Employment Statistics, Survey of Specific Groups of Workers.
4/f
g /f h h
gFinal Version
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
14/31
Review ofLiterature
Empiricali
nalysis
p onclusion
0.00
10.00
20.00
30.00
40.00
1991 1992 1993 1994 1995 1996 1997 2003 2004
Years
Figure 1. Percentage of Total Non-Regular Work to Total Establishment
Employment
4/q
r /q s s
rFinal Version
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
15/31
Review ofLiterature
Empiricalt
nalysis
u onclusion
0
2
4
6
8
10
12
14
16
1991 1992 1993 1994 1995 1996 1997 2003 2004
Years
Figure 2. Percentage of Specific Non-regular Workers to Total
Establishment Employment , Selected Years
Piece-ratedWorkers
Task or "Pakyao" Workers
Commission Workers
Part-timeWorkers
Casual Workers
ContractualWorkers
4/v
w /v x x
wFinal Version
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
16/31
Review ofLiterature
Empiricaly
nalysis
onclusion
Table 5. Establishment Employment by Industry and Type of Worker, 2003 (in
Thousands)
Total Total Type of Workers
Major Industry Group Number of Establishments Working Unpaid Managers/ Super - Rank & File Contractor/
Persons Employment Owners Workers Executives visors/ Regular Non-Regular Agency-
Engaged Foremen Hired
Workers
Total Non-Agriculture 2,919 2,603 16 5 148 221 1,562 651 316
Mining and Quarrying 25 20 a a 1 4 13 3 5
Manufacturing 1,126 1,000 5 1 37 78 634 245 126
Electricity, Gas & Water Supply 87 71 a a 3 10 50 9 16
Construction 85 81 1 a 4 8 25 44 4
Wholesale and Retail Trade 422 374 4 1 24 31 232 83 48
Hotels and Restaurants 172 152 1 1 12 16 66 56 20
Transportation, Storage &
Communications 222 203 1 a 10 23 136 31 19
Financial Intermediation 155 132 a a 25 16 82 8 23
Real Estate, Renting &
Business Activities 289 255 1 a 15 15 121 102 34
Private Education Services 208 195 2 1 10 10 125 47 13
Health & Social Work Except
Public Medical Dental and
Other Health Services 63 59 1 a 3 5 42 9 4
Other Community, Social &
Personal Service Activities 65 61 a a 4 6 36 15 4
Note: Details may not add up to total due to rounding.
4/
/
Final Version
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
17/31
Review ofLiterature
Empirical
nalysis
onclusion
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
No. of workers
Years
Figure 3. Comparison of Total Employment and Total Establishment
Employment, Selected Years
Total EmployedWorkers
Total EstablishmentWorkers
4/
/
Final Version
Overall, some effect in formal establishment but negligible to
total employment. May have brought about some biased
negative effects on the workers in formal establishments.
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
18/31
The failureof thepolicy todeliver its promisenopositiveeffect onemployment, leading to inefficiency in the labormarket
Effects of adverse selectiondue to thepolicies:
Thenegative impact onemployment Becauseof theease to set upcontracts, the
percent engaged in
formal establishments has drivenout of themarket themoreproductiveworkers whoare seeking tenure
Thenumber of dismissals arepresumably greater, thereby raising thenumber of the unemployed.
Theconsequence is a set of distorted incentives. Peoplewhoaremoreproductiveandmotivated will not beable tofind work, making investment in humancapitalunprofitable. The labor force surveys indicate that thecollegeeducatedpersons havea lower probabilityoflanding ajob.
4/
/
Final Version
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
19/31
Review ofLiterature
Empirical
nalysis
onclusion
0
5
10
15
20
25
Years
Figure 4. Unemployment and Underemployment Rates in the Philippines,
1991-2005
UnemploymentRate
UnderemploymentRates
4/
/
Final Version
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
20/31
Review ofLiterature
Empirical
nalysis
onclusion
Table 6. Relationship between average number of Non-regular Workers, Unemployment and
Underemployment, 2004
Non-regular Workersa
Unemployment Underemployment
Philippines 97583 11.8 17.6
National Capital Region 34715 18.1 11.9
Cordillera Administrative Region 215 9.1 13.3
Region I- Ilocos Region 1175 12.8 16.2
Region II -Cagayan Valley 2852 8.6 19.8
Region III - Central Luzon 13068 13.2 7.4
Region IV - A - CALABARZON 11827 14.2 12.1
Region IV - B - MIMAROPA 1159 9.7 17.2
Region V - Bicol Region 2752 8.5 29.5
Region VI - W. Visayas 4734 9.7 21.5
Region VII - C. Visayas 7318 13.1 11.4
Region VIII - E. Visayas 1643 9.7 26.2
Region IX - Zamboanga Peninsula 1757 7.1 20.5
Region X - N. Mindanao 4364 7.8 32.3
Region XI -Davao Region 7224 10.0 24.1
Region XII - SOCCSARGEN 1264 10.7 22.6
ARMM 1092 7.3 10.3
Caraga 424 10.4 23.3
Notes:aAverage Numbers of Non-regular Workers per Region. Includes Piece-rate, Commission,
Contractual, Task and Contractor/Agency Hired Workers.
Source: Bureau of Labor Employment and Statistics, National Statistics Office
4/
/
Final Version
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
21/31
Review ofLiterature
Empirical
nalysis
onclusion
0
10
20
30
0 10000 20000 30000 40000Non-regular Workers
Unemployment Underemployment
Fitted valuesFitted values indicate relationship between Non-regular workers and unemployment
Regional Data (2004)
Figure 5. Non-regular Workers vs. Unemployment and Underemployment
4/j
k /j l l
kFinal Version
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
22/31
Bootstrapmethod tests the stabilityof thecorrelation:This is done byconsidering different sub-samples of agiven sample, testing the significanceof each of the sub-samplecorrelations, and thenestimating the significance
of theaveragecorrelationobtained from the whole sampleusing theobserved sub-sample variances
Results:
! ! !2
*
0.171 1.361ln , adj-R 0.34, 17
(0.03) (1.96)
unemp nreg n
A one percentage increase in employment in flexible contracts is
offset by a 1.361 percent increase in unemployment, hence
associated to a net increase in unemployment by 0.36 percent.
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
23/31
Review ofLiterature
Empiricalm
nalysis
n onclusion
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
1995 1996 1997 1998 1999 2000 2001 2002 2003
Fig.6. Number of Displaced Workers due to Economic Reasons
All Industries
Agriculture, Forestry and Fishing
Mining and Quarrying
Manufacturing
Electricity, Gas and Water
Construction
Services
4/o
/o
Final Version
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
24/31
Market imperfections Becauseof the lackof investments, theemployment has not
increaseddespite the lower labor costs that have resultedfrom thecontractualization. Given thecountrys largepopulation, the fast-growing businesses in the service sector donot need to rapidly increase investment toenjoy rising profits
(Bocchi, 7). Theeconomy is able toachieve higher growth becauseof its
least protected sectors - the informal labor market and thenon-capital-intensiveactivities.
Furthermore, the burgeoning remittances due tomassive labormigration stimulateconsumption-led-growth whilea few non-capital-intensivemanufactures and services boost exports.
Theeconomic system is inequilibriumat a low-level of capitalstock, whereall economicagents haveno incentive tounilaterally increase investment, and thedismissed workersareoften thecarrying thecosts of the growth. s aconsequence, growth is slower and less employment isachieved
Review ofLiterature
Empirical
nalysis
onclusion
4/
/
Final Version
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
25/31
More search hourson the average!
4/
/
Final Version
Review ofLiterature
Empiricalz
nalysis
{ onclusionYear Average percentage of the Labor
Force who looked for work during
the past week
Average percentage of the Labor
Force Available for Work during
the past week
Average Weeks spent Looking
for work
1997 0.0275 0.0851 7.8016
1998 0.0341 0.1057 7.5999
1999 0.0340 0.1005 7.6872
2000 0.0329 0.0880 8.4453
2001 0.0424 0.1240 8.8377
2002 0.0382 0.1174 8.2378
2003 0.0285 0.1013 8.5271
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
26/31
Sameas theproposed reasons for theobserveddecreases in labor forceparticipation rates: Increased resources todelay formal participation in the labor
markets. Remittances fromother familymembers Household Involvement in the informal sector Aldaba et. al. ( 6) noted
y Families as a wholeare sub-contracted in theinformal sector
y Familymembers arecomplementary, though notsubstitutable
y Incomes are shared in the family The latest LFS noted the increasedproportionof
unpaid familymembers to the total employment
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
27/31
Further Evidence of Negative Relationships
between Contractualization and Employment
3
9
39.5
40
40.5
41
Hours
.08
.09
.1
.11
.12
Percentage
1997 1998 1999 2000 2001 2002 2003Year
Availabillity for work Total hours of work
1997-2003
Fig. 8. Worker Availability and Total Hours of Work
Source: LaborForceSurvey, National StatisticsOffice
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
28/31
As an increasing number of scholars havecometo see, theevidence for anycausal link betweenwage flexibilityand unemployment is thin. Thispaper contributes to thedebate bypresenting afew trends inemployment and flexiblecontractsand finds theassociationposited by theconventional view to fail in very simple tests ofassociation.
Analternative hypothesis, which specifies thathigh flexibility in various regions correspondinglyincreases unemployment rates, seems to fit theevidencemore satisfactorily.
Review ofLiterature
Empirical
Analysis
| onclusion
4/}
~ /}
~Final Version
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
29/31
First, unemployment has nothing todo with thedurationof contracts. Greater investments areneeded from the firms especially in the trainingof workers and in the formationof labor-inducing physical capital.
Toaccelerateeconomic growth, and increasejobcreation, local firms must be induced to investfurther. Todo this, rent seeking by the lites thatexercisepolitical andeconomicpower - or litecapture - must beaddressed.
While it is necessary to improve the investmentclimateandcompetitiveness, thecrucial steps in
attracting investment andcreating more local jobsare in terms of liberalizing and reforming thesectors dominated by rent-seeking corporateconglomerates.
4/
/
Final Version
Review ofLiterature
Empirical
Analysis
onclusion
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
30/31
Finally, institutions that allow greaterparticipationof the workers inpolicymakingneed to be strengthened. As shown from thecontractualization reform
experience, nopolicymeasure that seeks toincreaseemployment can succeed without firstdetermining how workers will react to thepolicy.
The formationof institutions maycertainlycausecertain setbacks in theeffort to increase theeconomic growth of thenation. But one thing iscertain: these institutions will bring about greater
welfare Labor unions need to be strengthened.
4/
/
Final Version
Review ofLiterature
Empirical
Analysis
onclusion
-
8/8/2019 Flexible Labor Contracts and Employment Consequences_final
31/31
Thankyou!
4/
/
Final Version
top related