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What we’re reading about job tenure in European labor markets

Technological progress and worldwide competitors require corporations to adapt to speedy adjustments in product markets and in manufacturing processes. Because of this, considerations in regards to the potential decline of secure jobs have intensified.

Corporations should be extra agile to adapt to the evolving calls for of latest services, whereas staff expertise extra frequent job transitions. Versatile and momentary contracts enable corporations to regulate workforces to adjustments within the financial setting. Such contracts additionally provide corporations alternatives to rent staff whose productiveness can’t be totally assessed upfront.

Versatile contracts are much less enticing to staff, nonetheless, as they carry extra threat of job instability, and each wage progress and investments in coaching are usually decrease. For that reason, there’s proof that staff could also be prepared to incur a wage penalty in change for job safety. The considerations with contract stability are particularly acute in international locations with growing old populations, as an older workforce adjusts much less simply to labor market shocks and retraining, and mobility is much less worthwhile. Acceptable labor laws and social safety devices are thus necessary to allow and accommodate flexibility.

The financial analysis on job tenure – a part of the intensive literature on labor market flexibility and job mobility – explores how tenure is expounded to well-being and fairness, and its linkages to effectivity. Contemplating the size of job tenure as a key measure of job stability, tenure might be seen as one of many major drivers of job satisfaction and staff’ well-being. Lengthy-lasting tenure is especially related in Europe, the place the concept of a “job for all times” was a part of its residents’ collective id within the second half of the twentieth century. Many Europeans nonetheless maintain that superb job as their main reference level, even when elementary adjustments in labor markets because the Seventies broke the implicit contract of long-term dedication between employers and staff. The empirical discovering that versatile, part-time, non-traditional labor contracts with shorter tenures are extra prevalent amongst youthful cohorts or much less well-paid staff means that this labor market transformation has regressive distributional impacts.

As well as, from an fairness perspective, adjustments in job tenure additionally impression wealth accumulation. Households whose members have extra secure jobs accumulate extra wealth even when controlling for revenue. Analyzing the evolution of job tenure might be informative about adjustments within the labor market and the anticipated evolution of family welfare. Tenure additionally displays the effectivity of job matching. When staff and staff are happy with the job match, solely a robust shock can sever employment, whereas inferior job matches are extra susceptible to dissolve rapidly. Thus, adjustments within the common size of job tenure, within the absence of great regulatory adjustments, also can point out adjustments in how good job matches are on common.

Tenure can be important for human capital funding selections, as corporations typically practice staff in firm-specific duties, and staff themselves acquire tacit and firm-specific data the longer they’re employed, in flip rising their productiveness. The connection between tenure and productiveness could not, nonetheless, be linear and will plateau. In the long term, laws that induce extreme use of momentary contracts or that favor excessive job turnover can hurt productiveness.

Job tenure

Important readings

Broader jobs agenda

This weblog relies on the February 2023 version of the Knowledge4Jobs e-newsletter, curated by the World Financial institution’s Jobs Group and Labor and Expertise International Options Group. Click on here to enroll in the Knowledge4Jobs e-newsletter.