Job Security and New Restrictive Permanent Contracts. Do Spanish Workers Fear Losing Their Jobs? Elisabetta Trevisan — Tilburg University and Centraal PlanBureau (CPB) 1997 REFORM IDENTIFICATION STRATEGY ESTIMATION STRATEGY INTRODUCTION SENSITIVITY ANALYSIS CONCLUSION Why Job Security? High in the policy agenda Relation between labour market institutions and perceived job security Broad implications: investment in specific job-skill, job mobility, consumption and savings, etc. Why Spain? Not a reform ‘at the margin’ 1997 reform as a natural experiment It reduces dismissal costs for unfair dismissal by 25% and payroll taxes between 40% and 90%. It applies to newly signed contracts and conversions from temporary to permanent contracts for: Temporary workers below 45 years Temporary workers above 45 years Long term unemployed Women under-represented in their occupations Disabled workers Reform’s Effects Reduction in the level of EPL. Ambiguous expected effect on perceived job security: higher probability to access to permanent contracts ↑ job security higher probability to be fired ↓ job security Data Cross-sectional longitudinal survey focusing on household income and living conditions. Period: Sample: men and women between 16 and 65 years of age. Perceived job security question “How satisfied are you with your present job or business in term of job security? Using scale 1 to 6, please indicate your degree of satisfaction. Position 1 means that you are not satisfied at all, and 6 that you are fully satisfied.” Treatment and control groups I use a balanced panel (heterogeneity over time) I matched the treatment and the control groups at 1995 using the propensity score matching (heterogeneity within and between group) I estimate the following model with a fixed effect estimator: Y it : perceived job security D it : treatment-control dummy α : individual effects δ : time effects D it Post 97 : interaction variable measuring the reform’s effect *, **, *** correspond to 1%, 5% and 10% level of significance respectively. The propensity score matching DID On the balanced panel, each year I calculated the ATT for the 3 treatment-control comparisons. I calculated the Differences-In-Differences: Spanish Labour Market – Two main steps Liberalization of fixed-term contracts Mid 90s – 30% temporary workers; 90% of new signed contract was temporary – New permanent contracts with lower firing costs and payroll taxes. Average level of perceived job security Below 30 Above 45 RESULTS Positive effect of 1997 reform on perceived job security of temporary workers below 30 and between 30 and 44 years of age. No effect for workers older than 45 years. Results Other sensitivity analysis Analysis on other satisfaction variables. Analysis on control groups. Evaluation study on the impact of introduction of new restrictive permanent contracts on the perceived job security of Spanish workers. Main Findings No effect for temporary workers older then 45. Positive and significant effect on perceived job security of temporary workers below 45 years of age.