Labor Market Effects of Work-Sharing Arrangements in Europe Francis Kramarz Pierre Cahuc Bruno Crépon Thorsten Schank Oskar Nordström Skans Gijsbert Van Lomwel André Zylberberg

Outline Forces for “work-sharing” everywhere Expressions differ Theory will help us understand potential reasons for differences Germany: the role of unions France: centralization, and productivity Sweden: unions, and international trade Holland: men, women, and children

Work-Sharing is everywhere Germany: firms and industries negotiated with unions decreasing hours in the 90s in the face of business difficulties France: unemployment “forced” hours reductions, first to 39 hours (1982), then to 35 hours at the end of the nineties Sweden: Career breaks everywhere Holland: the part-time economy

Theory (1) Labor Demand:

Theory (2) Reduction of working time when competition is perfect is worthless:

Theory (3) In the real world, competition is imperfect: Externalities (preferences, work norms, collective labor supply) Collective bargaining; demand for shorter hours and effects depend on: –Bargaining power of trade unions –Degree of coordination in wage bargaining –Weight of employment in unions’ objectives –Degree of product market competition

Germany (1) A strong tradition of bargaining between firms and unions, at the industry- and at the firm-levels Increasing dispersion in the bargaining regimes (firm or industry) Large dispersion in hours (west): 10% work 35 hours but 25% work 40, 50% work Reductions in working time had no impact on employment Reductions in working time were accompanied by increases in hourly wages (almost full monthly wage compensation)

Germany (2) Working time becomes flexible (opening clauses, working time accounts) 42% of workers have working time accounts Firms start to increase working time (Siemens, Daimler) “in exchange” for employment guarantees

Germany (3)

Germany (4)

Germany (5)

France (1) High unemployment Weak unions, large coverage, “paritarisme” In 1982, from 40 to 39: full monthly wage guarantee, induced employment destruction In the second half of 90s: reduction to 35 Through laws forcing firms and unions to strike bargains (Aubry I, Aubry II) with different levels of subsidies and obligations Full monthly wage compensation for workers in place; payroll tax subsidies plus “structural help” and other “incentivizations”

France (2)

France (3)

France (4)

France (5)

Sweden (1) Low unemployment (except 90s) Strong unions Small open country Reduction in hours without work-sharing Unions never asked for work-sharing (competitiveness) But unions asked for “career breaks” (welfare) We examine one example

Sweden (2)

Sweden (3)

Sweden (4)

Sweden (5)

Holland (1) Strong unions and government sets maxima Attempts of work-sharing Wassenaar agreement (1982): reduce working time against wage moderation Lots of freedom in ways to implement it: –More holidays ( , around 1993) –Flexible hours after –Part-time starting in industries with women Almost full wage compensation No employment effects Now, part-time is everywhere

Holland (2)

Holland (3)

Holland (4)

Conclusion Work-sharing is everywhere with very diverse implementation Not universally bad Reducing hours to create employment does not work in the “real” life (wage compensation) Reducing hours can be really bad and (or) costly (productivity, deaths,…) Giving more time to citizens is not necessarily bad (academics enjoy sabbaticals) The exact shape and financing of “career breaks” should be an outcome of negotiations