Featured Research

from universities, journals, and other organizations

Strict Labor Market Regulation Increases Global Unemployment, Study Shows

Date:
March 17, 2009
Source:
University of Bath
Summary:
Unemployment is increased in countries that have stringent labor market regulations. New research also suggests that the UK's fairly flexible labor market regulation is likely to strengthen the economy's resilience to weather the current global financial crisis.

Tight labour market regulation increases unemployment all over the world, finds a study of 73 countries by the University of Bath.
Credit: Image by Jason Cartwright

Tight labour market regulation increases unemployment all over the world, finds a study of 73 countries by the University of Bath.

Related Articles


The study, published in the Journal of Comparative Economics, is one of the first to cover not only industrial countries but also developing and transition countries.

Based on data for the years 2000 to 2003, the findings suggest that if, for example, Italy (a typical country with strict regulation) had enjoyed the same flexibility in labour market regulation as the United States (a typical country with flexible regulation), its unemployment rate might have been 2.3 percentage points lower among the total labour force, 3.4 percentage points lower among women and 5.6 percentage points lower among young people.

“The adverse labour market effects are probably due to lower investment by domestic firms as well as lower foreign direct investment inflows caused by stricter labour market regulation.” said Dr Horst Feldmann, from the University’s Department of Economics & International Development, who carried out the research.

One area of labour market regulation that appears to have particularly adverse effects on unemployment are stringent hiring and firing rules, the study finds.

While strict hiring rules restrict temporary work agencies and the use of fixed-term contracts, tight firing rules make it difficult and costly for employers to lay off workers.

According to the findings, these rules, as well as strict labour market regulation in general, have a particularly adverse impact on women and young people.

Dr Feldmann explained: “Women often take a career break to have children and later on try to get back into employment. Young people are just entering working life.

“Therefore, it is plausible that both groups are more strongly affected when employers are reluctant to hire staff due to stringent labour market regulation.”

Another type of labour market regulation that appears to raise unemployment on a world-wide scale is military conscription, the study finds.

“A main reason may be that conscripts leaving the armed forces after the end of their service have difficulties finding a job because they did not gather the skills and work experience that employers are looking for.” said Dr Feldmann.

“The longer the conscription period, the more severe this mismatch is likely to be. According to my findings, this effect is the strongest among young people. This is obviously because conscripts typically are in this age group.

“This is the first time the effects of military conscription on the labour market have been analysed.”

Apart from the indicators that measure the strictness of hiring and firing regulation and the use of conscription, Dr Feldmann used indicators that measure the strictness of minimum wage laws, the centralisation of wage bargaining and the generosity of unemployment benefits.

His aggregate indicator measuring the overall strictness of labour market regulation is the average of these five individual indicators.

On average over the years 2000-2003, Italy’s flexibility of labour market regulation (as measured by the aggregate indicator) was rated 3.6 out of 10 - while the United States was rated 7.2 and the United Kingdom was rated 6.8.

Dr Feldmann said: “The research suggests that the UK’s fairly flexible labour market regulation is likely to strengthen the economy’s resilience to weather the current crisis.

“Although unemployment is going to rise sharply for some time, countries with more flexible regulation will probably experience a faster and more pronounced fall in unemployment once the crisis is overcome.”


Story Source:

The above story is based on materials provided by University of Bath. Note: Materials may be edited for content and length.


Cite This Page:

University of Bath. "Strict Labor Market Regulation Increases Global Unemployment, Study Shows." ScienceDaily. ScienceDaily, 17 March 2009. <www.sciencedaily.com/releases/2009/03/090317095020.htm>.
University of Bath. (2009, March 17). Strict Labor Market Regulation Increases Global Unemployment, Study Shows. ScienceDaily. Retrieved November 24, 2014 from www.sciencedaily.com/releases/2009/03/090317095020.htm
University of Bath. "Strict Labor Market Regulation Increases Global Unemployment, Study Shows." ScienceDaily. www.sciencedaily.com/releases/2009/03/090317095020.htm (accessed November 24, 2014).

Share This


More From ScienceDaily



More Science & Society News

Monday, November 24, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Symantec Uncovers Sophisticated Spying Malware Regin

Symantec Uncovers Sophisticated Spying Malware Regin

Newsy (Nov. 24, 2014) A Symantec white paper reveals details about Regin, a spying malware of unusual complexity which is believed to be state-sponsored. Video provided by Newsy
Powered by NewsLook.com
Hackers Target Business Travellers

Hackers Target Business Travellers

Reuters - Business Video Online (Nov. 24, 2014) A newly detected malware, dubbed Darkhotel, infects hotel networks with spying software to steal sensitive data from the computers of high profile business executives, warns a leading computer security firm. Ciara Lee reports. Video provided by Reuters
Powered by NewsLook.com
Are Female Bosses More Likely To Be Depressed?

Are Female Bosses More Likely To Be Depressed?

Newsy (Nov. 24, 2014) A new study links greater authority with increased depressive symptoms among women in the workplace. Video provided by Newsy
Powered by NewsLook.com
NY Gov. on Flood Prep: 'prepared for the Worst'

NY Gov. on Flood Prep: 'prepared for the Worst'

AP (Nov. 23, 2014) First came the big storm. Now comes the big melt for residents of flood-prone areas around Buffalo. New York's governor says officials are preparing for the worst as the temperature is expected to rise and potentially melt several feet of snow. (Nov. 23) Video provided by AP
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:

Breaking News:

Strange & Offbeat Stories


Science & Society

Business & Industry

Education & Learning

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile: iPhone Android Web
Follow: Facebook Twitter Google+
Subscribe: RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins