How much does others’ protection matter? Employment protection, future labour market prospects and well-being

Abstract

Abstract Employment protection legislation (EPL) is an important determinant of workers’ perceived labour market prospects and also their subjective well-being. Recent studies indicate that it is not only a worker’s own level of protection that matters for individual prospects and well-being, but also that of others. We examine how such cross-effects on well-being are mediated by workers’ perceived risk of job loss and future employability. We apply a structural model to data from the European Quality of Life Survey and the OECD Employment Protection Database. Our results indicate that both permanent and fixed-term workers’ perceived employability is affected by EPL, positively for fixed-term workers and negatively for permanent workers. Stricter protection for permanent workers is positively related to fixed-term workers’ perceived risk of job loss. EPL has significant indirect (cross-)effects on life satisfaction via the mediators. There are no indications for direct, non-mediated effects.