Abstract
We investigate the long term employment outcomes of Italian injured workers over a time period when the country introduced policy reforms that increased labor market flexibility but reduced job security. Using an employer-employee database matched with injury data, we observe that both before and after the reforms almost one-fourth of injured workers were no longer employed 3 years after their “first” return to work. We note a slight decrease in this share after the reforms (from 24 to 22%) while we find a decline in workers’ job security as measured by their probability of re-employment in permanent contracts. We use multinomial logit estimates to study how liberalization reforms were associated with a changing role of individual, firm, and injury characteristics in shaping long-term employment outcomes of injured workers after their recovery period. Heterogeneity analyses show that low wage employees, women, immigrants, and individuals who suffered a more severe injury were penalized more. Pre-injury individual characteristics became stronger predictors of long-term employment than firms’ characteristics. In particular, we find that the advantage provided by working in larger firms was significant before the liberalization reforms, but disappeared afterward, while the advantage provided by human capital became more relevant after the liberalization.
Highlights
In Italy the cost of occupational injuries in 2007 was estimated to be equal to 2.63% of the national GDP
We find that the advantage provided by higher employment protection (EPL)-measured by firms’ size—in securing a successful outcome was significant before the liberalization reforms but is nonexistent afterward; while the advantage provided by human capital accumulation (HC)- measured by wages—increases in magnitude after the liberalization reforms
We examine how probabilities changed during and after the labor market reforms for workers characterized by different pre-injury EPL and HC, i.e. we interact the covariates of interest with the three reform periods
Summary
In Italy the cost of occupational injuries in 2007 was estimated to be equal to 2.63% of the national GDP. The remaining 27 billion euros were attributable to medical or indemnity costs incurred by national agencies, to production and adjustment costs sustained by employers, and to productivity losses or legal expenses faced by workers and their families (INAIL 2011) Across countries, all these expenses are known to be function of injury severity, and of the length of the time to recover and to return to work (RTW). For workers it is likely to mean reentry to work and ability to keep the job, the pre-injury wage, and to further advance in career (Young et al 2005a) In this context, the seminal study by Butler et al (1995) highlighted that the research focus on workers’ first RTW can produce a very misleading picture. It does not capture the real post-injury employment dynamics, as many injured workers fail to return to stable employment after their day of maximum medical improvement, and instead drop
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