Employment Adjustment Research Articles

VAT Reform and Labor Cost Stickiness: Evidence from China

ABSTRACT Rising labor costs have weakened product competitiveness and posed challenges to economic growth. We investigate the effects of a tax cut in alleviating labor cost stickiness by exploring China’s shift from a production-based to a consumption-based value-added tax (VAT) between 2004 and 2009. Using a multi-period DID model and data from Chinese A-share-listed firms for 2003 through 2011, we find that the VAT reform significantly reduced firms’ labor cost stickiness and increased their ability to manage employment adjustment costs by providing wage flexibility. The stickiness of labor costs declined most for firms characterized by labor-intensive operations, situated in more market-oriented areas, and with higher growth opportunities. Our findings show that VAT reform has had a real effect on firms by alleviating labor cost stickiness.

Does corporate digitalization promote labor investment efficiency? Evidence from Chinese listed companies

This study examines whether and how corporate digitalization affects labor investment practices. Using a sample of Chinese listed companies from 2007 to 2023, we find that corporate digital development is positively associated with labor investment efficiency. Mechanism tests show that corporate digitalization can facilitate precise judgment of labor input scales, accelerate employment adjustment responsiveness, recruit high-quality potential workforce, and improve management oversight, thus contributing to making efficient labor investment decisions. Cross-sectional tests indicate that the positive impact of corporate digital development is more prominent for firms located in regions with stronger labor protection systems, industries with higher competition levels and those non-state-owned enterprises. Moreover, corporate digitalization can curb both over- and underinvestment in labor resources, and this effect is primarily manifested in firm’s hiring practices. Our findings contribute to the literature on the determinants of corporate labor investment efficiency and provide practice insight into the role of corporate digitalization in firm’s decision-making.

Imports, Exports, and Employment: India’s Trading Relationship with China

This paper examines the effect of increased import competition and export demand on local labour markets in the context of India’s trading relationship with China. Using an instrumental variables approach, I find that Indian districts exposed to Chinese imports experience decreased manufacturing employment growth relative to their positive pre-existing trend with no offsetting adjustment in services employment or population. The negative employment effect of imports is greater for large establishments. On average, manufacturing employment does not grow in response to export demand shocks, but districts with sufficient development, density, or access to Chinese markets see increased manufacturing employment in response to Chinese export demand.

Short-time work, labor hoarding, and curtailed hiring: establishment-level evidence from Japan

This study analyzes the mechanisms by which short-time work (STW) schemes affect firm’s employment adjustments, using establishment-level data during the Great Recession from Japan. The findings show that STW leads to a decrease in both hiring and separations, with no significant positive effect on net employment. The observed curtailed hiring can be explained within the context of how STW promotes labor hoarding. STW encourages firms to maintain redundant employment by subsidizing the costs of labor hoarding. The excess labor surplus in firms adopting STW diminishes the incentive to recruit new workers in anticipation of the recovery period. Furthermore, as firms generally lack the motivation to hoard marginal workers, STW may exacerbate job security disparities between regular and marginal workers. These findings have important implications for policy evaluation, emphasizing the need for a comprehensive understanding of the potential adverse consequences of STW on labor market entrants and marginal workers.

The Upshot of Bs Industrial Technology Graduates' Acquired Competencies Aligned to Employment Opportunities

In today's global economy, competencies and skills are highly valued in employment opportunities. This research examines the employment profile, skills acquired in college, and the challenges of BS Industrial Technology graduates concerning job opportunities and their ability to successfully transition from college to employment. This study utilized concurrent triangulation research design. The respondents were chosen randomly for survey questionnaire and purposively for the interview. The results revealed that all majors have more single respondents than married respondents. The gender distribution of BSIT graduates varies according on their major, with some majors having a male- or female-dominated cohort. Additionally, the number of graduates varies from year to year across all majors, with some years having more or fewer graduates. Meanwhile, many students are also greatly motivated by a personal interest in the topic, highlighting the value of curiosity and passion in choosing a vocation. BSIT graduates have varying work situations which clarifies the characteristics of the labor market and the outlook for employment across a range of field of specialization. All majors agree that salaries and benefits are the main factors influencing employment decisions while career challenge ranks as the second most frequently cited factor. Furthermore, the variability in job opportunities, the impact of specialization, the relevance of education to employment, the role of transferable skills, and employment adjustments to market dynamics are some of the key themes that the challenges faced by BSIT graduates concerning job opportunities and their successful transition from college to employment encompass.

The effect of enterprise unions on employment adjustment speed in Japanese firms

AbstractUsing 20‐year dynamic panel data, we analysed the difference in employment adjustment speed and behaviour between unionized and non‐unionized firms, whether continuous or discontinuous, to investigate the effects of enterprise unions on job security in Japan. We confirmed that unionized firms were more reluctant to downsize and continue to offer stronger job security than non‐unionized firms. However, the unions’ influence on job security has gradually weakened. The primary contribution of this study is its clarification that unions in Japan played the role of guardians of job security under increasing globalization and technological innovation over the 20‐year sample period. Our clarification provides evidence that a different type of union, distinct from those in Western countries aiming for wage increases, is deeply embedded in the Japanese stakeholder system.

Robot adoption and employment adjustment: Firm-level evidence from China

This paper investigates the impact of robot adoption on employment adjustment at the firm level in China. By employing an instrumental variable that exploits the source of variation in robot adoption across firms, our analysis reveals that the utilization of industrial robots leads to an increase in employment within firms, particularly with regard to highly educated and skilled personnel. Furthermore, an exploration of the underlying mechanisms demonstrates that this positive employment effect is primarily attributed to the productivity effect of robot adoption, resulting in increased productivity and heightened labor demand. However, there is limited empirical support for the negative displacement effect wherein robots replace workers. Additionally, our investigation uncovers evidence of technology-driven intra-industry labor reallocation to robot-adopting firms from their non-adopting counterparts.

Import competition, state‐owned enterprise prevalence and employment: Evidence from China

AbstractDoes state‐owned enterprise (SOE) prevalence affect the employment adjustments of firms after trade liberalisation? This paper estimates the role of the prevalence of SOEs in the labour market in import competition by using city‐industry level panel data in China from 2000 to 2006. Our results indicate that import competition decreases employment in the manufacturing industry and that SOE prevalence could partially offset the negative effect on employment. This offsetting effect is demonstrated at both extensive and intensive margins. Moreover, SOE prevalence has a positive externality for the employment of non‐SOEs under the import competition shock. Therefore, we verify the positive externality of SOEs in labour market adjustment in response to import competition.

Employment Adjustment During the Initial Outbreak of COVID-19: Empirical Evidence from Tourism Workers in Bhutan

Even though quantifying the impacts of COVID-19 on jobs and employment has been studied in recent literature worldwide, not much research has attempted to investigate the impacts in terms of employment adjustment, especially during the initial outbreak of the pandemic. Using secondary survey data of 1,320 employees working in the tourism sector in Bhutan as a case study, our multinomial logit model estimations show that female workers were among the most vulnerable group to be asked to reduce some benefits from work, to receive only a partial salary or to leave without pay during the initial outbreak. However, when the situation became more severe (resulting in the laying off of employees), the tourism sector in Bhutan laid off male workers also. Negative impacts on their employment were likely to be found among workers with higher education, the relatively young and married workers. In addition, employment adjustments were also found to vary by tourism sub-sector during initial outbreaks. Workers in the entertainment sector seemed to experience the smallest hit from the initial outbreak since they still received some partial payments or were asked to only temporarily leave their jobs without receiving payment. Some sectors, especially tour guides, tour operations, river rafting and land transport, however, had to lay off their workers during the initial outbreak as those businesses rely mostly on international tourists. This study also discusses the policy recommendations to ensure employment stability during such a crisis in the future. JEL Codes: J23, M51, Z39

Public sector employment rigidity and macroeconomic fluctuation: A DSGE simulation for China.

Public sector employment in China has exhibited pronounced non-cyclical characteristics, with a recruiting scale and wage level showing limited responsiveness to economic fluctuations. The allure of civil service jobs in China has seen a significant resurgence post-COVID-19, with an observable increase in demand among educated job seekers for stable government positions amid growing economic uncertainties. This study investigates the implications of public sector employment rigidity on macroeconomic stability using a dynamic stochastic general equilibrium (DSGE) model integrated with search and matching (S&M) theory. Simulations incorporating alternative government job policies reveal that non-cyclical public employment exacerbates macroeconomic cyclical fluctuations. The low elasticity of public sector wages with respect to corporate wages fosters stable expectations among workers regarding the future value of government jobs, increasing the perceived value of the current state of unemployment. This leads job seekers to voluntarily remain unemployed, reducing labor supply to firms. Meantime, it preserves workers' bargaining power with firms, reinforcing wage stickiness and undermining the stabilizing role of price adjustments in employment. Hypothetical scenario analyses indicate that adopting a pro-cyclical wage policy for the public sector can mitigate the obstacles of wage cuts for firms, stimulate the creation of new jobs during economic downturns, and consequently reduce the magnitude and duration of rising unemployment rates. In contrast, maintaining a non-cyclical public sector wage may not prevent a continuous rise in unemployment or a worsening economic situation, even with expanded sector recruitment. This finding holds significant relevance in the context of the post-COVID era characterized by an economic slump and employment tension, providing theoretical support for establishing a transparent and flexible wage adjustment mechanism in the public sector that is linked to market conditions.

The productivity puzzle and the decline of unions

This paper finds that rapid de-unionization can explain the sudden vanishing of the procyclicality of productivity in the U.S. during the 1980s, a phenomenon dubbed the ‘productivity puzzle’. Cross-sectional evidence from U.S. states and industries shows that a decline in union power led to a decrease in the cost of hiring and firing workers, which prompted firms to rely less on labor hoarding, making productivity less procyclical. In a model with endogenous worker effort, a decrease in employment adjustment cost by the amount implied by de-unionization explains a significant part of the observed decline in the procyclicality of productivity.

Labour market flexibility and domestic value‐added trade: Evidence from the hukou reform in China

AbstractChinese manufacturing firms have seen an intriguing rise in domestic value‐added content in exports (DVAR) despite their deepening engagement in global value chains (GVCs) since 2001. This article investigates whether the rise of DVAR in China can be attributed to changes in labour market flexibility by using the staggered relaxation of Chinese hukou policies across cities and time as a quasi‐natural experiment. Using combined firm‐level data and transaction‐level trade data from 2000 to 2013, this article finds that the relaxation of labour market flexibility through hukou reform has significantly increased the domestic value‐added exports of Chinese firms. Firms exposed to hukou reform tend to allow for more employment adjustment and substitute domestic materials for imported intermediates, which raises the DVAR of Chinese manufacturing firms. This effect is more prominent for non‐SOE firms, foreign‐invested firms, processing firms, coastal firms and firms in the upstream sectors of GVCs.

How do firms adjust when trade stops?

We investigate how firms adjust to the introduction of sudden, unanticipated, and eventually long-lasting economic sanctions. In 2014, Russia introduced sanctions on imports from Europe, which caused an abrupt negative shock to the food production sector in Lithuania. We find that part-time employment is used as the first shock absorber, followed by full-time employment. Investment reacts immediately but also additionally in the later periods if part-time employment adjustments that proxy for the firm's exposure to the permanence of the shock are large. At the same time, firms dampen shock effects by expanding to other export markets. To rationalize this firm behavior, we provide a theoretical mechanism where forward-looking firms face nonconvexities in the labor market along with heterogeneous variable trade costs.

EMPLOYMENT ADJUSTMENT AND LEADERSHIP CAPABILITY DURING A PANDEMIC COVID-19 AND ITS IMPLICATIONS FOR HUMAN RESOURCE MANAGEMENT IN INDUSTRY IN JAKARTA

The performance of industrial human resources is an indicator of whether the production process of industrial workers in an industrial project is good or bad. In an effort to improve performance, work experience is needed. Work experience reflects proficiency in the knowledge and skills possessed by a workforce in a job that can be measured from the years of service and the type of work carried out by the workforce. This study aims to identify, analyze and demonstrate empirically the effect of job adjustment, leadership ability on human resource management in industry in Jakarta. This research was conducted with quantitative research methods. The population of this study are employees or employees of several industrial companies in Jakarta. Data collection techniques by observation, literature study, interviews and questionnaires. The final conclusion of this paper is that there is an effect of employment adjustment on human resource management. So, with large-scale social restrictions, with the stipulation of work from home, massive layoffs do not affect HR management policies. Furthermore, we know that there is an influence of leadership on human resource management. Where a leader has primary responsibility for the business, acting as a change maker for the organization Keywords: Employment Adjustment; Leadership Ability; Human Resource Management; Covid-19

Can water pollution control influence employment adjustment in enterprises?

Under the background of increasing water pollution, the achievement of a harmonious development of human and water systems has become increasingly important to build an ecological civilization and achieve high-quality economic development. On this basis, this paper takes Chinese A-share listed companies as the research object, and examines whether environmental regulation of water resources can influence employment decisions of enterprises. The results showed that the environmental regulation of water resources reduced the number of workers absorbed by enterprises characterized by high pollution and water consumption. Mandatory innovation pressures imposed on high-pressure group by the environmental regulation of water resources prompted these industries to recruit more high-tech workers; while those industries that were not subjected to mandatory innovation pressures (i.e., the medium-pressure group) did not show an evident increase in demand for high-tech workers. The results of further analyses showed that, although the employment decisions of these two groups of enterprises differed, their enterprise values clearly improved after the implementation of this policy. This study provides important policy insights on how to achieve the protection of water resources and the optimization of the enterprise employment structure under the background of environmental regulation of water resources.

Flexible Use of the Large-Scale Short-Time Work Scheme in Germany during the Pandemic: Dynamic Labour Demand Models Estimation with High-Frequency Establishment Data

Our study uses 24 waves of the survey Establishments in the COVID-19 crisis (BeCOVID), a high-frequency dataset collected at monthly intervals by the Institute for Employment Research during the COVID-19 pandemic, to investigate the behaviour of establishments with respect to the dynamics of their employment, in particular their use of short-time work. Due to the high-frequency intervals, the present data are considerably better suited than annual panel surveys to investigate adjustment processes. This is especially true for the role of short-time work, which is seen as a particularly fast adjustment option and thus reduces adjustment costs rapidly. Our estimations reveal a much faster overall workforce adjustment process compared with previous studies, which rely on annual panel surveys. In addition, our empirical results show that the employment adjustment in establishments using short-time work during the COVID-19 crisis occurred almost immediately within one month.

Firms’ financing dynamics around lumpy capacity adjustments

We study how firms adjust their financial positions around the times when they undertake lumpy adjustments in capital or employment. Using U.S. firm level data, we document systematic patterns of cash and debt financing around lumpy adjustment, remarkably similar across capital and employment. Firm-specific fundamentals reflected in Tobin’s Q, profitability and productivity are leading indicators of lumpy adjustment. Cash and debt capacity are actively manipulated, and contribute significantly quantitatively, to increase financial resources in anticipation of the expansion of firm capacity. Lumpy contractions in productive capacity follow years where firms reduce cash balances and hold above average levels of debt. During and after contractions, firms rebuild cash and reduce debt growth significantly in a concerted effort to restore financial resources by adjusting their productive operations.

Recruitment Policies, Job-Filling Rates, and Matching Efficiency

Abstract Recruitment intensity is important for the matching process in the labor market. Using unique linked survey–administrative data, we investigate the relationships between hiring and recruitment policies at the establishment level. Faster hiring goes along with higher search effort, lower hiring standards, and more generous wages. We develop a directed search model that links these patterns to the employment adjustments of heterogeneous firms. The model provides a novel structural decomposition of the matching function that we use to evaluate the relative importance of these recruitment policies at the aggregate level. The calibrated model shows that hiring standards play an important role in explaining differences in matching efficiency across labor markets defined as region/skill cross-products and for the impact of labor market policy, whereas search effort and wage policies play only a minor role.

Human resource management in recession: Restructuring and alternatives to downsizing in times of crisis

AbstractIn just over a decade two global crises have created significant instability across the world and plunged many national economies into recession. While studies of HRM during economic downturns are limited, the global impact of COVID‐19 on employment adds impetus to the debate. Though downsizing and mass layoffs attract most attention, redundancies are just one potential response to challenging economic conditions, and various other employment adjustments might be viewed as complements or alternatives to workforce reductions. However, little is known about the implementation of HR practices or enactment of HR strategies during recession. Drawing upon 56 in‐depth interviews, this article presents three case studies of recessionary restructuring in British manufacturing firms. The cases share a concern with mitigating redundancies and highlight the importance of actor agency as well as institutional and organisational context in shaping restructuring outcomes. The article contributes to HR theory regarding HRM in recession and employment restructuring.

Uncertainty shocks and employment fluctuations in Germany: the role of establishment size

Abstract Uncertainty shocks are found to affect labour market outcomes adversely. Most studies interrelate non-convex labour adjustment costs with the propagation of macroeconomic uncertainty to the labour market. I show that non-convex labour adjustment costs differ by establishment size in Germany. Hence, uncertainty shocks should affect large and small establishments differently. Therefore, this article studies the effects of uncertainty shocks on employment adjustments in large and small establishments employing four structural vector auto-regressive models for Germany from 1992 to 2014. These four models estimate the effects of uncertainty shocks on employment, worker flows, job flows, as well as worker churn in establishments with fewer than 100 and with at least 100 employees. The results suggest that uncertainty shocks trigger considerable employment fluctuations in large establishments while they barely affect small establishments. Furthermore, large establishments adjust their labour input by delaying the replacement of workers.