Employment Adjustment Research Articles

Oil & gas induced economic fluctuations and self-employment

This paper exploits oil and gas activity generated by recent technological advancements to understand the effect of localized boom and busts on self-employment. We find a positive contemporaneous impact on self-employment, mainly driven by self-employment in non-mining industries. We also find that self-employment is pro-cyclical, meaning that self-employment increases during oil and gas booms and contracts during the bust. Finally, results suggest that self-employment explains an economically meaningful share of the employment adjustment; specifically we estimate that about 11% of the employment adjustment can be explained by self-employed workers, a group which makes up about 9% of total employment.

The State-Dependent Effectiveness of Hiring Subsidies

The responsiveness of job creation to shocks is procyclical, while the responsiveness of job destruction is countercyclical. This new finding can be explained by a heterogeneous-firm model in which hiring costs lead to lumpy employment adjustment. The model predicts that policies that aim to stimulate employment by encouraging job creation, such as hiring subsidies, are significantly less effective in recessions: these are times when few firms are near their hiring thresholds and many firms are near their firing thresholds. Policies that target the job destruction margin, such as employment protection subsidies, are particularly effective at such times. (JEL E24, E32, H25, J23, J64)

Using managers' expectations for ex‐ante policy evaluation: Evidence from the COVID‐19 crisis

AbstractEvaluation of the impacts of government policies during an economic crisis is often delayed until the outcomes are realized. Policies can be better guided if they can be evaluated amid a crisis, before the realization of outcomes. This study examines whether survey data on the expectations of small business managers can help evaluate two high‐stake subsidies for firms amid the COVID‐19 crisis in Japan, namely, Subsidy Program for Sustaining Businesses (SPSB) and Employment Adjustment Subsidy (EAS). We evaluate the accuracy of managers' expectations, estimate the impact of subsidies on the expected firm survival, and compare it with the estimated impact on realized survival. We find that the managers' expectations on their future sales, survival rate, and the possibility of receiving these subsidies predict the realized outcomes, although they were highly pessimistic about their survival rates. We find that the estimated impacts of the SPSB on the expected survival rates have the same sign as the estimated impact on the realized survival rates, but the size is more than twice because of the pessimism on survival. The estimated impacts of the EAS are both insignificant. Therefore, although its impact may be overestimated, managers' expectations are useful for selecting an effective policy.

WTO accession, input trade liberalization and employment adjustment in Chinese manufacturing

WTO accession, input trade liberalization and employment adjustment in Chinese manufacturing

Determinants and effects of the use of COVID-19 business support programs in Japan

Using a survey of and financial data for Japanese small- and medium-enterprises (SMEs), this paper examines the determinants of firms’ use of the business support programs provided by the Japanese government during the COVID-19 pandemic and their effect. With respect to the determinants, we obtain the following three findings: First, firms were more likely to have obtained subsidized loans, grants, or subsidies the more their sales had fallen during the pandemic, suggesting that funds flowed to firms that were adversely affected by the pandemic. Second, the likelihood that firms obtained funds was higher if their credit scores were lower or if they were classified as “zombies” and/or “low-return borrowers” before the pandemic, suggesting that the government programs also helped firms that had been under-performing before the pandemic. Third, firms were more likely to receive funds if they had a stronger relationship with their main bank before, suggesting that bank relationships play an important role in firms’ access to government programs. Regarding the causal effects, we obtain the following three findings: First, except for the subsidies for employment adjustment, the support programs increased the cash holdings of user firms. Second, subsidized loans from private financial institutions lowered exit rates, while none of the programs had a significantly positive effect on employment relative to non-users (or in absolute terms). Third, the credit scores and profit-to-sales ratio of firms that used the support programs decreased and the likelihood of such firms being a zombie and/or a low-return borrower increased. Overall, our findings provide a cautionary tale in that the business support programs produced mixed results in that they may have prevented business failures but have also helped to prop up firms that are not viable in the long run.

Nonlinear Employment Effects of Tax Policy

AbstractWe study the nonlinear propagation mechanism of tax policy in a heterogeneous‐agent equilibrium business cycle model with search frictions in the labor market and an extensive margin of employment adjustment. The model exhibits endogenous job destruction and endogenous hiring standards in the form of occasionally‐binding zero‐surplus constraints. After parameterizing the model using U.S. data, we find that the dynamic response of employment to a temporary change in the labor income tax is highly nonlinear, displaying sizable asymmetries and state dependence. Notably, the response to a tax rate cut is at least twice as large in a recession as in an expansion.

Relationship Lending and Employment Decisions in Firms’ Bad Times

AbstractUsing firm-level survey information, we investigate whether relationship lending affects firms’ employment decisions in the face of negative sales shock. We find that firms with a durable relationship with their main bank display significantly less employment growth sensitivity to such shocks, especially where these are transitory. The result is stronger for younger and smaller firms that benefit from tighter bank-firm relationships, and for firms in sectors or economic environments where the costs of employment adjustment are greater. Our findings indicate that relationship lending provides liquidity insurance to firms to meet their demand for labor hoarding.

Gender Segregation at Work over Business Cycle—Evidence from Selected EU Countries

In this paper, we investigate whether gender employment rate responses to upward and downward fluctuations in the business cycle are symmetric and whether these responses differ depending on gender employment segregation in sectors and on different type of welfare states using the Esping-Andersen’s classification. We use the VAR model both in linear and non-linear (asymmetric) specification of GDP shocks and impulse response function. We find no convincing evidence of discouraged worker effect as it occurs in neither country fully, which suggests not hidden unemployment but rather the phenomenon of involuntary part-time workers becoming more common with the increase of precarious employment. Furthermore, we find that the pattern of gender employment adjustments to GDP fluctuations indicates that the gender sectoral segregation is a deeply entrenched feature within given economic sectors (construction, education, and accommodation) in all studied countries (Germany, Poland, and Portugal). Hence, this stagnation of gender segregation contributes to the preservation of gender pay differentials in spite of many years of equal pay legislation in the EU members.

Market-oriented environmental regulations, employment adjustment and transfer path: Quasi-experimental evidence from China's carbon emissions trading pilot

Following China's pilot program of the released Carbon Emission Trading (CET) in 2011, affected companies were forced to alter their production and operational choices, which had an impact on their labor demand and employment structure. This study examines the employment adjustment effect and employment transfer effect of CET in China using propensity score matching (PSM) and difference-in-differences (DID) method, based on the panel data of Chinese listed companies (2009–2019). We found that China's CET has expanded the scale of employment and changed the employment structure in the pilot regions. The employment adjustment effect of CET mainly comes from the First-tier pilot regions, and it mostly affects the highly educated work force. CET increased the proportion of highly-educated labor through the increase of R&D innovation and investment, while reduced the proportion of production worker employed due to the increase of production cost, it promotes the transfer of labor from underdeveloped regions to First-tier pilot regions.

Effects of financial frictions on employment: Evidence from Japan during the Global Financial Crisis

This study examines the impact of a large credit shock on employment in Japan during the Global Financial Crisis in 2008–2009. To identify which firms faced a serious credit shock, we used variations in the long-term debt that must be repaid in the crisis. Because long-term debt takes more than one year to mature, it was determined independently of employment adjustments during the crisis. Therefore, using long-term debt maturing in a crisis, it is possible to identify the impact of exogenous tightening of the borrowing constraint on employment. We found that companies with a higher ratio of long-term debt maturing during the crisis had a greater negative impact on employment. In particular, the impact increased as the period passed from the shock, and this feature was most conspicuous in the group with the highest proportion of long-term debt maturing in the crisis.

COVID‐19 Pandemic and Non‐standard Employees in Japan

This article aims to grasp the influence of the pandemic on standard and non‐standard employees in Japan and clarify its disparity between them. In 2020, there was an imbalance between the slight increase in standard employees and the massive loss of non‐standard employees in the labour market. Non‐standard employees' working hours were greatly reduced, often without allowances for absence, and hence their monthly income considerably diminished. As a result, their well‐being also declined. Thus, the pandemic has affected employment, and its impact has been felt most strongly by non‐standard employees. This does not mean that there is no discriminatory treatment of non‐standard employees in firms. However, a closer look at the real picture reveals a variety of factors. In addition to the discriminatory treatment that is related to the Japanese employment system, a combination of managerial factors such as the shortage of standard employees, practical factors such as differences in wage systems, and the lack of sufficient information about the expansion of the coverage of the Employment Adjustment Subsidy, have placed non‐standard employees at a huge disadvantage.

The Oil Crisis and the Employment Adjustment in Japan: A Case Study of Showadenko, 1978-1983

Purpose: This article reveals the reality that the lifetime employment system in Japan is separated from the illusion that it is an employment guarantee system. Research design, data, and methodology: Japan’s employment security system, the lifetime employment system, began to show signs of this during the Showa Depression, was established as a system during the reconstruction period and stabilized during the oil crisis. Although the lifetime employment system is known as a Japanese practice of stabilizing employment, a study has revealed that, like other countries, the number of people in the red continues to decrease. Results: According to a survey of the Showadennko(Showa Electricity) during the oil crisis, even in the early 1980s, management maintained the goal of how many people were excluded from employment and the right to set standards for who was excluded from employment. Implications: It is time to reconsider the previous claim that the employment adjustment method, which avoids appointment and dismissal, was established in the 1970s instead of giving up the right to negotiate.

The impacts of policy measures on Japanese SMEs during the pandemic

ABSTRACT Using monthly firm-level survey data, this study examines the effects of the three major government support measures on labour costs of Japanese SMEs during the COVID-19 pandemic. Policy measures were useful for supporting troubled SMEs to mitigate the effects of the economic downturn. However, they may have supported not just otherwise viable corporations, but also unprofitable but still operating corporations – often referred to as ‘zombies’. Our empirical results suggest that policy measures have heterogeneous effects on corporate activities. ‘Employment adjustment subsidies’ and ‘COVID19 subsidies’ had persistently mitigated the decline of labour costs, suggesting that employment and wage adjustments might have been inappropriate for improving labour productivity. On the other hand, ‘funding supports’ by banks, which were accompanied by the obligation to repay the principal in the future, had a negative and persistent impact on labour costs. The results suggest that, unlike the other support measures, funding supports were policies that may have improved labour productivity by reducing labour costs during the pandemic.

Mental Health of Employed Family Caregivers in Canada: A Gender-Based Analysis on the Role of Workplace Support.

This study examines the effect of gender differences in mental health outcomes among employed family caregivers, focusing on the role of workplace support in balancing work and caregiving. Guided by the social role theory, this study analyzes nationally representative data from the 2012 Canada General Social Survey, with a sample of 2,426 participants. Women experience worse mental health outcomes than men when they require employment adjustment to fulfill their caregiving responsibilities. Workplace support could offset the negative effects of employment adjustment on mental health either directly or indirectly through family–work conflict, but gender difference is apparent in terms of the effect of workplace support. In general, women require more supportive workplace than men. Further study of the effects of various types of workplace support on the mental health among women who are employed family caregivers, and on more tailored support, is recommended.

Labor adjustment and productivity in the OECD

Labor productivity is more procyclical in OECD countries with lower employment volatility. To capture this new stylized fact, we propose a business cycle model with employment adjustment costs, variable hours and labor effort. We show that, in our model with variable effort, greater labor market frictions are associated with procyclical labor productivity as well as stable employment. In contrast, the constant-effort model fails to replicate the observed cross-country pattern in the data. By implication, labor market deregulation has a greater effect on the cyclicality of labor productivity and on the relative volatility of employment when effort can vary.

Robot Adoption and Employment Adjustment: Firm-Level Evidence From China

Robot Adoption and Employment Adjustment: Firm-Level Evidence From China

Long Term Employment and Employment Adjustment in Japan

Long Term Employment and Employment Adjustment in Japan

Non-Linear Employment Effects of Tax Policy

<ns3:p>We study the non-linear propagation mechanism of tax policy in a heterogeneous agent equilibrium business cycle model with search frictions in the labor market and an extensive margin of employment adjustment. The model exhibits endogenous job destruction and endogenous hiring standards in the form of occasionally-binding zero-surplus constraints. After parameterizing the model using U.S. data, we find that the dynamic response of employment to a temporary change in the labor income tax is highly non-linear, displaying sizable asymmetries and state-dependence. Notably, the response to a tax rate cut is at least twice as large in a recession as in an expansion.</ns3:p>

기업의 노동 유연성이 혁신성과에 미치는 영향

We analyzed using Workplace Panel Survey (WPS) data on the impact of labor flexibility on innovation performance at the firm level. Verifying the impact of labor flexibility on innovation performance, the higher the flexibility of employment adjustment, the higher the level of employee-led innovation is than the industry average, and the higher the flexibility of contingent employment, the higher the probability to stay in copycat-level workplace innovation. In addition, the higher the wage flexibility and functional flexibility of a firm, the higher the probability that the level of employee-led innovation and product/service innovation will exceed the industry average, and the higher the level of workplace innovation. In addition, analysis of the buffering effects of interaction with employment flexibility, the negative impact of the flexibility of contingent employment on workplace innovation has been shown to buffer or convert by wage flexibility and functional flexibility. The findings suggest that, unlike wage flexibility and functional flexibility, employment flexibility does not positively impact innovation performance, so a detailed review of employment flexibility implementation is needed unless very reasonable reasons are involved. And it can be emphasized that mixed flexibility strategies should be used to secure long-term competitiveness from a Paradox perspective.

Collateral Constraints, Wage Rigidity, and Jobless Recoveries

Abstract The Great Recession has drawn attention to the importance of macro-financial linkages. In this paper I explore the joint role of imperfections in labor and financial markets for the cyclical adjustment of the labor market. I show that jobless recoveries emerge when, upon exiting a recession, firms are faced with deteriorating credit conditions. On the financial side, collateral requirements affect the cost of borrowing for firms. On the employment side, hiring frictions and wage rigidity increase the need for credit, making the binding collateral constraint more relevant. In a general equilibrium business cycle model with search and matching frictions, I illustrate that tightening credit conditions calibrated from data negatively affect employment adjustments during recovery periods. Wage rigidity substantially amplifies this mechanism, generating empirically plausible fluctuations in employment and output.