Job security and New Restrictive Permanent Contracts: Are Spanish

Workers More Worried of Losing their Job?

Elisabetta TrevisanDiscussion by Ernesto Villanueva (Bank of Spain)

1. Question of the paper

• QN: How is worker’s satisfaction with job security affected by changes in firing costs?

• Spanish labor market costs:– 2 contracts FT (fire-at-will), and PC (45 days per year)– 1998: (perm) contracts workers < 30 or >45 reduced

firing costs (treated group)

• 2-step procedure– Identify “comparable control group” using matching– D-in-D treated vs. Control.

• Several treatment groups: PC and FT

1. Findings

• Cohabitation as a good for parents (Manacorda and Moretti, 2005)

• Credit markets (Martins and Villanueva, 2006)

• Ruiz-Castillo and Martínez-Granado (2002)

• De la Rica and Iza, 2004: decision to get married. Use fixed-term contracts.

• Subjective measures of employment risk (Becker et al., 2004)

2. Contribution

• Work examining real impact of legal firing costs (Angrist, Autor)

• Work looking at subjective perceptions (Clark) or at expectations.

• This paper: How do workers perceive increased risk of losing jobs as brought about by legal reforms?

• Broad implications, possibly beyond labor econ.– Labor market: investment in job-specific skills – Health economics: stress– Macro: consumption and saving.

Concerns

• 1. What is exactly being measured?

• 2. What can this strategy (D-in-D) measure?

• 3. Why is it measured this way?– Why D-in-D + matching?– Why FT as a treated group?

3. What does the paper want to measure?

• Option 1: Perception of job insecurity?

– QN: Has the subjective probability of losing the job

increased? (interpersonally comparable, unlike

satisfaction).

– Spanish EFF has some information

• Option 2: A predictor of wellbeing or of fulfilment of expectations?– Question on how to compare across individuals– Make sure we are not picking “something else”.

2.What does this strategy capture?

• D-in-D captures all effects of a reform with GE effects– Wage increases (Lazear)?– More jobs available for all? For the treated?

• The reform moves other aspects of job satisfaction (beyond job security)– Subjectivity bias may change reports of all job-related

satisfaction components.• ECHP contains satisfaction w/job and w/other

aspects (some unrelated, like commuting)– Recommend exploring overall satisfaction w/job and

other dimensions.

3. The empirical strategy (i)

• D-in-D plus propensity-score matching– Heckman et al. (98)

• Matching required to “balance covariates”– D: deterministic function of age (used to match)– Compare person 28 w/ children and person 32, no

children, same P. Really comparable?– Same story for employment experience.

• Could start by plotting group-specific trends in satisfaction (checking if they are parallel).

3. Which treatment group?

• Version 1: workers with a PC already.– Directly affected in their current job.

• Version 2: workers with FT.

– Affected if contract upgraded or in new job.

• The latter case involves the impact

estimated many other margins.

Other concerns (FE)

• Discrepancy between results that include fixed-effects and those that do not.

• Given substantial heterogeneity in formation of satisfaction, FE advisable (Hamermesh, 99)– But FE, if truly constant, should be uncorrelated with

legal changes.

• Is the sample composition changing?– Attrition among FT contracts who find new job?

Other concerns (ii)

• How are standard errors computed?

• Choice of bandwidth of kernel/locllinreg used when propensity-score matching?– Sensitivity of choices?