NEVOUX Sandra

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This paper shows that the reforms which expanded short-time work in France after the great 2008-2009 recession were largely to the benefit of large firms which are recurrent short-time work users. We argue that this expansion of short-time work is an inefficient way to provide insurance to workers, as it entails cross-subsidies which reduce aggregate production. An efficient policy should provide unemployment insurance benefits funded by experience rated employers’ contributions instead of short-time work benefits. We find that short-time work entails significant production losses compared to an unemployment insurance scheme with experience rating.

Partial activity, better known as partial unemployment, allows companies faced with temporary and exceptional circumstances to receive subsidies to reduce the number of hours worked by their employees by paying for the hours lost. Partial unemployment has both beneficial and adverse effects. During the Great Recession of 2008-2009, partial activity has been the subject of renewed interest in the fight against unemployment, particularly in France where it has undergone successive reforms. This note shows that the partial activity reforms carried out after the recession mainly benefited large companies that use it on a recurrent basis to cope with seasonal fluctuations in activity. This expansion of partial activity is inefficient, as it subsidizes periods of inactivity, which reduces total output. In this context, it would be desirable to introduce a bonus-malus system, in which companies would finance partial activity via a tax proportional to their contribution to the cost of this measure, the payment of which would be spread over several years.

Short-time work programs were revived by the Great Recession. To understand their operating mechanisms, we first provide a model showing that short-time work may save jobs in firms hit by strong negative revenue shocks, but not in less severely-hit firms, where hours worked are reduced, without saving jobs. The cost of saving jobs is low because short-time work targets those at risk of being destroyed. Using extremely detailed data on the administration of the program covering the universe of French establishments, we devise a causal identification strategy based on the geography of the program that demonstrates that short-time work saved jobs in firms faced with large drops in their revenues during the Great Recession, in particular when highly levered, but only in these firms. The measured cost per saved job is shown to be very low relative to that of other employment policies.

No summary available.

Short-time work makes it possible for companies faced with temporary and exceptional circumstances to receive subsidies to reduce the number of hours worked by their employees by remunerating the time off. Short-time work has both beneficial and detrimental effects. During the Great Recession of 2008-2009, there was renewed interest in short-time work as part of the fight against unemployment, particularly in France, where it underwent successive reforms. This policy brief shows that the short-time work reforms carried out after the recession have mainly benefited large firms using them on a regular basis to cope with seasonal fluctuations in business activity. This expansion of short-time work is inefficient because it subsidizes periods of inactivity, thus reducing total output. In this context, it would be desirable to introduce a bonus-malus system by which companies would fund short-time work via a tax paid over several years and that is proportional to their contribution to the cost of the scheme.

The first chapter reviews the literature on partial activity and introduces the three research questions developed in this thesis, namely the local diffusion of the use of partial activity in France over the period 2003-2014, the effect of partial activity on employment in France during the Great Recession of 2008-2009, and the effect of the 2012-2013 reforms of partial activity and the recurrent use of this device on aggregate output in France. In the second chapter, we highlight the local diffusion of the use of partial activity in France over the period 2003-2014. To do so, we evaluate the effect of the geographical proximity of establishments that have already resorted to partial activity in the past on the use of partial activity by an establishment for the first time over the period 2003-2014. Indeed, we argue that the information available to establishments about the scheme and its procedure, particularly through neighboring establishments, is a key determinant of partial activity use. Our stylized facts reveal that the use of partial activity is geographically concentrated and that this concentration has a dynamic character. We use a spatial concentration index (based on inter-establishment distances) as a measure of the local diffusion of partial activity information and take into account the other characteristics of establishments in order to distinguish the effect of this transmission of information from other determinants of the use of the system and thus highlight its impact on the use of partial activity by an establishment for the first time. Our results show the importance of the local diffusion of information on partial activity, that this diffusion decreases in the first few kilometers and that this information is transmitted both within a given sector and between sectors.In the third chapter, we evaluate the effect of partial activity on employment in France during the Great Recession of 2008-2009. We develop a theoretical model according to which the effect of partial activity varies according to the financial situation of firms. For firms facing a strong decrease in turnover, partial activity allows to safeguard employment, while for firms with a moderate decrease in turnover, partial activity leads to a decrease in hours worked without preserving employment. These contrasting theoretical effects are confirmed by our empirical results, which show that partial activity reduced the number of jobs destroyed only in the case of a significant reduction in turnover, but had no significant effect on employment for the other firms, which account for around 40% of partial activity users. These windfall effects, although considerable in relation to the partial activity scheme, remain negligible compared to other measures such as wage and hiring subsidies. Moreover, partial activity has not contributed to keeping alive companies in structural difficulties. Partial activity was therefore an effective means of safeguarding employment in France during the Great Recession of 2008-2009.

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