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Effects of Mandatory Switching to Regular Employment Contracts on the Level of Employment

  • Journal of Regulation Studies
  • 2013, 22(1), pp.3-36
  • Publisher : 한국규제학회
  • Research Area : Social Science > Public Administration

변양규 1

1한국경제연구원

Accredited

ABSTRACT

National Assembly is competitively proposing new bills holding up the idea that a stronger restriction on the use of non-regular workers may boost the employment of regular head counts. However, majority of the current proposals are intended to directly restrict the use of workforce, which could cause employment contraction. This paper examines the effect of mandatory switching of non-regular workers to regular workers on the level of employment in an economy where workers differ in employment adjustment cost as well as productivity. Simulation result shows that raising employment adjustment cost of non-regular workers by enforcing indefinite-term contract of non-regular workers causes employment contraction. This effect overwhelms employment expansion of regular workers, resulting in employment contraction of the whole economy. The pivotal thing is that the possible segment of workers that could lose their jobs is mostly the current non-regular workers. Thus, this is not in accordance with non-regular worker protection as well as job creation. Instead, lowering employment protection of current standard workers may create more standard and non-standard jobs, and shorten unemployment duration. Thus, reducing employment protection of standard workers can be an effective way of achieving both job creation and worker protection.

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