Does deregulation help? The impact of employment protection reforms on youths’ non-employment and temporary employment risks in Europe

Previous comparative research argued that, across Europe, youths face increasing unemployment risks and insecure labour market positions in the course of globalization and related macro-structural changes. Besides macroeconomic conditions rigid employment protection legislation (EPL) has been blamed as the root of youths’ employment problems in Europe. Against this background, many European labour markets have reacted with the deregulation of employment protection laws, often targeted at the group of youths. However, doubts on the effectiveness on the EPL reforms occurred. Against this background we investigate whether EPL reforms succeeded in integrating youths into labour markets or whether they were ineffective and just promoted temporary employment as a crucial new social inequality in Europe.

The empirical analyses are based on a pooled cross-sectional design by using yearly micro-data from the European Labour Force Survey for 14 Western and 8 Eastern European countries for the period from 1992 to 2010. This database provides unique large-scaled, standardised micro data. We apply multilevel models with three levels (individual-, country- and time-level) implemented in a two-step estimation procedure to investigate contextual influences on individual age-related temporary employment and non-employment risks. At the macro-level we use cross-national and cross-temporal variation to quantify the impact of EPL reforms under control of other macro-institutional and macro-structural factors. Further, we control for country and time fixed-effects to account for unobserved heterogeneity.

Our descriptive analyses reveal heterogeneous inequality trends in youths’ temporary employment and non-employment risks in Europe. Moreover, our results cast doubt on the effectiveness of EPL reforms.