Can a Shorter Workweek Induce Higher Employment? Mandatory Reductions in the Workweek and Employment Subsidies

Author/Editor:

S. Nuri Erbas ; Chera L. Sayers

Publication Date:

October 1, 1999

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

A reduction in the legal workweek may induce a degree of downward wage flexibility, while an employment subsidy to firms accommodates downward wage rigidity. It may be possible, therefore, to increase employment with a policy that combines a reduction in the workweek with an employment subsidy. In general, however, the long-run employment outcome is ambiguous, and a decline in output cannot be ruled out. More direct policy measures whose impact can be assessed with greater certainty—in particular, removing structural rigidities in the labor market—should be given priority to decrease long term unemployment.

Series:

Working Paper No. 1999/144

Subject:

Employment Employment subsidies Income Labor National accounts Wages

English

Publication Date:

October 1, 1999

ISBN/ISSN:

9781451856422/1018-5941

Stock No:

WPIEA1441999

Pages:

33

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