Can a Shorter Workweek Induce Higher Employment? Mandatory Reductions in the Workweek and Employment Subsidies
October 1, 1999
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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.
Subject: Employment, Employment subsidies, Income, Labor, National accounts, Wages
Keywords: Employment, Employment subsidies, equilibrium wage, Income, income level, job creation, labor demand, labor supply, market wage, minimum wage, overtime work, responses to a cut, structural unemployment, take-home pay, wage determination, wage response, Wages, worker income, worker utility, workweek, WP
Pages:
33
Volume:
1999
DOI:
Issue:
144
Series:
Working Paper No. 1999/144
Stock No:
WPIEA1441999
ISBN:
9781451856422
ISSN:
1018-5941
