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Buechtemann, Christoph F.; Walwei, Ulrich --- "Employment Security through Dismissal Protection: Market versus Policy Failures" [2005] ELECD 144; in Backhaus, G. Jürgen (ed), "The Elgar Companion to Law and Economics, Second Edition" (Edward Elgar Publishing, 2005)

Book Title: The Elgar Companion to Law and Economics, Second Edition

Editor(s): Backhaus, G. Jürgen

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781845420321

Section: Chapter 20

Section Title: Employment Security through Dismissal Protection: Market versus Policy Failures

Author(s): Buechtemann, Christoph F.; Walwei, Ulrich

Number of pages: 16

Extract:

20 Employment security through dismissal
protection: market versus policy failures
Christoph F. Buechtemann and Ulrich Walwei1


Introduction
Employment security and the impacts of legal restrictions on employment
terminations by firms have been a regularly recurring theme and controversial
issue in the labour market policy debates of most Western industrialized
countries. Whereas the proponents of employment security regulations have
upheld the view that restraints on employers' dismissal behaviour are neces-
sary for establishing parity and fairness between the labour market parties
and for stabilizing employment over the business cycle, the critics have
blamed employment security regulations for slowing down necessary
workforce adjustments, increasing fixed labour costs, reducing the allocative
efficiency of labour markets and thus, at least in part, accounting for sluggish
employment growth and persisting high levels of long-term unemployment in
Europe as compared to the United States.
In the 1980s, such criticism, though frequently rooted in abstract notions
rather than firm empirical evidence about the functioning of labour markets,
spurred several European governments to introduce new legislation selec-
tively relaxing legal dismissal and lay-off restraints and/or widening legal
`loopholes' allowing a circumvention of statutory dismissal protection, for
instance, through facilitating the use of temporary workers or encouraging
early retirement of older workers. Despite these changes, which have left the
basic systems of statutory dismissal protection largely intact, the debate
about the allegedly adverse employment and labour market impacts of em-
ployment security regulation has continued with undiminished intensity,
receiving additional fuel from the substantial labour shedding ...