Employed 40 Hours or Not-Employed 39: Lessons from the 1982 Mandatory Reduction of the Workweek

Transcription

1 Employed 4 Hours or No-Employed 39: Lessons from he 982 Mandaory Reducon of he Workweek Bruno Crépon, Insee-Cres and Francs Kramarz, Cres-Insee and Cepr Frs Verson, December 999 Revsed Aprl 2 We would lke o hank he Edor of hs Journal, Sherwn Rosen, an anonymous referee for her exremely helpful suggesons as well as John Abowd, Alan Chenu, Perre-André Chappor, Guy Laroque, Françose Maurel, Bernard Salané, and Béarce Sedllo for her remarks on a prevous verson of hs ex and Suar Basefsky for provdng useful nformaon and, above all, Jean-Davd Fermanan for fndng an error n he consrucon of he daa used n a former analyss. All remanng errors are ours. Correspondng auhor: Francs Kramarz, Cres, Déparemen de la Recherche, 5 boulevard Gabrel Pér, Malakoff, France. Tel: Fax: E-mal: kramarz@ensae.fr

2 Employed 4 Hours or No-Employed 39: Lessons from he 982 Mandaory Reducon of he Workweek Absrac We use longudnal ndvdual wage, hours, and employmen daa o nvesgae he effec of he February, 982 mandaory reducon of weekly workng hours n France. Jus afer Franços Merrand s elecon n May 9, he governmen decded o ncrease he mnmum wage by 5%. Then, as promsed n s elecoral program, he socals governmen reduced he workweek from 4 o 39 hours. A he same me, mandaed sable monhly earnngs for mnmum wage workers and recommended he sablzaon of monhly earnngs for oher workers (recommendaons followed by 9% of he frms). We show ha workers drecly affeced by hese changes hose workng 4 hours n March 9 as well as hose workng overme a he same dae were more lkely o lose her jobs beween 9 and 982 han workers no affeced by he changes hose workng 36 o 39 hours n March 9. Moreover, because he decree enforcng he new sandard was ssued faser han earler promses, some frms had no me o complee negoaons and her workers were sll workng 4 hours afer February, 982. We show ha hese workers were also srongly affeced by he reducon n sandard hours. Our esmaes of he mpac of hs one-hour reducon of he workweek on employmen losses vary beween 2% and 4%, dependng on he mehodology or he daa used. Furhermore, we show ha mnmum wage workers were mos affeced by he changes. Ths resul, conssen wh our model, s due o he mpossbly of adjusng her monhly wage, whch resuls n excess job desrucon and creaon. These resuls should help us undersand he possble effecs of he upcomng mandaory reducon of hours n France, where he maxmum weekly workng hours declned from 39 o 35 hours begnnng n January 2. Smlar programs are envsaged n oher European counres, whch hope ha hours reducons wll be an effcen polcy for reducng unemploymen. Keywords: Hours reducon, Wages, Unemploymen JEL Classfcaons: J3, J23 Bruno Crépon Francs Kramarz INSEE-CREST CREST-INSEE Dvson Marchés e Sraéges d Enreprses Déparemen de la Recherche 5, bd Gabrel Pér 5, bd Gabrel Pér Malakoff Malakoff France France Bruno.Crepon@nsee.fr kramarz@ensae.fr

3 . Inroducon In 998 he French governmen adoped a polcy requrng frms o mplemen a 35-hour workweek by he year 2. Today, mos French frms have negoaed a workweek reducon agreemen wh her unons or personnel delegaes and have mplemened. Employer confederaons clam ha he reducon has had an adverse mpac on her acvy, n parcular by creang shor-erm labor shorages n a boomng perod ogeher wh an ncrease of producon coss. The represenaves of small frms are pessmsc abou he upcomng nroducon of he mandaory reducon n 22. On he oher hand, hs polcy appears o be popular among unons and a farly large par of he French workng populaon. I s even consdered successful by some polcans because of he sharp decrease n unemploymen durng he las hree years. Some Ialan and Spansh unon leaders and polcans advocae he same se of polces as he French have adoped (Economs, 998a and 998b). Germany s newly eleced governmen also appears o suppor mandaory hours reducons, as shown n he famous BMW agreemen (Economs, 999, 998c). Alhough he meda are full of dscussons of he effecs of he hours-reducon laws, serous evaluaon of he economc mpac of he recen workweek reducon s dffcul, even mpossble, because he changes are oo recen. Indeed, here are very few emprcal assessmens of he effecs of hs ype of regulaon, leavng he debae open o vews based on polcal prejudces (see, however, Hun, 999, who mosly focuses on he German case). Ths s ronc because France has already aemped o manpulae workng hours n order o reduce unemploymen. In 982, a few monhs afer Franços Merrand s elecon, he socals governmen, as saed n s elecon plaform, decded o shoren he workweek by cung he maxmum legal number of hours per week. 2 I s far o say ha he elecon of Franços Merrand was no foreseen by mos polcal analyss. A he begnnng of 9, he Pars corresponden of he Economs wroe: For monhs 22 for frms wh 2 employees or less. 2 The legal workweek n France s deermned by he maxmum number of hours, as specfed n naonal saues and mplemened n collecve barganng agreemens. The frms are permed o employ workers for more han he naonal sauory maxmum hours under he followng condons: () overme hours up o a sauory lm a a negoaed wage premum, (2) n ceran secors, e.g. hoels and resaurans, he sauory lms are hgher, (2) managemen and ceran engneerng posons (cadre) specfed n he collecve barganng agreemen are exemped. Abou 95% of he jobs n France are covered by collecve barganng agreemens even hough a much smaller percenage of workers belong o unons (Card, Kramarz, and Lemeux, 999). 3

4 French opnon polls have made Presden Gscard d Esang s reelecon hs sprng seem a foregone concluson. (Economs, 9). Furhermore, he vcory of he socalss a he parlamenary elecons, whch ook place a few weeks afer he presdenal elecon, was an even longer sho n hose frs monhs of 9. Therefore, even hough he hours reducon was ncluded n he socals s plaform, was almos fully unexpeced 6 monhs before he elecons. The hours reducon ook place a he begnnng of 982, n February, a few monhs afer he 5% ncrease n he French mnmum wage, he SMIC, of July 9. In addon, he February 982 decree spulaed he mandaory rgdy of monhly earnngs for mnmum wage workers employed by he frm a ha dae. In hs arcle we nvesgae he effecs of hs reducon n he maxmum workweek. We evaluae he effec of he workweek reducon on employmen o non-employmen ransons usng wo dfferen approaches, based on wo naural expermens assocaed wh he 982 hours reducon. In he frs one, we compare workers who worked 36 o 39 hours before 982 wh workers who worked exacly 4 hours and wh hose who worked overme (up o 48 hours). In he second expermen, we ake advanage of specfc feaures of he mplemenaon process of he reducon. As menoned earler, some frms were surprsed by he February, 982 decree. In Aprl 982, he dae a whch he French Labor Force Survey ook place, a szeable share of frms had no alered her hours o he new sandard. To analyze hese wo ssues, we use panel daa from he French Labor Force Survey (Enquêe Emplo) for he perod gong from 977 o 987. Our resuls show ha workers who were workng exacly 4 hours per week n March 9 as well as workers who were workng overme (4 o 48 hours) per week n March 9 were less lkely o be employed n 982 han observaonally dencal workers who, n 9, were workng 36 o 39 hours per week. Ths frs analyss uses dfferences n dfferences echnques by comparng ransons from 9 o 982, afer mplemenaon of he decree wh hose prevalng beween 978 and 9, before he elecon of Franços Merrand. Our second analyss also demonsraes ha workers sll employed 4 hours n 982 los her jobs more ofen han hose already employed under he new sandard workweek. Indeed, all our resuls show ha hese job losses can be drecly arbued o he reducon n he workweek. In our frs analyss, he effecs are sgnfcan and vary beween 2.6% and 3.9% accordng o he echnque consdered. In our second analyss, he effecs are also que sgnfcan, and we esmae a lower bound for he nduced addonal job losses a 4.%. Furhermore, we show 4

5 ha mnmum wage workers were much more affeced han ohers. All such resuls are fully conssen wh predcons of mos heorecal models of hours reducon, n parcular snce wage rgdy was bndng for mos low-wage workers, parcularly afer he 5% mnmum wage ncrease of July 9. In parcular, hs wage rgdy should have generaed smulaneous job desrucon and creaon. Gven emprcal relaonshps beween employmen desrucon and worker flows (Abowd, Corbel, and Kramarz, 999), excess job desrucon ha s observed for low-wage workers, around 8%, corresponds o roughly 2% annual employmen desrucon, yeldng an elascy of employmen o labor coss jus below mnus one, n he same ballpark as oher esmaes for hs caegory (Abowd, Kramarz, Margols, and Phlppon, 2 and Kramarz and Phlppon, forhcomng). In addon, our resuls show, also n conformy wh he model, ha beer compensaed workers were less drecly affeced by he reducon of he workweek. In he nex secon, we presen he decree and he nsuonal conex surroundng he 982 reducon of he workweek. We brefly dscuss he lkely effecs of hs reducon n Secon 3. Secon 4 conans a descrpon of he daa ses ha are used n he analyss. In Secon 5, we presen our analyss of he drec naural expermen whereas he analyss of he delayed reducon of hours s examned n Secon 6. Fnally, we conclude n secon 7. 2 Insuonal Conex 2. Prncples and Legal Aspecs of he 982 Reducon of he Workweek 2.. Changes n Hours The number of hours worked srongly decreased durng he sevenes, from 48 hours n 974 o jus above 4 hours n 9 (see also Table ). Durng all hs perod, ndeed snce 936, he sandard workweek was 4 hours. Franços Merrand s elecon n May 9 nduced a sudden decrease of he sandard o 39 hours (January 6, 982 ordnance). In fac, negoaons sared jus afer May 9, snce he reducon was par of he lef s elecoral plaform. These negoaons were should have ended before 982. In a repor o he Presden a he end of 9, he Prme Mnser menons ha negoaons dd no make real advances bu neverheless recommends leng frms and workers unons and delegaes connue unl he second quarer of 982, he suggesed dae of applcaon of he new sandard. Agans hs Prme Mnser s recommendaons, Franços Merrand mposed, by he January 6 ordnance, he new 39 hours sandard, whch ook effec February, 5

6 982. Collecve agreemens, specfyng he erms of applcaon of he decree, ensued, sarng wh he larges frms n he manufacurng ndusres and spreadng o smaller frms and oher ndusres (Marchand, Raul, and Turpn, 983). Therefore, he law reducng he workweek became effecve February, 982. I mandaed a maxmum legal workweek of 39 hours, whereas was 4 hours prevously, and only slghly alered he prevalng regulaon on overme: he overme premum remaned 25% for he frs four hours, and 5% above, bu he maxmum compensaed hours was reduced from 5 o 48 per week (for more deals see Marchand, Raul, and Turpn, 983) The Mandaory Nomnal Wage Rgdy and s Consequences The governmen also recommended ha monhly pay afer he change n workweek reman unchanged for all workers, bu no specal arrangemens were ncluded n he law o enforce hs recommendaon excep for workers pad he legal mnmum wage (SMIC) and workng 4 hours. For hese workers, a specal hourly mnmum wage was prescrbed n order o guaranee ha her monhly earnngs be unchanged afer he change n hours. 3 Hence, a worker pad he SMIC and workng 4 hours before February, 982 receved he same monhly earnngs afer February s even hough he workweek was only 39 hours. However, any worker hred a he mnmum wage rae afer February, 982 receved monhly pay correspondng o hs or her exac number of hours. Therefore, newly hred workers were approxmaely 2.5% ( Francs a monh or $2 US) cheaper han her more senor counerpars because of hs specal provson n he hours-reducon law. Furhermore, snce a 5% ncrease n he hourly SMIC was one of he frs decsons made by he newly eleced governmen n md-9, he hourly cos of mnmum wage workers ncreased by 7.5% beween md-9 and md-982. Fnally, for all oher caegores of workers, he recommendaon o leave monhly pay unchanged seems o have been followed by mos frms. A survey conduced n Sepember 982 showed ha more han 9% of all workers had her monhly pay unchanged afer mplemenaon of he law reducng he lengh of he workweek (Marchand, Raul, and Turpn, 983). 4 3 The mnmum wage legslaon n France specfes an hourly wage. 4 Manpulaons of he compensaon package smlar o hose descrbed n Trejo (99) were ruled ou. 6

7 3 Theory and Idenfcaon of he Impac of he Workweek Reducon 3. Theory The heorecal consequences of changes n sandard hours are now well known (see Rosen, 968, Ehrenberg, 97, and Calmfors and Hoel, 988 among many ohers). Consder a frm ha produces wh a producon funcon f(h,l,k) where h are weekly hours, where l denoes oal employmen, and where k denoes capal. The frm faces a cos funcon ha comprses wages (w denoes he hourly wage, θ denoes he overme premum for all hours above h s he mandaed sandard hours), a fxed cos of employmen f (see Rosen, 968), and a cos of capal r. In hs framework, usual resuls based on margnal coss consderaons as developed n Rosen (968) and, more fully, n Calmfors and Hoel (989) hold (see also Hun, 999). They can be summarzed as follows. Frs, consder he case n whch frms mnmze coss wh oupu fxed. The effec of a reducon n he normal workng me depends on he nal suaon. Obvously, here s no effec f he frm has opmal hours below he old sandard. A he oppose exreme, f he nal suaon s one wh overme, hen employmen decreases and hours ncrease. Indeed, he margnal cos of hrng s ncreased when sandard hours decrease whereas he margnal cos of addonal overme does no change. Furhermore, he margnal cos of a separaon decreases when sandard hours decrease. Fnally, assumng agan ha oupu s fxed, f he frm moves from he old sandard o he new sandard, employmen unambguously ncreases whereas when he frm moves from he old sandard o an neror soluon wh overme, employmen may decrease or ncrease. Nex, assume ha frms maxmze prof nsead of mnmzng coss, a negave oupu effec arses when sandard hours are reduced. Ths effec s larger, he larger he absolue value of he elascy of demand for workers (Calmfors and Hoel, d. page 57). Hence, he lkelhood of posve employmen effecs s smaller han when oupu s fxed. In fac, ncreasng employmen may even be mpossble. Now, o undersand he specfcs of he French workweek reducon, we mus remember ha nomnal monhly wage rgdy was mandaed for workers employed a he dae of he decree. I s herefore useful o have wo perods n our model; one ha precedes he reducon n he workweek (d and before); one ha s a, and follows, he reducon of he workweek (d). In perod, we have: 7

8 C ( s + fl + rk whl + wθ h h, ) l wh l q) l ( + e s where l - denoes employmen a he prevous dae, q denoes he exogenous qu rae, e denoes he number of hres n he frm, and s denoes he number of separaons (.e. excludng qus) when we assume ha frms choose hours n excess of sandard hours. Toal coss are: C + whl + fl rk when opmal hours are se a he sandard. The frm opmzes on capal, hours, hres, and separaons. Imporanly, snce hres and separaons boh enal a cos, as only he dfference beween hres and separaons maers for producon hrough employmen, s never opmal o hre and fre smulaneously. Hence, a leas one of e or s s equal o zero. 5 Consder wha happened afer he French reform of 982. Frs, sandard hours, h s,, decreased. Second, monhly wages dd no decrease (by law for mnmum wage workers whereas was only suggesed for oher workers bu frms followed he suggeson). Hence, hourly pay ncreased for hose who were already employed n he frm whle hourly pay was lef unchanged for new hres. Two wage raes prevaled a hose daes for oherwse dencal workers. Therefore, n perod, he cos funcon ha he frm faces s: C w h e + w θ( h wθ ( h h h s, s, ) e )[( q) l + w h [( q) l s ] + fl + rk s ] + wh l ( q) l + e s and where w denoes he wage of he new hres, and where w denoes he wage of he workers ha were presen n he frm before perod. The equvalen equaon can be wren when hours are se a he new sandard. Because of he legal resrcons and he suggesons o he frms, he followng equaon holds: h s, w hs, whs, or w w > w and w w h s, I s sraghforward o see ha hs double wage srucure exacerbaes he negave employmen effecs of hours reducon found n usual models dscussed above. 5 The proof s sraghforward. One mus wre he lagrangean wh he mulplers for e, s and look a he frs-order condons for hres and separaons. 8

9 There are also dramac consequences for worker flows. In addon o he (negave) effecs on employmen ha we have jus presened, he French specfcs of he 982 change add anoher source of employmen loss: s ofen opmal for frms o separae workers consraned by he old sandard,.e. workers pad 4 hours for a 39-hours workweek, and o hre new workers unconsraned by he old sandard,.e. workers who wll be pad 39 hours for a 39-hours workweek (see Crépon and Kramarz, 2, Appendx ). 3.2 Two Sources of Idenfcaon The process of reducon of he sandard workweek from 4 o 39 hours was sudden, unexpeced bu, a he same me, ook several years. In Aprl 982, he monh n whch he 982 French Labor Force Survey ook place, only a fracon of he frms had sgned an agreemen wh her workers. The srucure of hours n some frms n 982 was dencal o s srucure before promulgaon of he decree. Indeed, Table 4 shows ha he fracon of ndvduals employed 4 hours n he populaon of workers employed 4 or 39 hours was equal o 28% n 982 and fell o approxmaely 2% n 983, 984, and 985. Hence, he passage o he new sandard connued, even afer Aprl 982, dae of he survey. In addon, negoaons resuled n new and old workweeks of equal lenghs for 2% of he workforce; one hour beng couned as overme afer February, 982. These wo characerscs of he process consue our wo sources of denfcaon of he effecs of he hours reducon. The reducon of he workweek was unexpeced. In addon, some full-me workers were already employed 39 hours or less n 9. Hence, can be consdered as a naural expermen. We evaluae he effec of he reducon of he workweek by comparng he employmen ransons of workers employed 4 hours n 9 wh hose of workers employed less han 4 hours a he same dae. The denfyng resrcon s hen ha workers employed beween 36 and 39 hours n 9 are no affeced by he reducon. Snce mos heorecal analyses also predc a negave mpac on overme workers, we also examne he employmen ransons of workers employed 4 o 43 hours, exacly 44 hours (he knk n he overme premum schedule), and 45 o 48 hours (he overme premum jumps from 25% o 5% for all hours n excess of 44) n 9, once agan comparng hem wh hose of he workers employed less han 4 hours a he same dae. The reducon of he workweek was also gradual, and hs consues anoher source of denfcaon. To see hs, assume ha, once he reducon has been negoaed wh a group of 9

10 workers, all such workers are employed 39 hours exacly. Hence, all hose who work 4 hours n 982 are poenally affeced by he forhcomng reducon whle all workers employed 39 hours a ha dae are no any more. Therefore, hs las group s a poenally vald conrol group. 4. The French Labor Force Survey In hs secon, we descrbe he longudnal daa ses, he French Labor Force Surveys (called he Enquêe Emplo), ha are used n he analyss. Our analyss uses daa from 977 o Snce he French Labor Force Survey (LFS, hereafer) quesonnare and survey srucure changed beween 9 and 982, we frs descrbe he feaures of he survey ha are common o he wo sub-perods, hen we descrbe he specfcs for he years 977 o 9, and fnally, we descrbe he LFS for he perod 982 o 987. Every year, approxmaely 6, domcles are sampled from he sock of all houses and aparmens (he samplng rae s exacly /3). In March of he survey year, each person n he sampled household s nervewed (n person f presen a he me of he nervew or by proxy f absen). 7 One hrd of he domcle sample s replaced each year. Hence, all persons n he household are followed a mos hree mes. We buld our longudnal daa usng hs feaure. In all years, mos of he usual household and ndvdual characerscs are avalable for all surveyed ndvduals. Sex, educaon caegores (6 caegores), age a he end of schoolng (from whch we derve labor force experence), regon (lves n Ile de France or no), employmen conrac ype (apprence, shor-erm conrac, oher) and saus (employed or no employed), an ndcaor for par-me saus, senory, employer s ndusry (4 caegores), employer s sze (4 caegores) are avalable n all years and are used n mos of our analyses. The employmen saus of he ndvduals s defned accordng o he ILO crera. Durng he frs sub-perod (976 o 9), wo feaures are essenal o noe. Frs, here s no wage varable n he daa. Second, he nformaon s no on usual hours bu on hours worked durng he reference week. If he ndvdual works fewer han 45 hours, a second queson s asked on possble reasons. Some are labeled emporary (srke, dsease, ec.) whereas ohers are labeled durable, 6 For some descrpve sascs, we use daa from 976 onwards. 7 In 979, 98, and 9, he LFS also ook place n Ocober. Each wave had he same sze as hose of March. Unforunaely, he Ocober survey does no exs afer 9 and s herefore no usable for

11 among whch are dsngushed par-me work and usual duraon of he workweek. Hence, we have a poenal way of approxmang he usual hours concep. Unforunaely, responses o hs second queson appear o be frequenly mssng and hs possble measure s no usable. Sarng n 982, monhly wages (grouped by cells of 5 French Francs, roughly $ US) and usual weekly hours are also avalable. Alhough he usual survey dae s March, because of he 982 Census of Populaon, he 982 Labor Force Survey ook place n Aprl of ha year. Hence, he 982 Labor Force Survey ook place jus afer he legal reducon n he workweek o 39 hours ook effec on February, 982. For our frs analyss, we consruc four hree-year panel daa ses n whch ndvduals are followed from 977 o 979, from 978 o 98, from 979 o 9, and from 98 o 982. Ths allows us o characerze workers suaons before, a, and jus afer mplemenaon of he legal change n he sandard workweek. For our second analyss, we consruc also four hree-year panel daa ses n whch ndvduals are followed from 982 o 984, from 983 o 985, from 984 o 986, and from 985 o 987. Ths allows us o undersand he mplemenaon process of he reduced workweek ha ook place n 982 and jus afer, and conras hs perod wh he ones mmedaely afer. 5 The Reducon of he Workweek: a Naural Expermen 5. Prncple and Descrpve Analyss Table shows he proporon of full-me workers employed 36 o 39 hours whn he populaon of all full-me workers employed 36 o 48 hours n 9. Ths fracon s small, 2.4%, bu s ncreasng across me. The fracon of workers employed 4 hours s also ncreasng whereas he fracon of overme workers consanly decreases beween 976 and 9. Furhermore, he number of observaons also ncreases durng he perod, reflecng a decrease n he number of workers employed more han 48 hours. Table 2 shows he employmen o non-employmen ranson raes for hese varous caegores of workers. Beween 9 and 982, employmen o non-employmen ransons are more nense for workers employed 4 hours han for hose employed 36 o 39 hours. our purpose.

12 6.2% of all workers employed 4 hours n 9 have no employmen n 982 whereas 3.2% of hose employed less han 4 hours are n he same suaon, a dfference of hree percenage pons. However, he sze of he conrol group ha we use o evaluae he mpac of he reducon of he workweek s small; 2.4% of he workers wh hours beween 36 and 48 were employed less han 4 hours n March Selecvy Bas 5.2. Movaon and Sascal Model We now dscuss he denfcaon condons under whch we can solae a causal effec of he workweek reducon on employmen. Two hypoheses are necessary for our analyss. Frs, workers employed 36 o 39 hours mus no have been affeced by he reducon of he workweek. Second, he employmen o non-employmen ransons of hese workers denfes wha he ransons of workers employed 4 hours or more would have been n he absence of a reducon of he workweek. Therefore, we classfy ndvduals n wo caegores: hose affeced () and hose noaffeced () by he reducon. We consder he wo correspondng labor marke suaons NE(), NE() equal o f he ndvdual s no-employed and equal o zero oherwse. The effecve suaon of any ndvdual s: NE NE ( ) +D [ NE ( )-NE ( ) ] where D s equal o f he ndvdual s employed 4 hours or more hours a week n 9. The employmen loss probably s E(NE ) (where E(.) denoes he expecaon of he random varable beween parenheses). We focus on he quany NE ()-NE (). Such quanes measure, for each ndvdual, he dfference beween he labor marke oucome when affeced by he reducon of he workweek wh wha would have been he oucome f hey had no been affeced by hs reducon. We follow Rubn (974) n hs defnon of a causal effec. These quanes, dfferen for dfferen ndvduals, are unobservable snce any gven ndvdual s n one and exacly one sae among he wo possble ones. Only some parameers of he dsrbuon of NE ()-NE () can be denfed, under some hypoheses. For nsance, one can denfy he expecaon of he effec, condonal on changng hours from 4 o 39 (average reamen on he reaed n Heckman, Lalonde, and Smh, 999, ( D ) ermnology), defned as NE ( ) NE ( ) E. To measure hs las quany, we assume (H A ) ha, condonal on observable varables, he poenal oucome, n whch workers are no affeced 2

13 by he reducon, NE (), s ndependen of acually beng affeced by he reducon o 39 hours (ndependence condonal on observable varables, Rubn, 977). The correspondng equaon s: H A : E(NE ( ) x,d ) E(NE ( ) x,d ) Therefore, he followng relaon holds: E where he funcon ( ) ( NE x,d ) E( NE ( ) x ) +D E[ NE ( )-NE ( ) x,d ] D x ndvduals wh characerscs x. g ( x ) + D e ( x ) D e represens he average effec of he workweek reducon when appled o There are several avalable mehods for esmang he effec of he workweek reducon ha are compable wh he above hypoheses. A smple and ransparen mehod s based on he dfferences n he employmen o non-employmen ranson raes beween workers affeced and no affeced by he change of he sandard workweek, conrollng for all her observable characerscs. To analyze he 982 employmen losses of ndvduals employed n 9 wh observable characerscs x, we esmae a regresson usng a lnear probably model based on he followng relaon: E [ NE x D ] x + α I( D 4) 82, β () where he ndex has been omed for smplcy and where NE 82 corresponds o he nonemploymen suaon n 982. The mpac of he workweek reducon on employmen o nonemploymen ransons s gven by he coeffcen α. Noe ha oher echnques, such as machng mehods (Heckman, Ichmura, and Todd, 998) could have been used. We seleced a lnear probably model for smplcy and ransparency. To nclude workers workng overme hours, Rubn s model can be exended usng he framework wh mulple reamens as was recenly developed n Imbens (999), Lechner (999), and Broday, Crépon, and Fougère (999). In 9, before he change n he sandard workweek, he overme premum was 25% for all hours beween 4 and 44 and 5% for all hours srcly above 44. Hence, because of he srucure of he overme premum schedule, n addon o workers employed 4 hours, we dsngush among workers employed 4 o 43 hours, workers employed exacly 44 hours (for whom he margnal cos of employmen ncreases he mos when he sandard workweek s reduced by one hour), and workers employed 45 o 48 hours. We esmae he followng equaon: 3

14 E 4 4 [ NE x, D ] x + α I( D 4) + α I( 4 D 43) 82 β (2) + α 44 I 45 ( D 44) + α I( 45 D 48) Resuls The resuls presened n hs subsecon are based on he panel. Snce our analyss uses workers employed 36 o 39 hours as a conrol group, we frs checked ha her observed characerscs were smlar o hose of workers employed exacly 4 hours and above. We esmaed wo logsc regressons where he dependen varable was employed 4 hours versus employed wh more han 4 hours n years 98 and 9. 8 I appears ha very few ndvdual characerscs maer. More specfcally, dfferences n educaon, experence or senory are no assocaed wh srong dfferences n hours caegory. Mos dfferences sem from he employng frm. Shor hours are no only found n he servce secors bu also n some manufacurng ndusres, such as hose producng nermedary or consumpon goods. Hence, volaons of our hypohess H A are more lkely o come from unobserved frm heerogeney, ha we canno conrol for, han from unobserved ndvdual heerogeney. The frs Column of Table 3, Panel A, presens he esmaes of equaon (2). The ndependen varables ha we use are: sex, regon, educaon (4 caegores), labor marke experence (4 caegores), senory (4 caegores), he wo-dg ndusry of he employng frm, and nformaon on hours worked n he enry year of he panel,.e. 98. The ncluson of varables on he pas of he ndvdual may render he ndependence assumpon more plausble (Heckman, Ichmura e Todd, 998). Fnally, as menoned above, esmaes are based on a lnear probably model. Resulng esmaes confrm fgures from Table 2: workers employed 4 hours n 9 lose her job more ofen. The pon esmae s equal o 2.6%, sgnfcan a he level of %, for workers employed exacly 4 hours whereas coeffcens for overme workers,.e. employed srcly more han 4 hours, are all posve bu no sgnfcanly dfferen from zero Workng 39 Hours, 4 Hours, or More Before he Reducon Of course, ndependen of he reducon of he workweek, s possble ha workers employed exacly 4 hours or workers employed overme lose her jobs more (respecvely,. less) ofen han 4

15 oher workers, even afer conrollng for observable ndvdual characerscs. In such a case, our precedng esmaes would be based. Table 2 shows ha he job loss probably for workers employed 36 o 39 hours flucuaes from year o year, unlke workers employed exacly 4 hours. Ths probably s, n general, lower han he one observed for workers employed 4 hours (979, 98 and 982), bu s greaer n 9. The bgges dfference s observed n 982, 3% whereas he dfference s equal o.4% n 979, 2.3% n 979, and.8% n 9. As for workers employed overme, hey also end o lose her jobs more ofen han workers employed 36 o 39 hours excep n 9; furhermore workers employed 4 o 43 hours lose her job less ofen han hose employed exacly 4 hours. The frs four Columns of Table 3, Panel A, show he probably of non-employmen for our four panels, conrollng for observable characerscs of he workers, expressed as a dfference compared o he conrol group, workers employed 36 o 39 hours. No obvous paern s presen. To denfy he specfc effec of he 9 reducon of he workweek, we esmae he followng double dfference equaon usng all four panels: 4 [ ] ( ) ~ 4 4 ( ) ( ) ~ 4 x, D, x β + α I D 4 + α I D 4 + α I 4 D 43 + α I( 4 D 43) E NE + α 44 ~ ( D 44) + α I( D 44) + α I( 45 D 48) + α I( 45 D 48) I 78,79,8, The mpac of he reducon of he workweek s now gven by he coeffcens ~ 4 4, 44 (3) α ~, α~, α~, α ~. The esmaes of hese four coeffcens are presened n Table 3, Pooled Column of Panel A. For workers employed exacly 4 hours, he resulng esmae from hs approach s larger, around 4%, han hose obaned wh a smple dfference mehod. In addon, for overme workers, all esmaed coeffcens are large some are even larger han hose obaned for workers employed 4 hours as he heory predcs -- wo of hem are margnally sgnfcan and one srongly sgnfcan (for workers employed 45 o 48 hours) The double dfference analyss may lead o overesmang he mpac of he workweek reducon. As descrbed n he Daa Secon, hours are measured from he number of hours worked n he week ha precedes he nervew. There s no sasfacory nformaon on usual hours. Hence, we may capure he prevalng economc condons raher han he specfc effecs of he mandaory reducon 8 Those regressons are no repored here bu can be found n Crépon and Kramarz (2). 9 Even hough he dfferences beween he varous coeffcens are no sascally sgnfcan. See also 5

16 n hours. For nsance, n 9 economc condons were bad, and workers employed 36 o 39 hours may well be hose workng n adversely affeced frms. Therefore, such workers may lose her job more ofen han oher ypes of workers. Ths ype of measuremen error resuls n an upward bas of he esmaed mpac of he reducon of he workweek, f assessed wh a double dfference approach. One way of checkng he valdy of our conrol group s as follows. If workers employed 36 o 39 hours consue a vald conrol group, hey should no be affeced by he reducon n hours. In parcular, f we examne changes n hours beween and + for workers employed 36 o 39 hours a dae who are also employed a dae +, measured changes for 9 should no be dfferen from changes n he years before. Of course, hs s no rue of workers employed 4 hours or more. Therefore, we frs esmae [ ] ~ D x, D, x β + α I( 36 D 39) + α I( D 4) + α I( 4 D 43) E α I 45 ( D 44) + α I( 45 D 48), 78,79,8, (4) n whch we do no nclude a consan. The resulng esmaes are presened n he frs four Columns of Table 3, Panel B. We are neresed n he effecs ha are specfc o year 9,.e. o changes beween 9 and 982 ha canno be found n oher years. The correspondng equaon s E [ ] ~ 39 4,, I( 36 39) I( 4) ~ 4 D + x D x β + α D + α D + α I( D 4) α 4 + α I ( ) ~ 4 44 ( ) ( ) ~ 44 4 D 43 + α I 4 D 43 + α I D 44 + α I( D 44) I( 45 48) ~ 45 D + α I( 45 D 48), 78,79,8, 45 + (5) In equaon (5), he reference group comprses workers employed 36 o 39 hours n he years precedng 9. The esmaes of hese fve coeffcens, α ~, α~, α~, α~, α ~ , are presened n Table 3, Panel B, Pooled Column. Conssen wh our hypohess, 39 ~α s no sgnfcanly dfferen from. In hs regresson, workers employed 36 o 39 hours n he years before 9 consue our reference group. Therefore, workers employed 36 o 39 hours n 9 had hours changes ha were smlar o hose of workers employed 36 o 39 hours n he years before 9. Hence, her hours were no affeced by he workweek reducon. We conclude ha workers employed 36 o 39 hours n 9 consue a vald conrol group. In addon, workers employed 4 hours or more n 9 saw her hours decrease. For nsance, workers employed 4 hours n 9 had a change of.7 hours/week (-.2-(-.3)) n comparson o workers employed 36 o 39 hours n 9. Smlarly, Andrews e al. (999) for resuls wh he same flavor based on German plan-level daa. 6

17 workers employed 45 o 48 hours had a decrease n her hours of.29 hours/week. Resuls for workers employed 4 hours n 9 are herefore conssen wh predcons of heorecal models. However, resuls for overme workers are apparenly less n lne wh such predcons esmaed changes show a decrease nsead of an ncrease - bu he esmaed changes n hours are no precse enough o gve a defnve answer Dscusson Our frs analyss has several lmaons. Frs, he sze of he conrol group s small -- less han 3% of he observed populaon bu ncreasng. Ths s obvously he man reason for he lack of precson of some of our esmaes. Furhermore, even hough s small, hs conrol group could also be heerogeneous. To es he robusness of our resuls, we esmaed he same equaons as hose presened n Table 3 bu wh wo dfferen, alernave, conrol groups workers employed 35 o 39 hours and workers employed 37 o 39 hours. We also esmaed he same equaons usng daa from 975 o 982 (nsead of 977 o 982). All he esmaed resuls were smlar o hose already dscussed. I s also possble ha unobserved dfferences n ranson raes beween workers employed 36 o 39 hours and hose employed 4 hours, even afer conrollng for all observed characerscs, sll exs. In parcular, we do no have pay daa. The mnmum wage srongly ncreased n July 9 and may have generaed job losses que apar from hose assocaed wh he hours reducon. If workers employed 4 hours were more affeced by he SMIC ncrease han hose workng 39 or less, we may pu he blame on hours reducon whereas he job losses acually resuled from he SMIC ncrease. I s lkely ha hs source of esmaon bas s small. Wages are srongly correlaed wh sklls, educaon, dploma, experence, or senory. As menoned prevously, he nroducon of all hese characerscs n our regressons dd no modfy he esmaed effecs. The resdual componen of wages should no cause a bas. We red o examne he possble heerogeney of he mpac of he reducon of he workweek n he Neverheless, he dffuson of he reducon of hours o workers employed 39 or less n 9 leads o underesmang he effec of neres. In he exreme case of a complee dffuson of he reducon of he workweek o all workers employed less han 4 hours a week, we should fnd no effec of he hours worked n 9 on employmen losses n our regressons. More srongly n France han n he Uned Saes, see Abowd, Kramarz, and Margols (999). 7

18 populaon. In parcular, we esmaed effecs by skll-levels, by experence or senory groups, and by employmen saus (apprence or no). As expeced, we could no solae any sgnfcan effec. Ths does no mean ha he reducon affecs all groups smlarly bu, smply, ha he sze of he conrol group s oo small o measure such effecs. Such lms sze of he conrol groups or absence of some mporan varables (wage or usual hours, as opposed o hours n he week precedng he nervew) movaed us o examne more carefully he suaon ha prevaled from 982 onward, snce hese wo daa lmaons do no exs afer ha dae. Neverheless, such daa lmaons do no nvaldae he resuls of hs frs analyss: he reducon of he workweek from 4 o 39 hours s drecly responsble for he ncreased employmen o non-employmen ranson raes of affeced workers, hose who worked 4 hours as well as hose who worked overme before he reducon n 9. 6 Lae Changes o he New Sandard Workweek 6. Movaon A frs examnaon of he proporon of workers employed 4 hours beween 982 and 987, afer he decree mandang he workweek reducon, confrms ha he passage o 39 hours was progressve (Table 4). The fracon of workers employed exacly 4 hours became sable only n 983, a around 2% of workers employed eher 39 or 4 hours. Ths progressve ranson o 39 hours s anoher poenal source of denfcaon of he effec of he workweek reducon. Examnaon of Table 4 also shows ha dfferences n job loss probables beween workers employed 39 and workers employed 4 hours exs. In 982, hs dfference amouns o.6 pons for year-o-year job losses and o 3.9 pons for cumulaed losses over wo years. These dfferenal losses are much greaer n 982 han n any of he followng years. The perssence of a large fracon of workers employed 4 hours (usual hours) afer 982, 2%, demonsraes ha negoaons led many frms o manan hours as hey were before 982. Thus, a fracon of he workers declarng usual hours equal o 4 n 982 may well work for frms ha mplemened he new sandard before Aprl 982, he dae of he survey, one hour beng pad as overme. The proporon of workers employed exacly 4 hours n a frm ha had mplemened he 39-hours workweek before Aprl 982 s no known, bu can be esmaed under varous hypoheses usng he proporon of workers employed 4 hours a varous daes. 8

19 Usng as a parallel our frs analyss, n whch he conrol group was composed of workers employed beween 36 and 39 hours n 9, seems ha, based on he above dscusson, a poenal conrol group for hs second analyss could be all workers employed 39 hours n Aprl 982,.e. workers for whom he new sandard was appled mmedaely afer he publcaon of he February s decree and who were sll employed wo monhs afer hs dae. The assocaed reaed group consss of all workers employed exacly 4 hours n Aprl 982,.e. workers who were also employed afer February s n frms ha had compleed negoaons and kep he old sandard as well as n frms ha had no ye mplemened he new sandard. We dscuss n he followng subsecon, he man deas ha are suffcen for hs poenal conrol/reamen comparson o deec and o measure he mpac of he workweek reducon on employmen. 2 We dscuss n he las subsecon he economc valdy of hese hypoheses. In parcular, based on a survey performed n Ocober 982, we show ha frms ha compleed negoaons afer Aprl 982 dd so for reasons unrelaed o her economc suaon, bu for reasons ha were relaed o a weaker and less acve radon of barganng ha prevaled n her ndusry, whereas hose ha sgned earler mosly belonged o ndusres n whch negoaons were more commonplace. 6.2 Sascal Model The sascal model ha we use o evaluae he effec of he reducon of he workweek s an exenson o mul-wave reamens of he model used n our frs analyss. Le us consder hree poenal saes n 983 and 984: no affeced by he reducon o 39 hours (), affeced before Aprl 982 (), and affeced afer Aprl 982 (2). Le us denoe and ( ), NE ( ), NE ( 2) T, T, T2 he respecve evens NE s equal o f ndvdual was ever non-employed beween 982 and, for 982, 983, 984. Therefore, NE summarzes he employmen hsory of each ndvdual n he years followng he workweek reducon. Denoe also NE he resulng vecor of labor marke hsory a he varous daes of neres. Noce ha he hree poenal saes are muually exclusve, hence T T + T. In addon, all workers beng evenually affeced by he reducon of he + 2 workweek, we have T. Our quanes of neres are NE ( ) NE ( ) and ( ) NE ( ) NE.e. he mpac of he 2 2 The full se of sascal hypoheses and resuls are conaned n he Appendces of Crépon and Kramarz (2). 9

20 reducon on employmen for hose workers affeced before Aprl 982 or afer Aprl 982. However, hese quanes are no drecly observable. Therefore, denfyng hypoheses are necessary, as hey were n our frs analyss, n order o recover some of he parameers of he dsrbuon of hese quanes and n order o gve an evaluaon of he reducon of he workweek. The basc elemens of he model as well as her consequences are presened n Appendx. All formal deals and proofs of he resuls are presened n Appendx 2 of Crépon and Kramarz (2). We summarze her economc conen and he resulng equaons n he nex paragraphs. The frs hypohess (H A ) mples ha, for workers employed 4 hours n 982, and condonally on observable varables, he labor marke sae assocaed wh beng affeced before Aprl 982, NE (), s ndependen of he dae a whch he new sandard was mplemened, T. Ths s he analog of hypohess H A of our prevous model. The emprcal plausbly of hs hypohess s dscussed n he fnal subsecon of hs secon. In addon, we assume as hypohess (H B ) ha he effec of he reducon of he workweek s ndependen of he oucome, 39 or 4 hours, of he negoaon surroundng mplemenaon of he new sandard workweek. Ths las hypohess s no very demandng snce amouns o neglecng he addonal cos nduced by one overme hour when he oucome s 4 (overme adds 25% o a normal hour). Noce ha our frs analyss ends o suppor hs hypohess. Proposon n Appendx shows ha under hese hypoheses, he poenal conrol group,.e. workers employed 39 hours n 982, s a vald conrol group for deecng an mpac of he workweek reducon on employmen. In parcular, mples ha as soon as he reducon of he workweek has no employmen effec,.e. NE ( ) NE ( ) NE ( ), a regresson ryng o 2 explan non-employmen n 983 or 984 should no nclude an ndcaor for workng 4 hours n 982, denoed ( D 82 4). Even f he nerpreaon of he resulng esmaes of such an equaon s complex, a sgnfcan coeffcen on he varable ( 82 4) reducon had an mpac on employmen. D would demonsrae ha he We are no only ryng o deec he exsence of an effec, we wan o measure hs effec. To do so, we need addonal assumpons. Frs, we assume ha he effecs of he reducon only las a lmed number of perods, specfcally wo years. For nsance, n 984, only workers employed n frms havng compleed negoaons afer Aprl 982 are suscepble of losng her job because of he 2

21 reducon. And, n 983, job losses because of he reducon may come from job losses of workers employed 4 hours n 982 (frs-year effec) bu also from job losses of workers employed 39 hours n 982 (second-year effec). More precsely, consder workers employed 4 hours n 982 wh characerscs x. Ther job loss probably beween 982 and 983 s he sum of wo componens: one general o workers wh characerscs x and one due o he frs-year effec of he reducon of he workweek, π ( x ). Consder now workers employed 39 hours n 982 wh characerscs x. Ther job loss probably s also he sum of wo componens: one general o workers wh characerscs x and one due o he second-year effec of he reducon of he workweek, π ( x ). As a consequence, n 983, he dfference n job loss probables beween 2 workers employed 4 hours n 982 and hose employed 39 hours n 982 (and employed 4 hours n 9) s exacly π x ) - π ( x ). The same reasonng apples o ransons beween 982 and 984 and denfes π ( x ). ( 2 However, 2% of he workers were employed 4 hours several years afer compleon of he negoaons (Table 4). Ths makes he comparson of workers employed 4 hours wh hose employed 39 more dffcul and nroduces a nusance parameer n our esmang framework, he fracon of workers employed 4 hours n 982 ha compleed her negoaons afer Aprl 982. Our Proposon 2 summarzes hs dscusson (see Appendx ). 3 We prove ha he poenal conrol group,.e. workers employed 39 hours n 982, s a vald conrol group for measurng he mpac of he workweek reducon on employmen and ha: E ( NE x D ) 83, 82 g83( x) + P( T2 x, D82 4)( π ( x ) π 2( x ))( D82 4) ( NE x D ) g ( x ) + P( T x, D 4) ( x )( D 4) E π 84, where, as menoned above, π x ) denoes he change n employmen loss probably ha can be k ( drecly arbued o he reducon of he workweek for ndvduals wh characerscs x n he k h perod followng negoaons, and g(.) denoes any funcon ( NE 84 s equal o for a worker no employed n 983 or n 984 snce we only consder workers employed n 982). The oal effec of he reducon s herefore equal o π + π 2. As noed above, here s a nusance parameer, 3 All hypoheses and proofs are presened n Appendx 2 of Crépon and Kramarz (2). 2

22 P ( T x, D82 2 4), n hese equaons. Our equaons can be resaed as he followng regressons: E E ( NE83 D82, x ) xc + xλ( D82 4) ( NE D, x ) x d + x µ ( D 4) whch yeld parameers π ( x ) - π 2( x ) xλ and π ( x ) x µ for any gven value of he nusance parameer. Once agan, for smplcy and ransparency we esmae all models n hs secon usng lnear probably models. We examne he case of a homogeneous effec whn he populaon and we also esmae a specfc effec for low-wage workers. As n Secon 5, we mus also check ha he effecs ha are found, f any, are specfc o 982. One canno gnore he possbly ha, sarng afer 982, workers employed 4 hours lose her job more ofen han hose employed 39. Indeed, a common reason specfc o hese jobs bu unobserved o he economercan - could explan boh 4 hours beng he oucome of he negoaon and he desrucon of hese jobs, a desrucon ha would have aken place even whou any mandaory hours reducon. Therefore, we also esmae he followng equaons: 4 E E ( NE+ D, x ) δ( 82) + xc + xλ( D 4) + xλ( D82 4 ) ( NE D, x, z ) δ ( 82) + x d + x µ ~ ( D 4) + x µ ( D 4) + 2 Idenfcaon of he nusance parameer ( T x 4) 2 ~ 2,D82 82 P s dscussed a lengh n Crépon and Kramarz (2). The soluon adoped here assumes ha he nusance parameer s equal o for all ndvduals. Ths corresponds o he followng hypohess: all workers employed n frms havng mplemened he workweek reducon before Aprl 982 acually work 39 hours afer he reducon. The hypohess mples ha all frms n whch a 4-hour workweek prevaled, wh one hour beng compensaed as overme (based on he French LFS of 983 o 987, such frms comprse 2% of oal employmen), mplemened he reducon o 39 hours afer Aprl 982. Snce he nusance parameer les beween and, hs hypohess provdes us wh a lower bound on he parameer of neres. 5, 82 4 We also esmae he year-by-year regressons: E E ( NE+ D, x, z ) x c + z λ ( D 4 ) ( NE D, x, z ) x d + z µ ( D 4)

23 6.3 Resuls Our analyss s based on four panel daa ses spannng hree years each, , , , and The regressons presened n he ables explan non-employmen a dae +, NE +, gven employmen a dae, or non-employmen a dae + or a dae +2, NE +2, gven employmen a dae, as funcons of he number of workweek hours n year. We consder only full-me employees workng eher 39 or 4 hours. Our addonal explanaory varables are: he ndusry (2-dg classfcaon), sze of he employng frm, regon (Ile de France or no), sex, dploma (6 caegores), labor marke experence (4 caegores), senory (4 caegores), wage level (5 caegores defned wh respec o he mnmum wage, he SMIC; a low-wage correspondng o wages beween.95 and. mes he SMIC), and labor marke saus (apprence, on shor-erm conrac, on long-erm conrac). Table 5 presens esmaon resuls n whch he ndcaor funcon for usual hours4 s drecly ncluded (Column ). In Columns 2 and 3 we show he resuls when hs ndcaor funcon and s neracon wh a low wage ndcaor are boh ncluded. Column 4 gves he fracon of ndvduals employed exacly 4 hours whn he populaon of neres. Resuls for he panel demonsrae ha hose workers employed 4 hours n 982 are more lkely o lose her jobs. Afer one year, he effec amouns o.3%. Based on proposon 2, hs number measures he dfference beween he frs year and he second year employmen loss probables. The wo-year effec, 2.7%, s sgnfcanly dfferen from zero. I s roughly wce he one-year effec, demonsrang ha he effec s sll presen afer one year. The oal effec over he wo years s equal o 4.% ( 2*2.7-.3, see proposon 2). For a value of he nusance parameer equal o, we esmae ha he effec of he reducon of he workweek was a 4. percenage pon ncrease n he probably of becomng non-employed (oher values of he nusance parameer would yeld larger esmaes of he mpac). More mporanly, for all possble values of he nusance parameer, we always rejec he null hypohess of no mpac of he reducon of he workweek on he employmen o non-employmen ranson raes. Table 5 also shows ha, f esmaed panel by panel, he coeffcen of he hours4 ndcaor 5 Resuls usng oher values of hs nusance parameer are gven n Crépon-Kramarz (2). 23

24 flucuaes across years. I s negave and close o for he 983 and 985 panels, s posve and close o sgnfcance for he 984 panel. Gven he sandard errors, such values are no muually ncompable. Sll, hey leave open he possbly ha workers employed 4 hours lose her job more ofen han hose workng 39 for oher reasons han he reducon of he workweek. Table 6 presens esmaon resuls for he pooled regressons. The coeffcen on he hours4 varable neraced wh he 982 year ndcaor s equal o.3 for he one-year effec and o 2.3 for he woyear effec. Here agan, hs coeffcen s sgnfcanly dfferen from zero. Hence, we once more rejec he null of no effec of he reducon of he sandard workweek on employmen. These laer esmaes lead o slghly lower effecs of he reducon of hours on employmen losses han before. The oal effec s equal o 3.3% (2*2.3-.3) n hs case. Therefore, he effec of he reducon s also equal o 3.3%. All hese resuls are robus o he nroducon of ndvdual heerogeney n he nusance parameer Low-Wage Workers For he daa colleced snce 982, he sze of he sample and he avalably of he wage varable allow us o focus on he effecs of he reducon of he workweek on varous subgroups. We focus on he low-wage populaon, ryng o solae a specfc effec of he hours reducon on hs group. Resuls based on he panel show a specfc effec on he low-wage group employed 4 hours (Table 6). Ths effec s presen n 982 bu no n 983 nor n 984. However, he effec on low-wage workers also shows up for 985 (ransons from 985 o 987). If all panels are pooled, we observe a sgnfcan effec for he low-wage group ha s specfc o year 982 n addon o he common effec. The esmaed effec s equal o 7.7% afer one year (and o 6.8%, no sgnfcanly dfferen from zero, afer wo years). From hese resuls, we nfer ha he reducon frs affecs lowwage workers bu ha he res of he populaon s also affeced afer wo years. These very large ranson rae dfferences for mnmum wage workers appear o ndcae ha frms replaced her low-wage workers wh workers from he pool of applcans, conssen wh resuls of he heorecal model, n he year followng he decree. Ths excess desrucon and creaon of jobs was enrely due o he mandaory rgdy of monhly earnngs and no o he July 9 ncrease n he SMIC. Indeed, he mnmum wage connued o ncrease by 4% n 982, 983, and 984. Bu, he effecs ha are dscussed n Tables 5 and 6 are only presen n 982, he dae a whch he consran on monhly 6 All such resuls are presened n Appendx 3 of Crépon and Kramarz, (2). 24