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Job stability in industrialized countries remains surprisingly strong

ILO study sees labour markets less volatile than generally assumed

Article | 08 July 2003

GENEVA (ILO Online) – A new ILO study( see note 1) finds that job stability in industrialized countries – measured by the length of time that people stay with their employer, or job tenure – has hardly changed over the last 10 years, despite widespread belief that the workplace is becoming less and less secure.

This might sound odd, in a time of economic crisis, job cut announcements and mounting unemployment, but labour markets of most industrialized countries are still showing an unexpectedly large core of stable jobs, with different forms of flexible employment, concentrated on certain groups, organized around this core, says the study

The study shows that in 2000, on average, over 60 per cent of all employed persons in Europe remained in their jobs for more than 5 years. About 40 per cent held their jobs for more than 10 years, the study says. These percentages are about the same as those for the early 1990s.

Differences between countries are important, however, the study cautions. With about 25 per cent of employed persons holding jobs for more than 10 years over the last 10 years, job stability, although not dramatically declining, is much lower in the United States than in Europe. Indeed, while average tenure in Europe is around 10.6 years and reaches 10.9 years in Japan, it is only 6,6 years in the United States.

"Even if job stability is lower in the United States, the US labour market is in no sense a "bourse" or one in which most employees are free agents. Long-term employment relationships remain quite common. In addition, developments within the firm, such as high-performance work systems, set incentives for the firm to maintain stable employment relationships", says the study.

For the ILO's goal of increasing economic and social development in the world through decent work, these findings are of great significance. They show that in fact a high level of economic and social development usually correlates with a considerable level of job stability. The claim that developing countries must exclusively target the flexibilization of their labour markets in order to climb the ladder of development, create employment and reduce unemployment seems too simplistic. As important, if not more important, is to find ways to stabilize their labour markets and workplaces while allowing for some flexibility.

Average tenure in any given economy is also highly dependent on the demographic structure of the working population. While job tenure remains stable overall, young people have much shorter, and decreasing, job tenures of around 2 years in average, whereas for other age groups tenure has often increased.

The patterns also differ between men and women. In almost all European countries, average tenure for women employees is shorter than for men (In 2000 in the EU, average tenure was 9,8 years for women and 10,6 years for men), except in Portugal and Sweden where women now have longer tenured jobs than men. The gender gap is particularly significant in Ireland, Japan and the Netherlands. But is generally decreasing, as average tenure for men declines (due to structural change that affects longer tenured jobs, for example in manufacturing), and women increasingly hold their jobs longer.

Employment tenure also varies considerably across industries: the longest tenures are found in agriculture and public administration, and the shortest in financial intermediation. The wholesale and retail trade, and catering and tourism industries, are also characterized by short average tenures. Employment tenure also correlates with enterprise size: the employees of larger enterprises in the EU have significantly longer employment tenure than those in enterprises with less than ten employees.

While the share of temporary jobs has clearly increased in most countries (only in Denmark, Finland, and Ireland has the share of these jobs decreased) and is very important in flow terms (in and out of employment), many of these jobs tend to be transformed into permanent jobs which explains the relatively low stocks of such employment relationships. Again, differences between countries are important and these jobs are strongly concentrated on young people.

Job stability is not equivalent to job security

Despite the overall picture of job stability, employment security remains an issue of concern. Looking at the relationship between an objective indicator of employment security such as tenure, and the perceived level of employment security across countries, there is only a weak correlation. In countries said to be in economic crisis, for instance Japan, the feeling of employment insecurity may be high, despite average tenure in Japan remaining one of the longest in the world. In contrast, in countries with lower tenure, but better organized social protection systems, such as Denmark or the Netherlands, perceived employment security is higher.

It seems that, if the collectivity provides for replacement incomes and for active employability measures, people have less fear of losing their jobs, despite lower employment security on the job than in other countries. According to the study, in these countries there is a trade-off between employment protection and social protection.

In countries like Denmark and the Netherlands, both labour market stability and flexibility seems to be supported by labour market institutions. Thus, workers' and employers' organizations and collective bargaining, employment security regulation and social protection all play a role, both in stabilizing the employment relationship and in permitting secure transitions between jobs, between education and work, between family responsibilities and work and between employment and retirement, and result in higher levels of employment security.

"There is also a positive relationship between decent work and employment security", says the study. Employment security can be provided by stable jobs, but when recession looms and or structural changes accelerate, stable jobs become endangered.. In these situations, people need to feel confident about their social protection systems. But even in the absence of a crisis, the feeling that one is not strongly dependent on a specific job for securing an income, and that transitions are protected and other jobs are available, seems to increase perceived employment security. Perceived employment security is important for the economy as low security has a negative impact on household decisions on consumption and can accelerate an economic downswing as can be seen by the example of Japan. Thus the interaction between employment and social protection, resulting in country specific employment flexibility and security patterns, is therefore of utmost importance not only for perceived employment security on the labour market but for the whole economy.

Note 1