DP2158 Working 40 Hours or Not Working 39: Lessons from the 1981 Mandatory Reduction of Weekly Working Hours

Author(s): Bruno Crépon, Francis Kramarz
Publication Date: May 1999
Keyword(s): Hours Reduction, Minimum Wage, Unemployment
JEL(s): J23, J31
Programme Areas: Labour Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=2158

We use longitudinal individual wage, hours, and employment data to investigate the effect of the 1981 mandatory reduction of weekly working hours in France. A few months after François Mitterrand's election of May 1981, the government, applying its programme decided first to increase the minimum wage by 5% and, second, to reduce weekly working hours - from 40 to 39 - together with mandatory stability of monthly earnings of minimum wage workers and strong recommendation for stability of monthly earnings for other workers (indeed followed by 90% of the firms). We show that workers directly affected by these changes, those working 40 hours in March 1981, lost their jobs between 1981 and 1983 more often than workers not affected by the changes, those working 39 hours in March 1981 ; their year-to-year job loss probability increased from roughly 10% to 12.5%. Moreover, workers affected by both minimum wage changes and hours reduction were even more strongly hit ; their year-to-year job loss probability increased from roughly 10% to 26%. These results should help us understand the possible effects of the forthcoming mandatory reduction of hours in France, the weekly working hours going from 39 to 35 hours in year 2000. Similar projects are envisaged in other European countries hoping that hours reduction are an efficient way of tackling their unemployment problem.