published in: Journal of Political Economy, 2002, 110 (6), 1355-1389
We use longitudinal individual wage, hours, and employment data to investigate the effect of the
February 1, 1982 mandatory reduction of weekly working hours in France. Just after François
Mitterrand’s election in May 1981, the government decided to increase the minimum wage by 5%.
Then, as promised in its electoral program, the socialist government reduced the workweek from 40 to
39 hours. At the same time, it mandated stable monthly earnings for minimum wage workers and
recommended the stabilization of monthly earnings for other workers (recommendations followed by
90% of the firms). We show that workers directly affected by these changes—those working 40 hours
in March 1981 as well as those working overtime at the same date —were more likely to lose their jobs
between 1981 and 1982 than workers not affected by the changes—those working 36 to 39 hours in
March 1981. Moreover, because the decree enforcing the new standard was issued faster than earlier
promises, some firms had no time to complete negotiations and their workers were still working 40
hours after February 1, 1982. We show that these workers were also strongly affected by the reduction
in standard hours. Our estimates of the impact of this one-hour reduction of the workweek on
employment losses vary between 2% and 4%, depending on the methodology or the data used.
Furthermore, we show that minimum wage workers were most affected by the changes. This result,
consistent with our model, is due to the impossibility of adjusting their monthly wage, which results in
excess job destruction and creation. These results should help us understand the possible effects of
the upcoming mandatory reduction of hours in France, where the maximum weekly working hours
declined from 39 to 35 hours beginning in January 2000. Similar programs are envisaged in other
European countries, which hope that hours reductions will be an efficient policy for reducing
unemployment.
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