Reforming Severance Pay

Robert Holzmann And Milan Vodopivec

Description

Severance pay, a program that provides compensation to workers on termination of employment, is the most widely used income protection program for the unemployed-yet it is often blamed for creating economic inefficiencies such as reducing employment and limiting access to jobs for disadvantaged groups. Reforming Severance Pay: An International Perspective fills the knowledge gap in evaluating the international experience by providing a collection of worldwide overviews and labor market impact assessments, theoretical analyses, and country case studies. The authors summarize the performance of existing severance pay arrangements around the world and discuss recent innovative severance pay reforms in Austria, Chile, and the Republic of Korea.
Reforming Severance Pay proposes policy directions based on country characteristics such as folding severance pay of higher income countries into existing social insurance programs and making severance pay a contractual affair between market partners to live up to the efficiency-enhancing device in a knowledge-based economy. For lower income countries, the authors advise reforming severance pay toward realistic benefit levels, strengthening compliance of benefit payments by the employer, and safeguarding minimum benefits. This report will be of interest to policy makers and researchers working on labor market, unemployment benefit, and pension issues; economic policy reform; poverty reduction; and social analysis and policy.

Informations

• Publié par: world-bank-publications
• Publié le: 31 octobre 2011
• Nombre de lectures: 27
• EAN13: 9780821388518
• Langue: English
• Poids de l'ouvrage: 3 Mo

Extrait

Robert Holzmann and
Milan Vodopivec, Editors
An International
Perspective
Reforming
Severance PayReforming Severance Pay
AN INTERNATIONAL PERSPECTIVEReforming Severance Pay
AN INTERNATIONAL PERSPECTIVE
Robert Holzmann and Milan Vodopivec
Editors© 2012 The International Bank for Reconstruction and Development / The World Bank
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ISBN: 978-0-8213-8849-5
eISBN: 978-0-8213-8851-8
DOI: 10.1596/978-0-8213-8849-5
Library of Congress Cataloging-in-Publication data have been requested.
Cover photos: Eric Miller (left), Jim Pickerell (upper), Thomas Sennett (right)/World Bank Photo Library.
DuxX/istockphoto.com (lower).
Cover design: Naylor Design, Inc.Contents
Preface ........................................................................................................... xi
Acknowledgments ...................................................................................... xiii
Abbreviations ............................................................................................... xv
1. Severance Pay under Review: Key Issues, Policy
Conclusions, and Research Agenda ..................................................... 1
Robert Holzmann and Milan Vodopivec
Introduction ........................................................................................................... 1
Issues with Severance Pay ........................................................................................2
Chapter Overview ..................................................................................................5
Conclusions and Proposed Reform Directions ........................................................8
Research Agenda: Next Steps ................................................................................11
Notes .................................................................................................................... 13
References and Other Resources ...........................................................................13
2. Severance Pay Programs around the World: History, Rationale,
Status, and Reforms ............................................................................. 17
Robert Holzmann, Yann Pouget, Milan Vodopivec, and Michael Weber
Introduction: Objectives, Methods, and Structure ................................................17
T e Origins of Severance Pay 18
Mandated Severance Pay Programs: Modalities, Overview, Reforms .....................23
T e Motivation behind Severance Pay: Reviewing Hypotheses and Evidence ........43
Conclusions .......................................................................................................... 64
Notes .................................................................................................................... 66
Annex A. Historic Perspectives across Countries and Regions ...............................68
Severance Pay in the United States ........................................................................68
Sevnited Kingdom ..................................................................69
Severance Pay in Japan ..........................................................................................70
Origins of Severance Pay in Developing and Transitional Countries .....................70
Annex B. Inventory of Severance Pay across the World .........................................75
Annex C. Note on Econometric Estimation ........................................................111
Why Robust Regression? ....................................................................................111
Summary of Critical Aspects ..............................................................................111
References and Other Resources .........................................................................113
vvi REFORMING SEVERANCE PAY
3. Mandated Severance Pay and Firing Cost Distortions:
A Critical Review of the Evidence ..................................................... 121
Donald O. Parsons
Introduction ....................................................................................................... 121
Severance as Job Displacement Insurance: An Overview .....................................123
Severance Policies and Outcomes: T eoretical Structure 127
Government Reforms: A Policy Taxonomy .........................................................129
An Early Cross-National Study: A Bold Empirical Adventure .............................131
Extending the Dismissal Policy Vector: Heckman-Pagé s .....................................132
Employment Protection Legislation: OECD Studies ..........................................134
Labor Standards and T eir Consequences ...........................................................136
Broad Economic Reforms and T eir Consequences ............................................138
Employment Protection Legislation and Worker Separations ..............................141
EPL: Employment and Its Distribution ..............................................................142
EPL as Workplace Control .................................................................................145
Severance Pay Generosity ....................................................................................147
Conclusion ......................................................................................................... 149
Notes .................................................................................................................. 150
References ........................................................................................................... 153
4. The Firing Cost Implications of Alternative Severance
Pay Designs ........................................................................................ 159
Donald O. Parsons
Introduction ....................................................................................................... 159
Job Separation Benefi ts: Some Defi nitions ..........................................................160
Severance Insurance and Severance Savings: Consumption-Smoothing
and Firing Cost Consequences ............................................................................162
Diversity of Severance Pay Plans in the United States:
Firing Cost Implications .....................................................................................163
Individual Programs as Elements of a Policy Bundle ...........................................168
Firing Costs: Some International Evidence .........................................................169
Conclusion ......................................................................................................... 171
Notes .................................................................................................................. 172
References ........................................................................................................... 174
5. Effects of the Austrian Severance Pay Reform ................................ 177
Helmut Hofer, Ulrich Schuh, and Dominik Walch
Introduction ....................................................................................................... 177
Severance Pay Law in Austria ..............................................................................178
Capital Accumulation and the New Severance Pay Scheme .................................180
Mobility in the Labor Market .............................................................................184
Conclusions ........................................................................................................ 190
Notes .................................................................................................................192<