Skill-specific unemployment risks: Employment protection and technological progress – A cross-national comparison

Abstract

This article focuses on the relationship between employment protection legislation (EPL) and skill-specific unemployment risks. As a consequence of skill-biased technological progress, low- and high-skilled workers are expected to be affected differently. Moreover, the level of technological progress should moderate the relation between EPL and skill-specific unemployment risks. The analyses are based on data from the Labour Force Survey from the year 2008 and concentrate on the civilian labour force aged between 25 and 49 years in 20 European countries. The results show that stricter EPL strengthens unemployment risks between skill groups only when the level of technological progress is very advanced. In other countries, stricter EPL is related to less inequality in unemployment risks. However, there are two sides to a coin. While stricter EPL is related to lower unemployment risks for the low skilled in most countries, it leads to higher unemployment rates for the highly skilled at the same time.