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Aliki Mouriki

Table 5: Key employment indicators - 2006 (%)

Source: Employment in Europe, 2008
* 2005 figures

Employment Protection Legislation

A highly controversial issue in the literature is to what extent a high degree of employment
protection is associated with poor labour market performance, reflected in increased levels of un-
employment, low labour mobility and costly hiring and firing procedures. Or, inversely, whether
employment protection is associated with increased labour productivity, greater loyalty of the em-
ployees and a higher propensity of firms to invest in training. Less contested, however, is the impact
of strict employment legislation on the margins of the workforce and the strengthening of divisions
between ‘insiders’ and ‘outsiders’. As the empirical evidence suggests, in the majority of European
countries, reductions in the strictness of Employment Protection Legislation are usually confined to
the peripheral workforce and very rarely affect regular workers. ⁵⁶ De-regulation at the margins of the
labour market increases labour market segmentation, as atypical workers have to carry a dispropor-
tionate share of the burden of economic adjustment, thus leading to more precarious employment
(Viebrock & Clasen, 2009).

Despite successive legislative initiatives since the mid-1990s, Greece and Spain continue to have
the most restrictive EPL in the OECD. In Greece, however, labour market rigidity has watered down
significantly following a series of legislative initiatives during the period 1990-2005, that introduced
a number of flexible working arrangements (part-time work, telework, interim work, annualisation

56 See Boeri T., Conde-Ruiz, J. I. & V. Galasso, 2003, “Protecting against labour market risk: employment protection or

unemployment benefits?” CEPR Discussion Paper, no.3990, mentioned in Viebrock & Clasen, 2009.

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