Effects of obligatory compensation from previous experience on unemployment

Papadimitriou Pyrros and Smagadi Theodora

International Journal of Trade and Global Markets, 2012, vol. 5, issue 3/4, 254-267

Abstract: The purpose of this paper is to investigate the effects on unemployment from the legal obligation in Greece to compensate employees for their previous experience, measured by the years of employment in a similar job. If mandatory wage compensation according to this 'typical' experience leads to wages higher than the equilibrium, then the existence of this obligation is likely to be associated with higher rates of unemployment. The analysis of wage data from a sample of 1673 employees and the responses from 2370 unemployed people showed that increases in wages that are not combined with increased productivity can create distortions in the labour market which often result in layoffs and unemployment.

Keywords: unemployment; employee experience; wage gap; minimum wage; legal obligation; Greece; employee compensation; law; wages increase; productivity. (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijtrgm:v:5:y:2012:i:3/4:p:254-267

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