Labor market effects of work‐sharing arrangements in Taiwan, ROC

Purpose - To measure the effects of work‐sharing arrangements on participants’ subsequent labor market outcomes in Taiwan such as full‐time employment rates, working hours of women and men and the difference in scale effect and effect of substitution between hours and employment for women and men. Design/methodology/approach - Using the data from Manpower Utilization Survey, we applied the differences‐in‐differences estimation method to test the effects of work‐sharing arrangements on working hours, wage and employment. Multinomial logit was used to measure the effects of work sharing on full‐time employment. In order to correct the simultaneity and selectivity problems, we followed the Heckman two‐stage selection procedures to solve the selection bias, and used weighted least squares to solve heteroskedasticity in the wage and hour equations. The instrumental variable (IV) method was used to avoid simultaneity bias in the hour equation. Findings - This paper found the restrictions enforced by law on working hours have negative effects on employees’ working conditions in certain industries in Taiwan. After controlling the working hours, we found the wages paid to women and men have increased subsequent to the enforcement of law. However, compared to men the net wage earned by women has increased to a lesser extent. It was further observed that with enactment of work‐sharing law, the employment rate of women has considerably declined since 2001. Main findings assimilating the results for hour, wage and full‐time employment suggest that a country like Taiwan (with work‐sharing arrangements implemented by law) has witnessed a smaller gap between women's and men's working time and wages during 2001‐2002. However, for the period of 2003‐2006 the amendment that introduced compressed work week brought a larger gender gap in working hours as well as wages. In other words, the implementation of work‐sharing law has reduced the gender gap in hours and wages during 2001‐2002, but the prevailing gender gap in hours as well as wages has worsened after the introduction of compressed work week during 2003‐2006. Practical implications - An in‐depth analysis of labor market effects of work‐sharing law will be useful for the policymakers, especially those interested in understanding the impact of their policies on labor market outcomes like wage, hour and employment, and finding out whether policies were effective at reducing the gender gap in given outcomes. Originality/value - Findings of the present study should not only provide the broad lessons for policymakers in Taiwan, but the results that have emerged from the country case study may be referred by other Asian countries who want to bring a change in working and employment conditions for their labor by implementing work‐sharing law.