The Effect of Employment Protection on Worker Effort: Absenteeism during and after Probation

TLDR

Employment protection systems are believed to distort hiring and firing, yet their effect on worker behavior is poorly understood, and alternative explanations would predict a smooth absenteeism–tenure relationship rather than the observed discrete jump. The study investigates whether employment protection influences worker absenteeism using data from a large Italian bank. Weekly observations of 858 white‑collar employees hired between 1993 and 1995, who become protected after 12 weeks of tenure, were tracked for one year. Absenteeism, especially among men, rises sharply after protection is granted at the end of probation, indicating that employment protection causes higher absenteeism—a policy consequence largely overlooked in European debates.

Abstract

Employment protection systems are widely believed to generate distortions in firms' hiring and firing decisions. However, much less is known about the impact of these regulations on workers' behavior. In this paper we provide evidence on the latter question using data from a large Italian bank. Our analysis is based on weekly observations for 545 men and 313 females hired as white-collar workers between January 1993 and February 1995. These workers begin to be protected against firing only after the 12th week of tenure, and we observe them for one year. We show that—particularly for men—the number of days of absence per week increases significantly once employment protection is granted at the end of probation. This suggests that the provision of employment protection causes the increase in absenteeism. Alternative explanations based on career concerns or on learning about social norms would predict a smooth relationship between absenteeism and tenure instead of the observed discrete jump. This consequence of employment protection seems to have been neglected in European policy debates so far.