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Job Loss and the Fraying of the Implicit Employment Contract

Job Loss and the Fraying of the Implicit Employment Contract Abstract Most workers have one employment contract that is explicit and another one that is implicit. The explicit employment contract specifies working hours, compensation, and job tasks. The implicit contract involves expectations about the extent to which the employment relationship is likely to continue over time. Will the firms will seek to avoid mass layoffs unless or until absolutely necessary? Will firms cushion the wages and compensation of employees to some extent from broad swings in the economy? Will employees show some degree of loyalty to the firm? This paper will argue that, along a number of dimensions, the nature of the worker–firm employment relationship may have changed substantially in recent years—a group of changes that as a whole have negatively affected the lives of workers and produced modest, if any, benefits for firms. If employers have become less involved with cushioning the blow of unemployment and avoiding layoffs where possible, then public policy might have a role to play in spreading the burden of a down labor market so that the burden is not borne so heavily by those who lose their jobs entirely. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economic Perspectives American Economic Association

Job Loss and the Fraying of the Implicit Employment Contract

Journal of Economic Perspectives , Volume 23 (4) – Nov 1, 2009

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Publisher
American Economic Association
Copyright
Copyright © 2009 by the American Economic Association
Subject
Symposia
ISSN
0895-3309
DOI
10.1257/jep.23.4.69
Publisher site
See Article on Publisher Site

Abstract

Abstract Most workers have one employment contract that is explicit and another one that is implicit. The explicit employment contract specifies working hours, compensation, and job tasks. The implicit contract involves expectations about the extent to which the employment relationship is likely to continue over time. Will the firms will seek to avoid mass layoffs unless or until absolutely necessary? Will firms cushion the wages and compensation of employees to some extent from broad swings in the economy? Will employees show some degree of loyalty to the firm? This paper will argue that, along a number of dimensions, the nature of the worker–firm employment relationship may have changed substantially in recent years—a group of changes that as a whole have negatively affected the lives of workers and produced modest, if any, benefits for firms. If employers have become less involved with cushioning the blow of unemployment and avoiding layoffs where possible, then public policy might have a role to play in spreading the burden of a down labor market so that the burden is not borne so heavily by those who lose their jobs entirely.

Journal

Journal of Economic PerspectivesAmerican Economic Association

Published: Nov 1, 2009

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