How policies shape workers’ perceptions of job security

by Lena Hipp

What can national governments do to help workers feel secure in their jobs? This question is vital for both individuals and organizations. Workers who believe that their jobs are endangered (even if they actually are not) suffer from poor health and are less happy than workers who feel economically secure; organizations have to deal with decreased loyalty, reduced organizational commitment, and elevated turnover rates.

All of this harms the economy.

Governments and organizations need to understand the forces that make workers confident about their economic future in order to design effective policies. In a recent study of 23 countries I analyzed the relationship between national-level policies and workers’ perceived job and labor market security.

In this study, I distinguished between different dimensions of job security: Workers may feel confident about keeping their jobs (cognitive job security) but not about finding a new job of comparable quality (perceived labor market security) or they may be worried about losing their job (affective job security) because they cannot  afford to be laid-off. These dimensions are related, but do not necessarily overlap. If workers feel confident about keeping their jobs, they may not be worried about job loss. Likewise, if they are confident that they will easily find a new job, they may also not be worried about unemployment — even if they are not confident about staying with their current employer.

The degree to which workers believe that their job is secure or that they are worried about their job considerably varies across countries. One way to explain this variation is to by examining differences in the legal protection workers have against job loss and the financial support they will get in that case.

First, workers should be more confident about keeping their jobs if it is harder for their employers to fire them (e.g., because employers have to follow certain legal procedures if they want to terminate an employment contract). This should reduce the probability of job loss and workers should hence feel more secure. Second, workers should be less worried about job loss when it is not associated with devastating material consequences (e.g., because they are supported by cash benefits, placement services, or training in case of unemployment). All of these reduce the costs of job loss and should, in turn, result in workers being less afraid of termination.

As expected, my analyses show that workers are less worried when they think that it is unlikely that they will be fired or when they are confident that they will easily find a job equally as good as their current one. Moreover, I find that they are more worried if unemployment is high but less worried about job loss when they live in a country that provides generous unemployment assistance in case of job loss.

Not surprisingly, my study also shows workers are more confident about finding a new job when unemployment is low. However, in contrast to the wide-spread belief that labor market regulation is bad for workers’ labor market chances, I do not find that workers in countries with stringent dismissal protection are less optimistic about finding a new job than workers in countries where employers can easily dismiss workers (as is the case in the US). Instead, my results show that the better the support that unemployed individuals receive in case of job loss, in form of unemployment payments, training, wage subsidies, or counseling, the more confident they are that they will easily find another job of comparable quality.

My most surprising finding is that stringent dismissal protection does not necessarily make workers feel more confident about keeping their jobs. Only workers in countries that have high dismissal protection and in which a larger proportion of workers are employed on a temporary basis are actually more likely to believe that their jobs are secure. It seems to be the comparison with others who have much lower levels of protections that make workers confident about keeping their jobs.

In sum, unemployment assistance seems to be an effective means of increasing workers’ confidence regarding their economic future, while dismissal protection apparently only has a psychologically protective effect under certain conditions.

Put more generally, policies that reduce the severity of an undesirable event seem to be more effective in instilling confidence and positive expectations than policies aimed at reducing the likelihood of the occurrence of that event. Policy makers can use the findings of my analyses to evaluate existing labor market policies and to develop new ones that ensure workers feel secure about their economic future. In particular, they are well advised to provide workers with financial safeguards, placement services, and training in case of job loss.

Lena Hipp is head of the research group “Work and Care” at the WZB Berlin Social Science Center. This article is summarizes findings from “Insecure times? Workers’ perceived job and labor market security in 23 OECD countries” in Social Science Research.

Image: Wiros via Wikimedia Commons (CC BY-SA 2.0)