Business Cycles and Employment Dynamic in France

Flows on the labor market depend on business cycle. During recessions, two opposite trends are at work: an increase in involuntary movements (because of a rise in ends of fixed-term contracts and lay-offs) and a decrease in voluntary movements (fall in resignations because employees have less opportunities to move and fear unemployment). On the contrary, during periods of growth, employees are more likely to quit their job for outside opportunities.

Next to such a macroeconomic perspective, we propose to study the link between business cycle and job flows at the firm level. We want to study the firms’ labour force adjustment strategies to the business cycle and to their performance. Firm’s employment dynamic is the core of the creative destruction process. It is therefore important to analyse which are the firms which create or destroy jobs – small or large firms? Young or old firms? – and at which stages of the business cycle ?

To our knowledge, there are very few results on the effect of firm performance on job flows in France. Yet this could allow to better understand the effects of the economic crisis on employment and its variable impact on different categories of workers : when they experience downturn, do firm adjust their workforce by reducing inflows or increasing outflows of employees ? To what extent and by which types of hiring and separations? And which categories of workers (younger or older workers, men or women, etc.) are particularly concerned by these adjustments?

The analysis is conducted using French EMMO/DMMO data over the period 1985-2010 (which describe worker flows in and out of establishments). The first dataset (EMMO) is a survey at establishment level for establishments between 10 and 49 employees. The second dataset (DMMO) is exhaustive for establishments with 50 employees or more.

Our first results are consistent with the literature: the youngest firms (less than one year of existence) have a better job growth rate than the older ones and hire employees on temporary contracts. And this difference between young and old firm is more important when the conjuncture is bad.