The Effects of Minimum Working Hours: Theory and Evidence

This paper studies how firms respond to the implementation of a floor for hours of work. In 2014, the French government introduced a minimum work week of 24 hours in order to reduce involuntary part time employment. As a result, a job with less than 24 hours per week cannot be created unless the worker asks explicitly for that. First, I rely on linked employer-employee data and an event study design to assess the employment effects of the policy. I find that the reform reduced both hires and the number of workers in the firm (negative extensive margin effect) and increased average hours worked (positive intensive margin effect). The latter comes from an increase in the number of full-time workers rather than part-time workers above 24 hours. Overall, total hours worked in the firm decreased significantly. Second, I find that the negative effect on employment is two times larger for women as compared to men. This results from both a strong decrease in part time employment for women and a stronger increase in full time employment for men. These findings suggest that firms tend to substitute men working full time for women working less than 24 hours. Reduced-form evidence also indicates that men benefited from indirect reallocation effects while these effects are close to zero for women. Third, I rely on a structural model in order to account for the indirect effects induced by the regulation and to quantify the macroeconomic impact of the reform. I build a search and matching model with heterogeneous workers and heterogeneous large firms. The framework allows for within- and between-firm heterogeneity in hours worked. The model predicts positive general equilibrium effects on employment and reallocation patterns that benefit more to men.