Operationalization of Employment Protection Legislation and Implications for Substantive Results: Example of Perceived Job Insecurity and Temporary Employment Risk

Abstract

Almost all comparative research on the effects of employment protection legislation of regular employees (EPLR) is based on the index of the OECD. This study argues that this index is methodologically flawed and proposes a new EPLR index, following a theory-driven formative index construction approach. To demonstrate the implications using the OECD EPLR index versus the new index, we use two empirical applications: First, the effects of EPLR on perceived job insecurity, using multi-level models with data from the European Social Survey, the European Working Condition Survey, and the European Quality of Life Survey. Secondly the temporary employment risk for new hires, using multi-level models with data from the European Labour Force Survey. Whereas the results based on the OECD EPLR index significantly deviate from the hypotheses in the literature, the results using the new EPLR index is compliant with the hypotheses in the literature. This demonstrates higher criterion validity of the theory-driven new EPLR index and also calls for replications of previous research that is based on the index of the OECD.