TY - JOUR
T1 - Matching severance payments with worker losses in the Egyptian public sector
AU - Assaad, Ragui
PY - 1999
Y1 - 1999
N2 - Severance pay programs can reduce political opposition and minimize the social costs of labor redundancies. In Egypt, only voluntary programs are feasible because legal limitations preclude layoffs and strong organized labor groups oppose any weakening of job security protections. A common problem with voluntary severance programs, however, is that they tend to overpay workers relative to the welfare losses they experience from displacement. This article estimates the losses that public sector workers would incur if they were displaced from their jobs and simulates several voluntary severance schemes to determine how well the schemes match compensation payments to these estimated losses. It provides a fairly strong argument for looking at the structure of opportunity costs and wage profiles when designing severance programs. It shows that significant overpayment can be avoided by matching compensation payments to the expected losses of workers. It also provides a method for estimating these losses from standard labor force surveys that are available in most countries.
AB - Severance pay programs can reduce political opposition and minimize the social costs of labor redundancies. In Egypt, only voluntary programs are feasible because legal limitations preclude layoffs and strong organized labor groups oppose any weakening of job security protections. A common problem with voluntary severance programs, however, is that they tend to overpay workers relative to the welfare losses they experience from displacement. This article estimates the losses that public sector workers would incur if they were displaced from their jobs and simulates several voluntary severance schemes to determine how well the schemes match compensation payments to these estimated losses. It provides a fairly strong argument for looking at the structure of opportunity costs and wage profiles when designing severance programs. It shows that significant overpayment can be avoided by matching compensation payments to the expected losses of workers. It also provides a method for estimating these losses from standard labor force surveys that are available in most countries.
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U2 - 10.1093/wber/13.1.117
DO - 10.1093/wber/13.1.117
M3 - Article
AN - SCOPUS:0032866234
SN - 0258-6770
VL - 13
SP - 117
EP - 153
JO - World Bank Economic Review
JF - World Bank Economic Review
IS - 1
ER -