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3. Data
The data used to analyze the impact of implementation of Labor Pension Act (LPA) on layoff are drawn from the Manpower Utilization Quasi-longitudinal Survey (MUQLS). MUQLS is constructed from the Manpower Utilization Surveys (MUS) of Taiwan by linking the overlapping observations for two consecutive years. And MUS, which is a cross-sectional database, was started in 1978 and is administered in May each year.
MUS provides a lot of information such as workplace, occupation, income and job seniority which can be used when analyzing human resources related topics.
Therefore, MUQLS generated from MUS does not only let individual observations become repeatedly observable but also provide more valuable information.
As described in Section 1, employees not covered by the Labor Standards Act (LSA) are treated as the reference group for applying the difference in differences method. However, information from MUQLS does not directly tell us whether an employee is covered by LSA. Therefore, it is necessary to formulate some classification rules to specify which group the employee belongs to.
According to the latest regulations announced by the Council of Labor Affairs, industries and occupations listed in Table A1 are not covered under LSA.
Classification as treatment group and reference group is according to this information.
However, some industries or occupations listed in Table A1 cannot be easily defined to match with occupations mentioned in MUQLS. For example, employees hired in private schools are not applicable to LSA; instead, they are protected by the Private School Law. And, unfortunately, MUQLS takes all education related jobs as one occupation, making the classification difficult to execute. Therefore, both subjective and objective classification rules are required for classification. Table A2
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lists all classification rules used to specify which groups do the occupations mentioned in MUQLS belong to.
Basically, there are three objective classification rules, linkages of industries, occupations and sectors of employer. The first two are straightforward and provide most of the necessary information to execute the classification. However, some kinds of occupations are not applicable to LSA only if the employer is a public sector organization. For example, employees hired in hospitals (except for doctors and some crafts, blue collar and menials) are not covered by LSA only when the hospitals belong to the public sector. Thus, knowing the sectors of employers can help divide the employees into treatment group and reference group more accurately in such kinds of situations.
When information provided from objective classification rules is not sufficient for classification, some subjective classification rules are required. In general, the level of income and scale of the workplace can be helpful when classifying some kinds of jobs. For example, doctors, lawyers and accountants are the jobs which have relatively higher incomes. Hence, using the general standard level of income for such jobs can be an appropriate way to distinguish them from the relatively low-skilled jobs in the same industries.
Information of the scale of workplace is also useful for distinguishing jobs which belong to the same industry but are different in terms of the scale of workplace. For example, it is difficult to segregate employees in private schools from a relatively rough classification of occupations such as the education industry. Moreover, employees in cram schools are covered by LSA but the corresponding information makes it hard to distinguish them from those hired in private schools. However, despite both being education-related jobs in private sector, private schools generally hire more employees than cram schools. As a result, setting an appropriate interval of
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the scale for private schools could be a reasonable way to define employees of private schools.
Still some industries or occupations need to be eliminated due to the movement from being not covered by LSA to coverage under LSA because of the policy change.
For example, employees hired in labor unions were originally not covered under the Labor Standards Act earlier but LSA became applicable to them after 1 December in 2003. To assure the accuracy of difference in differences model (see Section 4 for details), it is necessary to eliminate such kinds of observations so that the composition of the treatment group and the reference group remains unchanged. Table A3 lists all such industries and occupations with corresponding classification rules, which are the same as the rules used in Table A2.1
After completing the classification for the treatment group and the reference group, as well as the elimination of inconsistent observations, laid off employees need to be defined. As mentioned above, MUQLS is a repeated cross-sectional database where each employee can be regarded as having been investigated twice, in two consecutive years. Therefore, whether an employee has been laid off or not depends on the information in the second observation year; information from the first observation year is used to control the individual characteristics.
The MUQLS asked two important questions to respondents, related to the state of employment. The first asks about the number of times the respondent had changed jobs in the last year. The second asks about the reasons for changing the job if the employee did change job in the last year. Moreover, possible reasons listed in response to the second question include voluntary reasons such as “salary is not fair”,
“workplace environment is not ideal”, “no prospects”, “lack of job security” and
1 After eliminating all inconsistent observations, on average, there are about 7000 employees covered by LSA and about 800 employees to whom LSA is not applicable, in each year.
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involuntary reasons such as “business contractions”, “shutdown” , “personnel adjustment”, “marriage or birth”, “retirement”, etc.
According to the Labor Standards Act, layoff caused by situations such as
“businesses are suspended”, “business contractions”, “terminated employees due to the change of nature of business cannot be transferred to proper positions” require the employer to pay severance pay. As a result, by combining the information from MUQLS and the definition from the Labor Standards Act, laid off employees can be defined. And here is the definition: laid off employees are employees who have ever been laid off in the last year due to business recession, shutdown or personnel adjustment.
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