In this work, we analyze the effect of labour flexibility on productivity in the Andalusian hotel industry. For this purpose, we use the data obtained by the Quality, Productivity and Competitiveness in the Hospitality Industry for Andalusia project (PO7/SEJ-02889). Using a expanded version of the Cobb-Douglas production function, the model distinguishes two employment shares: full-time permanent (standard work) and temporary plus part-time employees (non-standard work).  Our results indicate that productivity in Andalusian hotels is lower the higher the percentage of temporary and part-time workers. Furthermore, there are no statistically significant differences between the negative impact on productivity of both types of labour contract. However, since the costs associated with both temporary and part-time workers are lower than those of workers with full-time permanent contracts, future studies should analyze the differential impact of all the types of contracts discussed on the mean cost per employee in hotels.Universidad de Málaga. Campus de Excelencia Internacional Andalucía Tech

García-Pozo, Alejandro

López-Rubio, José

Marchante-Mera, Andrés Jesús

Sanchez-Ollero, Jose Luis

English

Sánchez-Ollero, José Luis

Repositorio Institucional Universidad de Málaga

EFFECT OF LABOUR FLEXIBILITY ON PRODUCTIVITY IN THE ANDALUSIAN HOTEL INDUSTRY Ph.D. Alejandro García-Pozo a  Ph.D. Andrés Marchante-Mera b  Ph.D. José López Rubio c Ph.D. José Luis Sánchez-Ollerod (corresponding author) University of Malaga  a,b,c Department of Applied Economics  Faculty of Economics & Business Studies C/ El Ejido nº 6.  PO 29071, Malaga, Spain.  a E-mail: alegarcía@uma.es Tel.: +34 952131180 b E-mail: marchante@uma.es Tel.: +34 952131179  c E-mail: jlopezr@uma.es Tel.: +34 952131180  dE-mail: jlsanchez@uma.es Tel.: +34 952131178  Fax: +34 952136616  ABSTRACT In this paper, we analyze the effect of labour flexibility on productivity in the Andalusian hotel industry. For this purpose, we use the results from the Quality, Productivity and Competitiveness in the Hospitality Industry for Andalusia project (PO7/SEJ-02889). The model used distinguishes three employment shares: open-ended contracts, temporary contracts, and part-time contracts. However, it should be borne in mind that the Spanish model of labour flexibility has mainly focused on the use of temporary contracts rather than other human resource management practices, such as internal labour flexibility (Dolado et al., 2002). Temporary contracts would have positive effects on the Spanish economy, where permanent workers have high levels of employment protection (Ortega and Marchante, 2010). Following Booth et al. (2002a), temporary contracts can provide a mechanism that enhances labour market flexibility, since firms can adjust their workforces by varying the number of temporary workers. The use of temporary contracts can also provide the firm with new workers who are employed for a specific probation period in order to test whether they are suitable for an open-ended job. This type of employment can have a positive impact on the firm’s performance if temporary workers perceive that the probability of rehiring depends on their aptitude and work effort. Moreover, temporary contracts may provide the firm with workers who replace staff on leave due to maternity, sickness, and so on. This is needed particularly in the service industries, where there is a strong requirement to meet certain standards. These contracts may also encourage entrepreneurship and business start-up by reducing the fixed costs of recruitment, training, and redundancy by using agencies (Green, 2008).  Thus, it is accepted that temporary contracts, whose main distinguishing feature is that they reduce labour costs compared to other types of contract, have led to the creation of jobs, mainly in those economic sectors in which productivity is lower and there is high employee turnover. However, it is also noteworthy that the use of temporary contracts has had a negative impact on both job security and incentives to accumulate human capital and, consequently, on increasing productivity. On the other hand, a linear relationship does not exist between employee turnover and productivity. When labour turnover is low, productivity will also be low, because the efficient reallocation of the productive factor would occur more slowly, from jobs with lower productivity to those with higher productivity. Conversely, if labour turnover is very high it would discourage both workers and employers to invest in training, thus making the accumulation of human capital more difficult. Therefore, temporary contracts would have marked effects on worker productivity due to their impact on job turnover. Research on the effects of part-time work on firm productivity is scarce, and theoretical predictions are ambiguous regarding the expected effects (Nelen et al., 2009). On the one hand, human capital theory suggests that there is a negative relationship between part-time employment and labour productivity. The reason behind this, as already noted, is the low incentive for part-time workers to invest in human capital, which leads to these workers under-performing in terms of productivity compared to full-time workers (Manning and Petrongolo, 2008). On the other hand, hiring part-time workers could be beneficial to the productivity of the company in the event that the hours worked by these employees are more than those established in their contracts or when consumer demand is concentrated in specific certain peak hours (Delsen, 2006; Rosendaal, 2003). THEORETICAL MODEL We extend the standard production function by distinguishing between part-time, temporary, and full-time labour inputs. We follow Nelen et al. (2009) and Ilmakunnas and Maliranta (2005) in the way they model the productivity effects of different employment shares. This so-called share-approach to including heterogeneous labour inputs assumes that different types of employees are perfect substitutes, but may have different marginal productivities. We divide the workforce into three employment shares: part-time (PT), full-time permanent (FT), and temporary employees (TE). Taking the full-time permanent contracts as our reference group, and scaling its productivity to one, the relative productivity of the part-time employment share equals (ϓpt-1) and the relative productivity of the temporary employment share equals (ϓte-1). The quality-adjusted labour input is therefore: L*= L[1+(ϓpt-1)PT+ (ϓte-1)TE]     (1) Equation 1 can be simplified using the following expression: Ln [1+(ϓpt-1)PT+ (ϓte-1)TE]  <> (ϓpt-1)PT+ (ϓte-1)TE        (2) The part-time and temporary employment shares are thereby directly included in a log-form production function. Using the quality-adjusted labour input ( ), the production function is written as follows: Y = AKαL*β                                                                      (3) or in logs and using the expression in equation 2: ln(Y) = ϕ+αln(K)+βln(L)+ϓ*ptPT+ϓ*teTE                     (4) where  ϕ=ln(A); ϓ*ptPT =β(ϓpt-1) and ϓ*te= β (ϓte-1) DATABASE The database was created as part of the Quality, Productivity and Competitiveness in the Hospitality Industry for Andalusia project (PO7/SEJ-02889). It includes representative parameters from 232 Andalusian hotels (96 rated as 3 star, 126 as 4 star, and 10 as 5 star) offering a total of 64,036 beds representing 34.99% of the total beds offered by these types of establishments in Andalusia at the end of 2009. These parameters were obtained from semi-structured questionnaires administered to the hotel managers by the researchers. According to SIMA (the Multiterritorial Information System of Andalusia), which was created by the Institute of Statistics and Cartography of Andalusia, there were a total of 822 establishments in these categories in Andalusia in 2009, and thus the database provides direct information on 28.2% of all hotels in the region. Given that Andalusia is very large, we took the distribution of the sample into account bearing in mind the relative importance of the hotel sector in each province. In addition, we included control variables to identify establishments according to their location (coastal, inland, or capital city)i and other control variables that reflect the establishments' structural and management characteristics. The fieldwork for the study was conducted in person by researchers from the universities of Malaga, Granada, and Seville in 2010. The economic data was obtained directly via questionnaires and the annual accounts filed by firms in the Mercantile Registryii. A directory of the hotels to be surveyed was created using the Turespaña Hotel Guide, which lists certified hotels published by the local government of Andalusia (i.e. the Junta de Andalucía) and Camerdataiii. After discarding the questionnaires that had not been correctly completed, the final sample consisted of 181 hotels.  RESULTS Our results indicate that productivity in Andalusian hotels is lower the higher the percentage of temporary and part-time workers. Furthermore, there are no statistically significant differences between the negative impact on productivity of both types of labour contract. However, since the costs associated with both temporary and part-time workers are lower than those of workers with full-time permanent contracts, future studies should analyze the differential impact of all the types of contracts discussed on the mean cost per employee in hotels. REFERENCES Booth, A.L., Dolado, J.J. and Frank, J. (2002): “Symposium on temporary work. Introduction”, The Economic Journal, Vol. 112, No. 480, pp. F181–F188. Delsen, L. E. (2006): Operating hours and working time: a survey of capacity utilisation and employment in the European Union, Springer Press, New York. Dolado, J.J., García-Serrano, C. and Jimeno, J.F. (2002): “Drawing lesson from the boom of temporary jobs in Spain”, The Economic Journal, Vol. 112, No. 480, pp. F270–F295. Green, F. (2008): “Temporary work and insecurity in Britain: a problem solved?”, Social Indicators Research, Vol. 88, pp. 147–160. Ilmakunnas, P. and Maliranta, M. (2005): “Technology, Labour Characteristics and Wage-productivity Gaps", Oxford Bulletin of Economics and Statistics, Vol. 67, No. 5, pp. 623-645. Manning, A. and Petrongolo, B. (2008): “The part-time pay penalty for women in Britain", The Economic Journal, Vol. 118, No. 526, pp. F28-F51. Nelen, A., De Grip, A., and Fourage, D. (2009): “Does part-time employment affect firm productivity”, Occasional Paper Series, Research Centre for Education and the Labor Market, Maastricht University, The Netherlands. Ortega, B. and Marchante, A.J. (2010): “Temporary contracts and labour productivity in Spain: a sectoral analysis”, Journal of Productivity Analysis, Vol. 34, pp. 199-212. Rosendaal, B. (2003): “Dealing with Part-time Work", Personnel Review, Vol. 32, No. 4, pp. 474-491.                                                             i Of the 8 Andalusian provinces, four (Almería, Málaga, Cádiz, and Huelva) have capital cities on the coast. In such cases, the establishments have been classified as being located in a capital city rather than on the coast. ii In Spain, firms are required to file their annual financial accounts in the Mercantile Registry, thus making them  an important source of reliable data on Spanish firms. iii Camerdata SA, created in 1985 by the Spanish Chamber of Commerce, is a pioneering company in creating business databases that include the censuses of all Spanish Chambers of Commerce. It also has a permanent program that ensures that the national census is fully updated at least once a year using data from all Chambers of Commerce. This database is complemented by data from other sources or public media, such as the Mercantile Registry. This source was also used to verify which hotels in Andalusia are still currently operating. 

Effect of labour flexibility on productivity in the andalusian hotel industry

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Effect of labour flexibility on productivity in the andalusian hotel industry

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