The effect of trial periods in employment on firm hiring behavior

Isabelle Sin; Nathan Chappell

doi:10.2478/izajolp-2020-0009

Figures & Tables

Theoretical prediction of trial period policy impact on whether to hire.Notes: Area A represents μ-σ combinations such that the applicant will not be hired whether or not trial periods are available; applicants in area B will be hired only when trial periods are available and then will be hired with a trial period; applicants in area C will be hired regardless of trial period legislation and hired on a trial period when available; and applicants in area D will always be hired and never with a trial period. A value of 0.5 is used for the cost of using trial periods, and the discount rate is δ = 0.1.

Theoretical prediction of trial period policy, heterogeneous effects.Notes: This figure shows how the effects of trial period policy differ for firms with different discount rates. The blue lines (dashed and solid) denote a discount rate of 0.1, and the red lines (dash-dotted and dotted) denote a discount rate of 0.4. See further notes in Figure 1.

Substitution toward riskier applicants with trial periods.Notes: This figure compares applicant a, with expected profitability of 0.5 and a standard deviation of profitability of 0.5, with applicant b, whose μ and σ are plotted on the two axes. Area A gives the μ-σ combinations for applicant b such that applicant a is hired regardless of whether trial periods are available; area B gives the combination such that applicant a is hired when trial periods are not available and applicant b is hired when trial periods are available; and area C gives the combinations such that applicant b is hired regardless of whether trial periods are available. The equation comes from the theoretical model in Section 3.2. A value of 0.5 is used for the cost of using trial periods, and the discount rate is δ = 0.1.

New hires as a percentage of total employees by firm size.Notes: Values are 3-month moving averages. Vertical gray lines indicate the policy changes.

Time-varying estimate of policy effect on number of new hires.Notes: This figure plots the point estimate and 95% confidence interval of the coefficient on date*small firm in a regression that replicates column 4 in Panel A of Table A1 in Appendix, but allows the difference between small and large firms to vary each 3-month period.

Policy effect on the number of new hires, varying firm sizes included

Dependent variable		Number of new hires
Firm sizes included:	18–21	17–22	16–23	15–24	10–50
*Between small firm**	0.008	0.009	0.009	0.008	0.012
	(0.019)	(0.017)	(0.015)	(0.014)	(0.009)
Post * small firm	-0.005	-0.002	0.003	0.000	0.010
	(0.017)	(0.015)	(0.014)	(0.013)	(0.010)
Small firm	-0.014	-0.000	-0.018	-0.014	-0.016*
	(0.016)	(0.013)	(0.012)	(0.011)	(0.009)
Observations	314,637	478,503	650,934	835,362	2,495,838

Firm sizes included:	17–18, 21–22	16–18, 21–23	15–18, 21–24	10–18, 21–50
*Between small firm**	0.030	0.024	0.019	0.016*
	(0.020)	(0.017)	(0.015)	(0.010)
Post * small firm	0.010	0.012	0.006	0.013
	(0.018)	(0.016)	(0.015)	(0.010)
Small firm	0.032	-0.032	-0.020	-0.019*
	(0.028)	(0.019)	(0.016)	(0.010)
Observations	322,119	494,553	678,978	2,339,457

Firm sizes included:	16–17, 22–23	15–17, 22–24	10–17, 22–50
*Between small firm**	0.009	0.006	0.014
	(0.020)	(0.017)	(0.010)
Post * small firm	0.008	0.001	0.013
	(0.019)	(0.017)	(0.010)
Small firm	-0.126***	-0.043*	-0.022*
	(0.039)	(0.025)	(0.012)
Observations	336,297	520,725	2,181,201

Substitution between trial periods and temporary contracts

Dependent variable	On temporary contract, 2012	On temporary contract, 2012	On trial period, 2012	On trial period, 2012	On temporary contract, 2008	On temporary contract, 2008
Predicted probability of temporary contract from 2008 data, parsimonious	1.156***		–1.436***
	(0.220)		(0.223)
Predicted probability of temporary contract from 2008 data, full controls		1.364***		–1.230***
Predicted probability of trial period from 2012 data, parsimonious		(0.151)		(0.147)	–0.270**
Predicted probability of trial period from 2012 data, full controls					(0.135)	–0.521***
						(0.086)
Year	2012	2012	2012	2012	2008	2008
Observations	2,397	2,385	2,397	2,385	1,686	1,686
R-Squared	0.014	0.043	0.015	0.025	0.003	0.023
Mean of dependent variable	0.207	0.207	0.376	0.375	0.200	0.200

Policy effect on long-term hires and employees moving between firms

Dependent variable	New hires who lasted 5+ months	New hires who were employed elsewhere previous month
*Between small firm**	0.006	-0.002
	(0.015)	(0.017)
Post * small firm	0.006	-0.003
	(0.014)	(0.015)
Small firm	-0.013	-0.016
	(0.012)	(0.013)
Firm size (ln)	1.000***	0.948***
	(0.037)	(0.041)
Month-in-year fixed effects	Yes	Yes
Calendar month * lvl 3 industry fixed effects	Yes	Yes
Observations	835,362	835,362
% of nonzero hires of given type	30.1%	29.8%

Policy effect for very small firms

Negative binomial regression
Dependent variable: Number of new hires
Between * size 1–4	-0.003
	(0.016)
Between * size 5–9	0.015
	(0.016)
Between * size 10–14	0.017
	(0.016)
Between * size 15–19	0.003
	(0.017)
Between * size 25–29	0.015
	(0.020)
Post * size 1–4	-0.013
	(0.014)
Post * size 5–9	-0.005
	(0.015)
Post * size 10–14	-0.014
	(0.015)
Post * size 15–19	-0.004
	(0.015)
Post * size 25–29	-0.028
	(0.018)
Observations	15,423,435
% of nonzero hires	15.9%

Policy effect on the distribution of employment duration of new hires

Dependent variable: Indicator for employment lasting at least	2 months	2 months	5 months	12 months	24 months
*Between small firm**	0.003	0.002	-0.002	-0.001	-0.002
	(0.002)	(0.002)	(0.003)	(0.002)	(0.002)
Post * small firm	0.007**	0.006**	0.000	-0.003	-0.001
	(0.003)	(0.003)	(0.004)	(0.003)	(0.003)
Small firm	-0.001	-0.003	-0.003	-0.001	-0.002
	(0.002)	(0.002)	(0.002)	(0.002)	(0.002)
Firm size (ln)	0.026***	0.014**	0.029***	0.025***	0.015***
	(0.006)	(0.006)	(0.008)	(0.007)	(0.005)
Plant size (ln)	-0.015***	-0.013***	-0.019***	-0.009***	-0.005***
	(0.001)	(0.001)	(0.002)	(0.001)	(0.001)
Age		0.013***	0.018***	0.015***	0.012***
		(0.000)	(0.000)	(0.000)	(0.000)
Age squared (per 100)		-0.015***	-0.020***	-0.016***	-0.012***
		(0.000)	(0.000)	(0.000)	(0.000)
Female		0.007***	0.006***	-0.006***	-0.011***
		(0.001)	(0.001)	(0.001)	(0.001)
On jobseeker benefit in previous year		-0.026***	-0.071***	-0.070***	-0.051***
		(0.002)	(0.002)	(0.002)	(0.001)
On sole parent benefit in previous year		-0.027***	-0.051***	-0.053***	-0.040***
		(0.003)	(0.003)	(0.003)	(0.002)
On supported living benefit in previous year		-0.056***	-0.090***	-0.082***	-0.056***
		(0.005)	(0.006)	(0.004)	(0.003)
On other benefit type in previous year		-0.031***	-0.055***	-0.055***	-0.035***
		(0.003)	(0.004)	(0.003)	(0.002)
Recent migrant		0.001	-0.033***	-0.040***	-0.032***
		(0.002)	(0.002)	(0.002)	(0.001)
No wage or salary income in previous year		0.017***	0.041***	0.045***	0.034***
		(0.001)	(0.002)	(0.001)	(0.001)
Worked at a different firm the previous month		0.015***	0.046***	0.055***	0.040***
		(0.001)	(0.001)	(0.001)	(0.001)
Maori		-0.012***	-0.028***	-0.027***	-0.020***
		(0.001)	(0.002)	(0.001)	(0.001)
Pasifika		-0.009***	-0.016***	-0.015***	-0.007***
		(0.002)	(0.002)	(0.002)	(0.002)
Asian		0.004*	0.007***	-0.002	-0.005***
		(0.002)	(0.002)	(0.002)	(0.002)
Other ethnicity		-0.006***	-0.012***	-0.010***	-0.008***
		(0.002)	(0.002)	(0.002)	(0.002)
Education leaver (in past year)		0.021***	0.027***	0.021***	0.009***
		(0.001)	(0.002)	(0.002)	(0.001)
Month-in-year fixed effects	Yes	Yes	Yes	Yes	Yes
Calendar month * lvl 3 industry fixed effects	Yes	Yes	Yes	Yes	Yes
Observations	723,084	671,073	671,073	671,073	671,073
% of hires of given type	76.8%	77.8%	48.3%	26.0%	14.2%
R-squared	0.118	0.125	0.146	0.123	0.099

Policy effect on the probability a new hire was a disadvantaged jobseeker

Dependent variable: Indicator for hire type	Beneficiary in past year	Jobseeker beneficiary in past year	Not worked in past year	Recent migrant	Under 25 years old	Maori or Pasifika under 25	Education leaver
*Between small firm**	0.003	0.003	0.004	–0.003	–0.003	–0.000	–0.001
	(0.003)	(0.002)	(0.003)	(0.004)	(0.004)	(0.002)	(0.002)
Post * small firm	0.005	0.003	0.005*	–0.001	0.003	0.001	0.002
	(0.003)	(0.002)	(0.003)	(0.004)	(0.004)	(0.002)	(0.002)
Small firm	–0.001	–0.001	–0.003	–0.004	0.003	–0.002	0.000
	(0.002)	(0.002)	(0.003)	(0.003)	(0.003)	(0.002)	(0.002)
Firm size (ln)	–0.002	0.001	–0.002	0.009	0.004	–0.004	0.002
	(0.007)	(0.006)	(0.008)	(0.010)	(0.009)	(0.006)	(0.005)
Plant size (ln)	–0.002	0.000	0.004*	0.001	0.013***	0.009***	–0.004***
	(0.002)	(0.002)	(0.002)	(0.003)	(0.003)	(0.002)	(0.001)
Month-in-year fixed effects	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Calendar month * 3-digit industry fixed effects	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Observations	893,292	893,292	893,292	893,292	890,352	890,352	770,415
% hires of given type	18.2	11.4	24.9	18.2	41.6	9.7	12.1
R-Squared	0.030	0.031	0.035	0.092	0.122	0.027	0.010

Test for parallel trends in the pre-announcement period

Dependent variable	Number of new hires
*Time trend small firm**	0.0002
	(0.0005)
Time trend	-0.0087
	(0.0054)
Small firm	-0.0143
	(0.0181)
Log of firm size	0.9632***
	(0.0448)
Calendar month * level 3 industry fixed effects	Yes
Observations	359,046

Heterogeneous policy effects on the probability a new hire was a disadvantaged jobseeker

Dependent variable: Indicator for hire type	Beneficiary in past year	Jobseeker beneficiary in past year	Not worked in past year	Recent mi-grant	Under 25 years old	Maori or Pasifika under 25 years old	Education leaver
Panel A: Trial period use, employee training, permanent contract use, and long-term jobs
*Between small firm * proportion of**	0.019	0.023	–0.058**	–0.028	0.001	–0.008	–0.046**
jobs starting on trial period	(0.023)	(0.019)	(0.026)	(0.022)	(0.028)	(0.018)	(0.020)
Post * small firm * proportion of jobs	0.048**	0.046***	–0.023	–0.075***	–0.012	0.010	–0.022
starting on trial period	(0.021)	(0.017)	(0.023)	(0.020)	(0.025)	(0.016)	(0.022)
Observations	873,837	873,837	873,837	873,837	870,972	873,837	754,212
Mean proportion of jobs in industry on a trial period	0.225	0.225	0.225	0.225	0.225	0.225	0.224

*Between small firm * proportion of**	–0.005	–0.007	–0.002	–0.062***	0.034	0.004	–0.012
jobs with no training	(0.017)	(0.014)	(0.019)	(0.017)	(0.021)	(0.013)	(0.015)
Post * small firm * proportion of jobs with	–0.004	0.002	–0.006	–0.042***	0.020	–0.002	–0.001
no employer-funded training	(0.016)	(0.013)	(0.018)	(0.015)	(0.019)	(0.012)	(0.017)
Observations	884,805	884,805	884,805	884,805	881,901	884,805	763,449
Mean proportion of jobs with no employer-funded training	0.744	0.744	0.744	0.744	0.744	0.744	0.743

*Between small firm * proportion of**	0.059	0.084**	0.031	0.185***	–0.035	0.019	–0.086**
jobs starting on permanent contract	(0.041)	(0.034)	(0.046)	(0.040)	(0.051)	(0.032)	(0.035)
Post * small firm * proportion of jobs	0.089**	0.062**	–0.010	0.094***	–0.039	0.055**	–0.076**
starting on permanent contract	(0.036)	(0.029)	(0.040)	(0.035)	(0.044)	(0.027)	(0.038)
Observations	884,805	884,805	884,805	884,805	881,901	884,805	763,449
Mean proportion of jobs starting on permanent contract	0.891	0.891	0.891	0.891	0.891	0.891	0.891

*Between small firm * proportion of**	0.033**	0.041***	–0.008	0.053***	–0.020	0.013	–0.013
jobs lasting 5+ months	(0.015)	(0.012)	(0.017)	(0.014)	(0.018)	(0.011)	(0.013)
Post * small firm * proportion of jobs	0.045***	0.031***	0.011	0.013	–0.029*	0.019*	–0.018
lasting 5+ months	(0.013)	(0.011)	(0.015)	(0.013)	(0.016)	(0.010)	(0.014)
Observations	893,259	893,259	893,259	893,259	890,319	893,259	770,415
Mean proportion of jobs lasting 5+ months	0.448	0.448	0.448	0.448	0.448	0.448	0.449

Panel B: Seasonality and firm growth

*Between small firm * seasonality of**	–0.003	–0.007*	0.001	–0.001	–0.000	–0.001	0.006
industry	(0.005)	(0.004)	(0.005)	(0.004)	(0.006)	(0.004)	(0.004)
Post * small firm * seasonality of industry	–0.010**	–0.008**	0.002	0.009**	–0.002	–0.005*	0.008**
	(0.004)	(0.003)	(0.005)	(0.004)	(0.005)	(0.003)	(0.004)
Observations	893,040	893,040	893,040	893,040	890,100	893,040	770,241
Mean seasonality of industry	1.578	1.578	1.578	1.578	1.578	1.578	1.578
Standard deviation of seasonality of industry	0.472	0.472	0.472	0.472	0.472	0.472	0.472

*Between small firm * firm growth over**	–0.000	–0.001	0.005**	–0.003*	–0.001	–0.001	–0.000
previous 12 months	(0.002)	(0.002)	(0.002)	(0.002)	(0.002)	(0.001)	(0.002)
Post * small firm * recent firm growth	0.005**	0.003*	0.004*	–0.001	0.003	–0.000	0.001
	(0.002)	(0.002)	(0.002)	(0.002)	(0.003)	(0.002)	(0.002)
Observations	720,147	720,147	720,147	720,147	717,873	720,147	605,694
Mean firm growth over previous 12 months	0.198	0.198	0.198	0.198	0.198	0.198	0.195
Standard deviation of Firm growth over previous 12 months	1.386	1.386	1.386	1.386	1.382	1.386	1.417

Distribution of employment and hiring over firm sizes

Firm size category	Firms with 0–14 employees	Firms with 15–19 employees	Firms with 20–24 employees	Firms with 25+ employees
Average employment (employee–firm matches)	570,100	80,500	59,400	1,363,000
% of total employment	27.5%	3.9%	2.9%	65.8%
Average number of firms employing in a month	135,734	4,803	2,723	9,278
% of total firm months	89.0%	3.1%	1.8%	6.1%
Count of all hires	6,611,700	799,500	590,900	8,796,100
% of all hires	39.4%	4.8%	3.5%	52.4%
Count of new hires	3,948,500	512,100	381,200	5,439,200
% of new hires	38.4%	5.0%	3.7%	52.9%

Policy effect on the total number of new hires, robustness checks

Robustness check	Excluding anomalous industries	Excluding firm months with extremely high hiring	Measuring firm size excluding all working proprietors	Interact small firm with GDP	OLS regression	OLS regression	OLS regression

Dependent variable	Number of new hires	Number of new hires	Number of new hires	Number of new hires	Dummy for any new hires	Log (new hires +1)	Percentage change in employment (%)
*Between small firm**	0.018	0.012	0.005	0.016	0.006	0.019***	–0.093
	(0.015)	(0.012)	(0.012)	(0.017)	(0.004)	(0.005)	(0.093)
Post * small firm	0.006	0.001	0.002	0.010	0.004	0.013***	0.021
	(0.014)	(0.011)	(0.012)	(0.024)	(0.004)	(0.005)	(0.083)
Small firm	–0.021*	0.001	–0.008	0.023	–0.002	–0.011***	–0.045
	(0.012)	(0.009)	(0.010)	(0.082)	(0.003)	(0.004)	(0.083)
Firm size (ln)	0.952***	1.023***	0.941***	0.930***	0.258***	0.359***	–0.360
	(0.036)	(0.028)	(0.030)	(0.034)	(0.009)	(0.011)	(0.236)
Month-in-year fixed effects	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Calendar month * 3-digit industry fixed effects	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Small firmquarterly GDP interaction Observations*	781,725	827,883	810,189	Yes835,362	835,362	835,362	824,547
% with nonzero-dependent variable	45.8%	46.1%	61.6%	46.6%	46.6%	46.6%	62.6%

Policy effect on the distribution of employment duration of different hire types

Dependent variable: Indicator for employment lasting at least:	2 months	5 months	12 months	24 months
Panel A: Beneficiaries, jobseekers, nonworkers, and migrants
Recent beneficiary hires
*Between small firm**	-0.002	-0.002	-0.001	-0.001
	(0.005)	(0.006)	(0.005)	(0.004)
Post * small firm	0.006	-0.008	-0.012*	-0.005
	(0.007)	(0.008)	(0.007)	(0.005)
Small firm	-0.002	0.004	0.005	0.002
	(0.005)	(0.006)	(0.005)	(0.003)
Observations	129,507	129,507	129,507	129,507

Recent jobseeker hires
*Between small firm**	-0.001	-0.004	0.004	0.003
	(0.007)	(0.008)	(0.006)	(0.005)
Post * small firm	0.002	-0.013	-0.010	-0.008
	(0.008)	(0.010)	(0.008)	(0.006)
Small firm	0.005	0.009	0.006	0.007
	(0.006)	(0.007)	(0.006)	(0.004)
Observations	80,904	80,904	80,904	80,904

Recent nonworking hires
*Between small firm**	-0.000	-0.003	-0.002	-0.002
	(0.005)	(0.006)	(0.005)	(0.004)
Post * small firm	0.010	0.001	-0.009	-0.005
	(0.006)	(0.007)	(0.007)	(0.005)
Small firm	-0.002	-0.006	0.003	0.000
	(0.004)	(0.005)	(0.005)	(0.004)
Observations	147,909	147,909	147,909	147,909

Recent migrant hires
*Between small firm**	0.004	0.003	-0.007	-0.005
	(0.006)	(0.008)	(0.006)	(0.005)
Post * small firm	-0.002	-0.015	-0.018**	-0.013**
	(0.008)	(0.010)	(0.008)	(0.007)
Small firm	0.002	0.008	0.012**	0.009**
	(0.006)	(0.007)	(0.006)	(0.005)
Observations	84,780	84,780	84,780	84,780

Panel B: Youth, young Māori and Pasifika, and education-leaver hires
Young (under 25 years) hires
*Between small firm**	0.007*	-0.001	0.001	-0.002
	(0.004)	(0.004)	(0.004)	(0.003)
Post * small firm	0.005	-0.003	-0.005	-0.005
	(0.005)	(0.006)	(0.005)	(0.004)
Small firm	-0.005	-0.001	-0.003	0.000
	(0.003)	(0.004)	(0.003)	(0.002)
Observations	274,461	274,461	274,461	274,461

Young Māori and Pasifika hires
*Between small firm**	0.007	-0.003	-0.000	0.004
	(0.008)	(0.009)	(0.007)	(0.005)
Post * small firm	-0.005	-0.014	-0.009	-0.009
	(0.010)	(0.012)	(0.009)	(0.007)
Small firm	0.004	0.003	-0.006	0.001
	(0.007)	(0.008)	(0.006)	(0.004)
Observations	70,128	70,128	70,128	70,128

Recent education-leaver hires
*Between small firm**	0.004	-0.004	0.004	-0.001
	(0.006)	(0.008)	(0.007)	(0.006)
Post * small firm	0.003	-0.013	-0.013	-0.001
	(0.008)	(0.010)	(0.009)	(0.007)
Small firm	-0.008	0.006	0.004	-0.001
	(0.006)	(0.007)	(0.006)	(0.005)
Observations	87,813	87,813	87,813	87,813

Distribution of contract type for new hires in 2012

Type of contract	Permanent contract with a trial period (%)	Permanent contract without a trial period (%)	Temporary contract (%)
% of new hires	37.6	41.7	20.7

Descriptive statistics for treatment and control firms by period

	Firms with 15–19 employees			Firms with 20–24 employees
Period relative to policy changes	Pre	Between	Post	Pre	Between	Post
Average number of firms employing each month	4,884	4,710	4,753	2,754	2,648	2,733
Average firm size	16.8	16.8	16.8	21.8	21.8	21.8
% of firms with multiple plants	13.8%	13.7%	13.3%	17.7%	18.0%	16.8%
% of firm months hiring anyone	60.6%	54.0%	55.7%	67.6%	61.4%	62.8%
% of firm months hiring a nonseasonal employee	49.1%	42.2%	44.2%	56.4%	49.2%	51.1%
% of firm months hiring a new employee	47.3%	40.0%	42.3%	52.7%	46.8%	49.1%
Average number of new hires per firm month	1.1	0.9	0.9	1.4	1.2	1.2
Among firm months that hired a new employee
Average number of new hires	2.2	2.2	2.1	2.5	2.5	2.4
25th percentile of number of hires	1	1	1	1	1	1
50th percentile of number of hires	1	1	1	2	1	1
75th percentile of number of hires	2	2	2	3	3	3
Among new hires,% who
Stayed with the firm for 5+ months	45.1%	47.1%	49.1%	45.3%	46.5%	49.3%
Received benefit income in previous year	17.1%	18.1%	20.1%	17.2%	18.3%	19.6%
Received jobseeker benefit income in previous year	10.2%	12.2%	13.2%	10.2%	12.2%	12.7%
Had not worked in the past year	23.4%	25.3%	27.6%	23.1%	25.0%	26.7%
Arrived in New Zealand on a visa in the past 2 years	16.2%	19.0%	20.3%	16.4%	20.0%	20.8%
Are <25 years old	43.1%	40.3%	42.3%	41.3%	38.9%	40.1%
Are Maori or Pasifika and <25 years old	10.2%	8.7%	9.2%	10.3%	8.8%	9.1%
Left education in the previous year	12.6%	11.1%	11.2%	12.6%	11.1%	10.9%
Had a job elsewhere the previous month	51.4%	47.3%	47.6%	51.6%	47.6%	48.3%

Policy effect on the probability a new hire was a disadvantaged jobseeker, varying firm-size band

Dependent variable: Indicator for hire type	Beneficiary in past year	Jobseeker beneficiary in past year	Not worked in past year	Recent migrant	Under 25 years old	Maori or Pasifika under 25	Education leaver
Firms sized 18–21
*Between small firm**	0.001	0.004	0.004	0.005	–0.005	–0.007*	–0.004
	(0.004)	(0.004)	(0.005)	(0.006)	(0.005)	(0.003)	(0.003)
Post * small firm	0.001	0.003	0.002	0.006	–0.009*	–0.006**	0.004
	(0.004)	(0.003)	(0.004)	(0.006)	(0.005)	(0.003)	(0.003)
Small firm	0.001	–0.002	0.003	–0.009*	0.011**	0.001	0.003
	(0.004)	(0.003)	(0.005)	(0.005)	(0.005)	(0.003)	(0.003)
Observations	350,265	350,265	350,265	350,265	349,173	349,173	302,172

Firms sized 10–50
*Between small firm**	0.005**	0.004**	–0.001	0.001	0.001	0.002	0.001
	(0.002)	(0.002)	(0.002)	(0.003)	(0.003)	(0.002)	(0.001)
Post * small firm	0.001	–0.000	0.004*	0.004	0.002	–0.001	0.003**
	(0.002)	(0.002)	(0.002)	(0.004)	(0.003)	(0.002)	(0.001)
Small firm	–0.001	–0.000	0.002	–0.002	0.002	–0.002	–0.000
	(0.002)	(0.001)	(0.002)	(0.003)	(0.002)	(0.002)	(0.001)
Observations	2,728,668	2,728,668	2,728,668	2,728,668	2,719,995	2,719,995	2,352,420

Firms sized 15–24, excluding 19–20
*Between small firm**	0.005	0.004	0.002	–0.006	–0.002	0.002	–0.000
	(0.003)	(0.003)	(0.004)	(0.005)	(0.004)	(0.003)	(0.002)
Post * small firm	0.005	0.003	0.006*	–0.003	0.006	0.003	–0.000
	(0.003)	(0.003)	(0.003)	(0.005)	(0.004)	(0.002)	(0.002)
Small firm	–0.003	–0.000	–0.005	–0.001	–0.000	–0.003	–0.001
	(0.003)	(0.003)	(0.004)	(0.005)	(0.004)	(0.003)	(0.003)
Observations	718,575	718,575	718,575	718,575	716,181	716,181	619,950

Firms sized 10–50, excluding 18–21
*Between small firm**	0.005**	0.004**	–0.002	0.001	0.002	0.004**	0.002
	(0.002)	(0.002)	(0.002)	(0.004)	(0.003)	(0.002)	(0.001)
Post * small firm	0.001	–0.001	0.004**	0.004	0.003	–0.001	0.004**
	(0.003)	(0.002)	(0.002)	(0.004)	(0.003)	(0.002)	(0.001)
Small firm	–0.001	–0.001	0.004**	–0.001	0.001	–0.002	–0.001
	(0.003)	(0.002)	(0.003)	(0.004)	(0.003)	(0.002)	(0.001)
Observations	2,378,403	2,378,403	2,378,403	2,378,403	2,370,822	2,370,822	2,050,248

Predicting temporary contracts and trial period jobs

Dependent variable	On temporary contract, 2008	On temporary contract, 2008	On trial period, 2012	On trial period, 2012
Aged 50+ years	0.037	0.022	-0.078***	-0.067**
	(0.028)	(0.026)	(0.026)	(0.026)
Aged 15–24 years	0.065***	0.083***	-0.025	-0.050**
	(0.025)	(0.026)	(0.024)	(0.025)
Male	-0.028	-0.035	0.027	0.005
	(0.019)	(0.022)	(0.020)	(0.023)
Degree or higher qualification	0.066**	0.045	-0.182***	-0.117***
	(0.032)	(0.032)	(0.025)	(0.029)
School qualification	0.003	0.016	-0.011	-0.019
	(0.026)	(0.026)	(0.027)	(0.027)
No qualification	0.011	-0.004	-0.052*	-0.071**
	(0.027)	(0.026)	(0.030)	(0.029)
Does not know qualification	0.064	0.133	-0.084	-0.082
	(0.126)	(0.137)	(0.139)	(0.133)
Professional occupation		-0.005		-0.085**
		(0.037)		(0.043)
Technicians and trade		0.048		0.055
		(0.050)		(0.045)
Community and personnel		0.015		-0.003
service		(0.040)		(0.048)
Clerical and admin		0.030		-0.040
		(0.040)		(0.045)
Sales workers		0.118**		-0.001
		(0.054)		(0.046)
Machinery operators and		0.051		0.004
drivers		(0.056)		(0.055)
Laborers		0.087**		-0.035
		(0.041)		(0.042)
Other occupation		–		0.080 (0.317)
Ethnicity fixed effects	Yes	Yes	Yes	Yes
Level 1 industry fixed effects	No	Yes	No	Yes
Observations	1,686	1,680	2,409	2,406
Mean of dependent variable	0.200	0.201	0.376	0.376

Heterogeneous policy effects, with various interaction variables

Dependent variable: No. of new hires	Proportion of jobs in lvl 2 industry	Proportion of jobs in lvl 2 industry with	Proportion of jobs in lvl 2 industry	Proportion of jobs in lvl 2 industry	Seasonality of lvl 2 industry (proportion of max to min hires in a season, March 2005– February 2009)	Firm growth in employment over
interaction variable	using a trial period (0–1)	no employer-funded training (0–1)	with a permanent contract (0–1)	lasting 5+ months, 2005–2008 (0–1)		previous 12 months (decimal)
*Between small firm**	0.135	0.070	0.273	–0.008	–0.060*	–0.025*
* interaction variable
	(0.139)	(0.105)	(0.276)	(0.107)	(0.031)	(0.013)
Post * small firm * interaction	0.163	0.040	0.492*	0.078	–0.088***	0.000
variable
	(0.138)	(0.101)	(0.259)	(0.101)	(0.030)	(0.014)
Between * small firm	–0.021	–0.040	–0.238	0.011	0.097*	0.004
	(0.035)	(0.079)	(0.249)	(0.053)	(0.051)	(0.014)
Post * small firm	–0.036	–0.030	–0.443*	–0.038	0.131***	–0.003
	(0.034)	(0.074)	(0.235)	(0.051)	(0.048)	(0.014)
Between * interaction variable	–0.570***	–0.214**	–0.960***	–0.338***	0.077***	0.039***
	(0.113)	(0.086)	(0.238)	(0.094)	(0.026)	(0.010)
Post * interaction variable	0.038	0.091	0.151	0.002	–0.014	0.041***
	(0.115)	(0.083)	(0.231)	(0.089)	(0.025)	(0.012)
Small firm * interaction variable	–0.185**	–0.125*	–0.274	–0.051	0.053***	0.008
	(0.089)	(0.068)	(0.170)	(0.067)	(0.019)	(0.007)
Interaction variable	–15.960**	5.130**	–6.534**	–2.339**	0.567**	0.040***
	(7.516)	(2.351)	(3.114)	(1.124)	(0.273)	(0.006)
Small firm	0.028	0.077	0.233	0.011	–0.092***	–0.013
	(0.024)	(0.050)	(0.154)	(0.034)	(0.031)	(0.012)
Observations	817,449	826,206	826,206	835,338	834,972	716,514
Mean of interaction variable	0.234	0.729	0.913	0.513	1.444	0.129
Standard deviation of interaction	0.081	0.115	0.050	0.124	0.410	0.826
variable

Policy effect on the distribution of employment duration of rehires

Dependent variable: Indicator for employment lasting at least	2 months	5 months	12 months	24 months
*Between small firm**	0.002	-0.002	-0.001	-0.002
	(0.002)	(0.003)	(0.002)	(0.002)
Post * small firm	0.006**	0.000	-0.003	-0.001
	(0.003)	(0.004)	(0.003)	(0.003)
Small firm	-0.003	-0.003	-0.001	-0.002
	(0.002)	(0.002)	(0.002)	(0.002)
Employee demographic controls	Yes	Yes	Yes	Yes
Month-in-year fixed effects	Yes	Yes	Yes	Yes
Calendar month * level 3 industry fixed effects	Yes	Yes	Yes	Yes
Observations	390,963	390,963	390,963	390,963
% hires of given type	61.9%	35.1%	15.3%	8.4%
R-squared	0.121	0.181	0.077	0.061

The effect of trial periods in employment on firm hiring behavior

Figures & Tables

Figure 1

Figure 2

Figure 3

Figure 4

Figure 5

Figure 6

Policy effect on the number of new hires, varying firm sizes included

Substitution between trial periods and temporary contracts

Policy effect on long-term hires and employees moving between firms

Policy effect for very small firms

Policy effect on the distribution of employment duration of new hires

Policy effect on the probability a new hire was a disadvantaged jobseeker

Test for parallel trends in the pre-announcement period

Heterogeneous policy effects on the probability a new hire was a disadvantaged jobseeker

Distribution of employment and hiring over firm sizes

Policy effect on the total number of new hires, robustness checks

Policy effect on the distribution of employment duration of different hire types

Distribution of contract type for new hires in 2012

Descriptive statistics for treatment and control firms by period

Policy effect on the probability a new hire was a disadvantaged jobseeker, varying firm-size band

Predicting temporary contracts and trial period jobs

Heterogeneous policy effects, with various interaction variables

Policy effect on the distribution of employment duration of rehires

Paradigm

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