Effects of Access-to-Hours and Just Cause Regulations on Labor Market Outcomes

Abstract

Inspired by innovative, recent labor regulations adopted by New York City for its fast food sector, this paper theoretically and empirically models Access-to-Hours and Just Cause policies. Access-to-Hours policy aims to promote full-time jobs by mandating that firms offer open shifts to current employees before hiring new workers to take the shifts, and is part of a wave of new Fair Workweek laws in the U.S. Just Cause policy requires firms to document a performance or business reason for employee hours cuts or dismissal, similar to Employment Protection Legislation common in Europe. We develop a theoretical model of how firms will respond to the regulations and the implications for sectoral employment and turnover. The access-to-hours (ATH) model predicts that total employment will decrease and two countervailing effects on turnover. The Just Cause model, which includes possible managerial favoritism, also predicts opposing effects on turnover but clarifies that a greater share of turnover will come from recently-hired employees. Guided by the model, we estimate the effects of New York City's fast food 2017 Fair Workweek law, with special attention to the ATH aspect of the law and the 2021 Just Cause law. Both applied only to the city's chain, limited-service restaurants and we use synthetic difference-in-differences designs comparing changes here against those in the same industry in other cities and those in other industries in New York City. The empirical analysis does not find evidence of substantial effects of ATH on any outcome, including employment which our theory predicted would decline. The analysis does find that the Just Cause law increases turnover, especially among recently-hired employees, without affecting overall employment. The finding that turnover is more concentrated among recent hires coincides with our theory.

Keywords: employment, turnover, access-to-hours, fair workweek, just cause, synthetic difference-in-differences

JEL Classification: J80, J63