Working Time Accounts and Turnover

Working time account is a tool that allows firms to smooth their demand for hours employed.Descriptive literature suggests that working time accounts can reduce layoffs and inhibit increases in unemployment during recessions. In a model of optimal labour demand I show that working time account does not necessarily guarantee fewer layoffs at the firm level. Layoffs may fall or rise depending on whether the firm meets an economic downturn with a surplus or a deficit of hours, and on how productive the firm is. On aggregate and in expected terms, however, working time account reduces job destruction.