IDEAS home Printed from https://ideas.repec.org/p/iza/izapps/pp105.html
   My bibliography  Save this paper

Precarious and Less Well Paid? Wage Differences between Permanent and Fixed-term Contracts across the EU

Author

Listed:
  • Silva, António Dias da

    (European Central Bank)

  • Turrini, Alessandro

    (European Commission)

Abstract

We analyse wage differences between permanent and fixed-term contracts across the EU using data from the European Structure of Earnings Survey. We find that, after controlling for individual and job characteristics, workers on permanent contracts earn on average about 15% more than workers on fixed-term contracts with similar observable characteristics. The permanent contract wage premium is higher for men, workers at middle age and with middle education, and performing non-elementary occupations. We also find that permanent workers enjoy a higher wage premium for education and age. We explore cross-country differences in the wage premium for permanent workers and correlate them with indicators of labour market institutions. In particular, results indicate that the wage premium is higher the stricter is employment protection for permanent contracts and the higher the share of temporary employment, which supports the view that workers with fixed-term contracts suffer from a negative wage gap due to lower bargaining power.

Suggested Citation

  • Silva, António Dias da & Turrini, Alessandro, 2015. "Precarious and Less Well Paid? Wage Differences between Permanent and Fixed-term Contracts across the EU," IZA Policy Papers 105, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izapps:pp105
    as

    Download full text from publisher

    File URL: https://docs.iza.org/pp105.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Antje Mertens & Vanessa Gash & Frances McGinnity, 2007. "The Cost of Flexibility at the Margin. Comparing the Wage Penalty for Fixed‐term Contracts in Germany and Spain using Quantile Regression," LABOUR, CEIS, vol. 21(4‐5), pages 637-666, December.
    2. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4, National Bureau of Economic Research, Inc.
    3. Francisco de Castro & Matteo Salto & Hugo Steiner, 2013. "The gap between public and private wages: new evidence for the EU," European Economy - Economic Papers 2008 - 2015 508, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    4. Alison L. Booth & Marco Francesconi & Jeff Frank, 2002. "Temporary Jobs: Stepping Stones Or Dead Ends?," Economic Journal, Royal Economic Society, vol. 112(480), pages 189-213, June.
    5. Edward P. Lazear, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(3), pages 699-726.
    6. Oaxaca, Ronald, 1973. "Male-Female Wage Differentials in Urban Labor Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 693-709, October.
    7. Simona COMI & Mara GRASSENI, 2009. "Are Temporary Workers Discriminated Against? Evidence from Europe," CHILD Working Papers wp17_09, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
    8. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1.
    9. Kahn, Lawrence M., 2012. "Temporary jobs and job search effort in Europe," Labour Economics, Elsevier, vol. 19(1), pages 113-128.
    10. Sarah Brown & John G. Sessions, 2003. "Earnings, Education, and Fixed‐Term Contracts," Scottish Journal of Political Economy, Scottish Economic Society, vol. 50(4), pages 492-506, September.
    11. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-990, October.
    12. Boeri, Tito, 2011. "Institutional Reforms and Dualism in European Labor Markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 13, pages 1173-1236, Elsevier.
    13. Assar Lindbeck & Dennis J. Snower, 2001. "Insiders versus Outsiders," Journal of Economic Perspectives, American Economic Association, vol. 15(1), pages 165-188, Winter.
    14. Lawrence M. Kahn, 2016. "The Structure of the Permanent Job Wage Premium: Evidence from Europe," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 55(1), pages 149-178, January.
    15. Jacob A. Mincer, 1974. "Schooling and Earnings," NBER Chapters, in: Schooling, Experience, and Earnings, pages 41-63, National Bureau of Economic Research, Inc.
    16. Ben Jann, 2008. "The Blinder–Oaxaca decomposition for linear regression models," Stata Journal, StataCorp LP, vol. 8(4), pages 453-479, December.
    17. Klara Stovicek & Alessandro Turrini, 2012. "Benchmarking Unemployment Benefit Systems," European Economy - Economic Papers 2008 - 2015 454, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    18. O Blanchard & A Landier, 2002. "The Perverse Effects of Partial Labour Market Reform: fixed--Term Contracts in France," Economic Journal, Royal Economic Society, vol. 112(480), pages 214-244, June.
    19. Bosio, Giulio, 2009. "Temporary employment and wage gap with permanent jobs: evidence from quantile regression," MPRA Paper 16055, University Library of Munich, Germany.
    20. Samuel Bentolila & Juan J. Dolado, 1994. "Labour Flexibility and Wages: Lessons from Spain," Working Papers wp1994_9406, CEMFI.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ramskogler, Paul, 2021. "Labour market hierarchies and the macro-economy – Do labour market dualities affect wage growth in Europe?," Structural Change and Economic Dynamics, Elsevier, vol. 56(C), pages 154-165.
    2. Yang, Guanyi, 2017. "General Equilibrium Evaluation of Temporary Employment," MPRA Paper 80047, University Library of Munich, Germany.
    3. Christos Koutsampelas, 2018. "Non-standard employment in Cyprus: Trends and policy responses," Cyprus Economic Policy Review, University of Cyprus, Economics Research Centre, vol. 12(1), pages 41-58, June.
    4. Petros Kosmas & Antonis Theocharous & Elias Ioakimoglou & Petros Giannoulis & Leonidas Vatikiotis & Maria Panagopoulou & Lamprianos Lamprianou & Hristo Andreev & Aggeliki Vatikioti, 2022. "Mapping and measuring the phenomenon of precariousness in Cyprus: challenges and implications," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 175, Hellenic Observatory, LSE.
    5. Paola Naddeo, 2015. "The Wage Effects Of Fixed-Term Contracts," RIEDS - Rivista Italiana di Economia, Demografia e Statistica - The Italian Journal of Economic, Demographic and Statistical Studies, SIEDS Societa' Italiana di Economia Demografia e Statistica, vol. 69(4), pages 63-72, October-D.
    6. Cindy Biesenbeek & Maikel Volkerink, 2023. "The price of flexible jobs: Wage differentials between permanent and flexible jobs in The Netherlands," Working Papers 779, DNB.
    7. Rahul Menon, 2019. "Short-term contracts and their effect on wages in Indian regular wage employment," The Economic and Labour Relations Review, , vol. 30(1), pages 142-164, March.
    8. Stefan Jestl & Sandra M. Leitner & Sebastian Leitner, 2022. "The relative impact of different forces of globalization on wage inequality: A fresh look at the EU experience," Review of International Economics, Wiley Blackwell, vol. 30(4), pages 1003-1037, September.
    9. Cabo, Francisco & Martín-Román, Ángel L., 2017. "Dynamic collective bargaining. Frictional effects under open-shop industrial relations," MPRA Paper 77562, University Library of Munich, Germany.
    10. Kosmas, Petros & Theocharous, Antonis & Ioakimoglou, Elias & Vatikiotis, Leonidas & Giannoulis, Petros & Panagopoulou, Maria & Lamprianou, Lamprianos & Andreev, Hristo & Vatikioti, Aggeliki, 2022. "Mapping and measuring the phenomenon of precariousness in Cyprus: challenges and implications," LSE Research Online Documents on Economics 117571, London School of Economics and Political Science, LSE Library.
    11. Mussida Chiara & Zanin Luca, 2019. "Voluntary Mobility of Employees for Better Job Opportunities Given a Temporary Contract: Insights Regarding an Age-Varying Association Between the Two Events," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(2), pages 1-27, April.
    12. Gerhard Fenz & Christian Ragacs & Alfred Stiglbauer, 2019. "Aggregate wage developments in Austria since the introduction of the euro," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue Q-1-Q2/19, pages 41-56.
    13. Diego Daruich & Sabrina Di Addario & Raffaele Saggio, 2023. "The Effects of Partial Employment Protection Reforms: Evidence from Italy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(6), pages 2880-2942.
    14. Giuseppe Lucio Gaeta & Giuseppe Lubrano Lavadera & Francesco Pastore, 2022. "The Effect of Job–Education Vertical Mismatch on Wages Among Recent PhD Graduates: Evidence From an Instrumental Variable Analysis," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 8(1), pages 197-225, March.
    15. Clémence Berson, 2018. "Fixed-Term Contracts and Labor Market Duality in France," De Economist, Springer, vol. 166(4), pages 455-476, December.
    16. José M Arranz & Enrique Fernández-Macías & Carlos García-Serrano, 2021. "Wage differentials and segmentation: The impact of institutions and changing economic conditions," European Journal of Industrial Relations, , vol. 27(2), pages 203-227, June.
    17. Lehner, Lukas & Ramskogler, Paul & Riedl, Aleksandra, 2022. "Begging thy coworker – Labor market dualization and the slow-down of wage growth in Europe," INET Oxford Working Papers 2022-04, Institute for New Economic Thinking at the Oxford Martin School, University of Oxford.
    18. Francisco Cabo & Angel Martín-Román, 2019. "Dynamic collective bargaining and labor adjustment costs," Journal of Economics, Springer, vol. 126(2), pages 103-133, March.
    19. Alessia Matano, 2022. "Spatial externalities in big cities and duality of the labour market," Journal of Regional Science, Wiley Blackwell, vol. 62(2), pages 471-498, March.
    20. Perugini, Cristiano & Pompei, Fabrizio, 2017. "Temporary Jobs, Institutions, and Wage Inequality within Education Groups in Central-Eastern Europe," World Development, Elsevier, vol. 92(C), pages 40-59.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Garcia-Louzao, Jose & Hospido, Laura & Ruggieri, Alessandro, 2023. "Dual returns to experience," Labour Economics, Elsevier, vol. 80(C).
    2. Diego Daruich & Sabrina Di Addario & Raffaele Saggio, 2023. "The Effects of Partial Employment Protection Reforms: Evidence from Italy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(6), pages 2880-2942.
    3. Albanese, Andrea & Gallo, Giovanni, 2020. "Buy flexible, pay more: The role of temporary contracts on wage inequality," Labour Economics, Elsevier, vol. 64(C).
    4. Jens Holscher & Cristiano Perugini & Fabrizio Pompei, 2011. "Wage inequality, labour market flexibility and duality in Eastern and Western Europe," Post-Communist Economies, Taylor & Francis Journals, vol. 23(3), pages 271-310.
    5. José M Arranz & Enrique Fernández-Macías & Carlos García-Serrano, 2021. "Wage differentials and segmentation: The impact of institutions and changing economic conditions," European Journal of Industrial Relations, , vol. 27(2), pages 203-227, June.
    6. Smirnykh, Larisa & Wörgötter, Andreas, 2019. "The importance of institutional and organizational characteristics for the use of fixed-term contracts in Russia," Journal of East European Management Studies, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 24(1), pages 89-121.
    7. Lawrence M. Kahn, 2016. "The Structure of the Permanent Job Wage Premium: Evidence from Europe," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 55(1), pages 149-178, January.
    8. Matteo PICCHIO, 2006. "Wage Differentials between Temporary and Permanent Workers in Italy," Working Papers 257, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    9. Sami Napari, 2008. "The Early‐career Gender Wage Gap among University Graduates in the Finnish Private Sector," LABOUR, CEIS, vol. 22(4), pages 697-733, December.
    10. Gail Pacheco & Bill Cochrane, 2015. "Decomposing the temporary-permanent wage gap in New Zealand," Working Papers 2015-07, Auckland University of Technology, Department of Economics.
    11. Michaela Fuchs & Anja Rossen & Antje Weyh & Gabriele Wydra‐Somaggio, 2021. "Where do women earn more than men? Explaining regional differences in the gender pay gap," Journal of Regional Science, Wiley Blackwell, vol. 61(5), pages 1065-1086, November.
    12. Marta Silva & Luis Filipe Martins & Helena Lopes, 2015. "Asymmetric labour market reforms and wage growth with fixed-term contracts: does learning about match quality matter?," Working Papers Series 2 15-04, ISCTE-IUL, Business Research Unit (BRU-IUL).
    13. Zhang, Li & Sharpe, Rhonda Vonshay & Li, Shi & Darity, William A., 2016. "Wage differentials between urban and rural-urban migrant workers in China," China Economic Review, Elsevier, vol. 41(C), pages 222-233.
    14. Domenico Depalo & Raffaela Giordano & Evangelia Papapetrou, 2015. "Public–private wage differentials in euro-area countries: evidence from quantile decomposition analysis," Empirical Economics, Springer, vol. 49(3), pages 985-1015, November.
    15. Fuchs, Michaela & Rossen, Anja & Weyh, Antje & Wydra-Somaggio, Gabriele, 2019. "Why do women earn more than men in some regions? : Explaining regional differences in the gender pay gap in Germany," IAB-Discussion Paper 201911, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    16. Arceo-Gómez, Eva O. & Campos-Vázquez, Raymundo M., 2014. "Evolución de la brecha salarial de género en México," El Trimestre Económico, Fondo de Cultura Económica, vol. 0(323), pages .619-653, julio-sep.
    17. Tai Lee, 2022. "The Impact of Employment Protection on the Probability of Job Separation: Evidence from Job Duration Data in South Korea," Journal of Labor Research, Springer, vol. 43(3), pages 369-414, December.
    18. Theodossiou, I. & Zangelidis, A., 2009. "Career prospects and tenure-job satisfaction profiles: Evidence from panel data," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(4), pages 648-657, August.
    19. Niels-Hugo Blunch, 2018. "Just like a woman? New comparative evidence on the gender income gap across Eastern Europe and Central Asia," IZA Journal of Migration and Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 8(1), pages 1-41, December.
    20. Ferreira, Maria & de Grip, Andries & van der Velden, Rolf, 2018. "Does informal learning at work differ between temporary and permanent workers? Evidence from 20 OECD countries," Labour Economics, Elsevier, vol. 55(C), pages 18-40.

    More about this item

    Keywords

    segmentation; wage premium; contract type;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izapps:pp105. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Holger Hinte (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.