Earnings, Education, and Fixed-Term Contracts

We explore the relationship between earnings, education, and fixed‐term contracts using data from the 1997 British Social Attitudes Survey. We find that the log hourly wage of workers employed under such contracts is approximately 13% lower than that of their ‘permanent’ counterparts, even after controlling for a plethora of personal and job characteristics. Standard decompositions indicate that the vast majority of this differential (more than 70%) is attributable to price effects, which may reflect discrimination on the part of the employer. Such findings may, therefore, suggest that employment protection is appropriate for individuals employed under fixed‐term contracts.