Explaining cyclical movements in employment: Creative-destruction or changes in utilization?

An important step in understanding why employment fluctuates cyclically is determining the relative importance of cyclical movements in permanent and temporary plant-level employment changes. If movements in permanent employment changes are important, then recessions are times when the destruction of job-specific capital picks up and/or investment in new job capital slows. If movements in temporary employment changes are important, then employment fluctuations are related to the temporary movement of workers across activities (e.g. from work to home production or search and back again) as the relative costs/benefits of these activities change. I estimate that in the manufacturing sector temporary employment changes account for nearly 60% of the change in employment growth over the cycle. However, if permanent employment changes create and destroy more capital than temporary employment changes, then their economic consequences would be relatively greater. The correlation between gross permanent employment changes and capital intensity across industries supports the hypothesis that permanent employment changes do create and destroy more capital than temporary employment changes.     

Temporary jobs and job search effort in Europe

Using longitudinal data on individuals from the European Community Household Panel (ECHP) for eleven countries during 1995-2001, I investigate temporary job contract duration and job search effort. The countries are Austria, Belgium, Denmark, Finland, France, Greece, Ireland, Italy, the Netherlands, Portugal and Spain. I construct a search model for workers in temporary jobs which predicts that shorter duration raises search intensity. Calibration of the model to the ECHP data implies that at least 75% of the increase in search intensity over the life of a 2+ year temporary contract occurs in the last six months of the contract. I then estimate regression models for search effort that control for human capital, pay, local unemployment, and individual and time fixed effects. I find that workers on temporary jobs indeed search harder than those on permanent jobs. Moreover, search intensity increases as temporary job duration falls, and roughly 84% of this increase occurs on average in the shortest duration jobs. These results are robust to disaggregation by gender and by country. These empirical results are noteworthy, since it is not necessary to assume myopia or hyperbolic discounting in order to explain them, although the data clearly also do not rule out such explanations.     

How binding are legal limits? Transitions from temporary to permanent work in Spain

This paper studies the duration pattern of fixed-term contracts and the determinants of their conversion into permanent ones in Spain, where the share of fixed-term employment is the highest in Europe. We estimate a duration model for temporary employment, with competing risks of terminating into permanent employment versus alternative states, and flexible duration dependence. We find that conversion rates are generally below 10%. Our estimated conversion rates roughly increase with tenure, with a pronounced spike at the legal limit, when there is no legal way to retain the worker on a temporary contract. We argue that estimated differences in conversion rates across categories of workers can stem from differences in worker outside options and thus the power to credibly threat to quit temporary jobs.     

Employment protection reforms,employment and the incidence of temporary jobs in Europe: 1996–2001

This paper uses longitudinal data on individuals from the European Community Household Panel over the 1996–2001 period to investigate the impact of reforms of employment protection systems in nine countries on the incidence of employment and of temporary jobs for wage and salary workers. Important features of the research design include the use of individual fixed effects models as well as the inclusion of country-specific trends in the dependent variable. A robust finding is that policies making it easier to create temporary jobs on average raise the likelihood that wage and salary workers will be in temporary jobs. This effect is felt primarily when the regional unemployment rate is relatively high. However, there is no evidence that such reforms raise employment. Thus, these reforms, while touted as a way of jump-starting individuals' careers in the job market, appear rather to encourage a substitution of temporary for permanent work.     

Labour contract regulations and workers' wellbeing: International longitudinal evidence

All industrialized countries have employment protection legislation (EPL) for permanent workers and restrictions on the use of temporary employment (RTE). The (ambiguous) effects of these on the levels of employment and unemployment have been extensively studied, but nothing is known empirically about their wellbeing implications. Using longitudinal data from the European Community Household Panel, the author conducts the first study of the link between both EPL and RTE and workers' wellbeing. The results provide evidence that both permanent and temporary employees gain from reforms that ease restrictions on temporary employment but leave firing costs for permanent workers unchanged. This finding contrasts with common claims found in the political economy literature.     

Flexicurity and job satisfaction in Europe: The importance of perceived and actual job stability for well-being at work

In this paper we study the effect of a micro-level measure of flexicurity on workers' job satisfaction. To this end, using micro-data from the Eurobarometer survey, we disaggregate the sample of workers into different groups according not only to their employment contract (i.e. permanent or temporary), but also to their perceived job security, and we evaluate differences in job satisfaction between these groups. After the potential endogeneity of job type has been controlled for, the results show that what matters for job satisfaction is not just the type of contract, but mainly the perceived job security, which may be independent of the type of contract.The combination “temporary but secure job” seems preferable to the combination “permanent but insecure job”, indicating that the length of the contract may be less important if the worker perceives that s/he is not at risk of becoming unemployed. Our main conclusions are robust to the use of alternative definitions of workers' types and they generally hold within different welfare regimes and also for different aspects of job satisfaction, mainly those more related to job security.     

A Multiple‐Group Analysis of Associations Between Emotional Exhaustion and Supervisor‐Rated Individual Performance: Temporary Versus Permanent Call‐Center Workers

This study investigates whether contract type (temporary versus permanent employment) moderates the relationship between emotional exhaustion and supervisor‐rated individual performance. Most temporary workers desire permanent employment, and this may drive them to uphold performance also when strained. This hypothesis was tested with multiple‐group analysis in a sample of 430 call‐center operators from five Portuguese organizations from different sectors. The results show that emotional exhaustion related negatively to supervisor‐rated individual performance among permanent workers, but not among temporary workers. Our conclusion is that the relationship between emotional exhaustion and supervisor‐rated individual performance is conditional upon contract type. © 2014 Wiley Periodicals, Inc.     

Fixed-term contracts as sorting mechanisms: Evidence from job durations in West Germany

We estimate the effect of initial episodes under fixed-term contracts (FTCs) on job duration in the further course of the employment spell, using data from the German Socio-Economic Panel (SOEP) from 1985 to 2002 and a statistical matching approach. Our results show that job exit rates are initially much higher if the employment spell began with an FTC. However, exit rates fall below those of comparable spells spent entirely in permanent employment after a few years time. This suggests that FTCs accelerate a sorting process and that they may at least to some part be understood as prolonged probationary periods. Strikingly, the probability of long-term employment of more than five years duration is not lower in spells that are initially concluded as FTCs. Hence, the sorting processes taking place in both forms of contracts lead to similar results.     

Job flows,jobless recoveries,and the Great Moderation

This paper explores a link between the decline in employment volatility and the onset of jobless recoveries observed since the mid-1980s using a time series of job flow estimates for manufacturing that covers the entire postwar period. I show that job creation and job destruction rates have fallen and become less cyclical. This has increased the importance of reallocative shocks relative to aggregate shocks in explaining their time-series fluctuations. Despite the increased importance of reallocation, it is a change in the responses of job flows to aggregate shocks, which are now larger and more persistent, that lead to the onset of jobless recoveries. The decline in the cyclicality of temporary layoffs and the rise in the use of employment services cannot account for these altered responses.     

Are some sectors more “youth friendly” than others? Employment regimes,sectors, and gender disparities in the Great Recession

Despite national differences in youth employment, many countries share striking similarities in the uneven sectoral distribution of job opportunities for young women and men in Europe. A shift‐share analysis of European Labour Force data identifies “youth‐friendly” sectors, how this varies between countries, and how this changed during the Great Recession. This reveals how youth job opportunities were lost because the sector shrank or because employers were less likely to offer full‐time, permanent contracts. New jobs for youth were more likely to be in part‐time and temporary employment. Youth vulnerability to unemployment is contingent not only on employers' engagement with institutions shaping school‐to‐work transitions but also on gender segregation and to the fact that some sectors have been particularly fragile during the economic crisis. Future research needs to link institutional effects with employers' business strategies to understand how these shape job opportunities for young women and men.     

Signaling,selection and transition: empirical evidence on stepping-stones and vicious cycles in temporary agency work

Despite the growing importance of temporary work agencies, the benefits they bring to temporary agency employees (TAEs) are still disputed, and empirical findings are, by and large, mixed. Using a unique dataset comprising almost 12,000 TAEs on their first and second temporary work assignments, this work aims at disentangling the consequences of temporary agency work on the level of the individual TAE in Germany. We find that temporary agency work assignments act as learning devices for employers about the underlying ability of TAEs. High ability employees can show their qualities and fit with the organization with the time spent on temporary work assignments, albeit at decreasing rates. In addition, we find that if a TAE is assigned to a subsequent project after the first one, it is less likely that the employee transitions into permanent employment. Hence, we conclude that a division exists among TAEs: where the high ability employee may find it a stepping-stone to a desired permanent position, and others get trapped in it and have a hard time transitioning into permanent employment.     

The mediating role of leader–member exchange: a study of job satisfaction and turnover intentions in temporary work

This paper focuses on turnover intentions in temporary work. Specifically, we analyse whether job satisfaction and leader–member exchange (LMX) play the same role as antecedents of turnover intentions for both temporary and permanent employees. Results from a total‐effects moderation model based on a survey of 593 individuals placed by a temporary work agency suggest that temporary work lessens the impact that high job satisfaction has in terms of reducing turnover intentions. Furthermore, while for permanent employees, high‐quality LMX relationships play a central role in the link between job satisfaction and turnover intentions; for temporary employees, job satisfaction is less important in the formation of high‐quality LMX relationships. Therefore, we contribute to knowledge on turnover intentions in temporary work by showing that within this context, turnover intentions cannot be directly remedied by high job satisfaction and that temporary work inhibits LMX's reinforcing role in the relationship between job satisfaction and turnover intentions.     

Temporary contracts and employee effort

Temporary contracts provide employers with a tool to screen potential new employees and have been shown to provide “stepping stones” into permanent employment for workers. For both reasons, workers on temporary contracts have an incentive to provide more effort than permanent employees. Using indicators for unpaid overtime work and absences taken from the Swiss Labor Force Survey (SLFS), we present evidence that temporary workers indeed provide higher effort than permanent employees: Their probability of working unpaid overtime exceeds that of permanently employed workers by 60%. We show the heterogeneity of this effect across different types of temporary contracts, investigate differences between men and women, and discuss the relevance of endogenous selection into temporary employment.     

Labor market flexibility and poverty dynamics

The past two decades have witnessed a rapid growth in flexible work arrangements that, in some instances, could expose workers to a higher poverty risk via limited job stability, few advancement opportunities, and low wages. Nowhere in the world has this increase in flexible work arrangements being more evident than in Spain, where about a third of the wage and salary workforce holds fixed-term contracts. Using Spanish panel data and maximum-likelihood binary models that account for state dependence and unobserved heterogeneity, we examine the poverty implications of past and present temporary employment. Our findings suggest that fixed-term contracts are linked to a greater poverty exposure among women and older men relative to open-ended contracts. Furthermore, this greater poverty exposure can last several years due to feedback effects operating via job instability or via the transition to work statuses characterized by higher poverty hazards. Finally, the adverse impact of temporary employment is linked to the short duration of some contracts, thus signaling the importance of work attachment.     

Transitions From School to Work and the Early Labour Market Experience

We consider transitions from school to work and the early market experience. The duration of post-school unemployment, wages, and job duration are estimated simultaneously. We find that individuals with higher levels ofschooling get jobs more quickly and have longer employment durations. Apprentices have shorter unemployment periods and stay longer in their jobs than others at the same educational level. Females have shorter unemployment periods and lower wages, and also stay in the first job longer. The unemployment duration and the accepted wage affect job duration positively, but the estimated covariance terms suggest unobserved factors working in the opposite direction.     

Financial incentives to postpone retirement and further effects on employment — Evidence from a natural experiment

This paper examines the effect of the introduction of permanent benefit reductions for early retirees (i) on the duration until benefit claiming and (ii) on the duration until exit from gainful employment. I estimate discrete time duration models using different error term specifications. Administrative data containing the full earnings history of the individuals are used. Since the reform implementing the benefit reductions was a natural experiment, under some assumptions a causal effect can be identified. The permanent reduction of retirement benefit amounts causes a postponement of claiming benefits by about 14 months and a delay of employment exit by about 10 months on average.     

The impact of the employee-organization relationship on temporary employees' performance and attitude: testing a Singaporean sample

Following the framework proposed by Tsui et al . (1997), this research paper examines the impact of the employee-organization relationship on temporary employees' job performance, turnover intention, overall job satisfaction, affective commitment, perception of fairness and perception of work options. Data were collected from 191 temporary employees from seven employment agencies in Singapore. Analyses conducted revealed that employee responses do vary under the four types of relationship (quasi-spot contract, under-investment, mutual investment and over-investment). In general, both mutual investment and over-investment relationships were associated with higher levels of performance and more favourable attitudes than either the under-investment or quasi-spot contract. Specifically, temporary employees under the mutual investment and over-investment relationships have better job performance, a higher level of affective commitment to the agency, improved overall job satisfaction, higher perception of fairness, higher perception of work options and lower turnover intentions. Furthermore, these finding were obtained even after controlling for the effects of company tenure and job level on employee performance and attitudes. The results highlight the importance of employee-organization relationships in eliciting the desired temporary employee outcomes. Practical implications were drawn for human resource practitioners and employment agencies on how best to manage temporary employees. Some limitations and suggestions for future research were discussed.     

Examining policy configurations as conditions for long-term unemployment and non-standard employment in OECD countries using fuzzy-set analysis

This paper investigates how particular configurations of institutional conditions cause high rate of long-term unemployment and non-standard employment rate for 18 OECD countries during the period of 2001–2008. The paper aims to investigate how employment protection legislation (EPL), unemployment benefit and statutory minimum wages are associated with long-term unemployment and non-standard employment. Using the fuzzy-set analysis, the paper examines how the combination of policies matters in causing long-term unemployment and/or non-standard employment. The result suggests that a low level of statutory minimum wage can lead to high levels of non-standard employment in combination with either strict EPL for permanent workers or weak EPLs for temporary workers. The long-term unemployment rate is suggested to be high when there is strict EPL for temporary workers in combination with high levels of statutory minimum wage. This paper highlights the importance of examining multiple policies as configuration.     

When Does the Stepping‐Stone Work? Fixed‐Term Contracts Versus Temporary Agency Work in Changing Economic Conditions

This paper emphasizes differences among short‐term contracts in terms of career prospects. Using French data over the 2002–2010 period, we rely on a dynamic model with fixed effects to disentangle state dependence from unobserved heterogeneity. Although fixed‐term contracts may provide a ‘stepping‐stone’ to permanent positions, temporary agency work is hardly better than unemployment in this regard. The Great Recession of 2008 has changed the dynamics on the labor market and amplified the difference between fixed‐term contracts and temporary agency work. For both types of temporary workers, providing overtime work does not significantly increase the transition to permanent employment. Copyright © 2014 John Wiley & Sons, Ltd.     

Employment protection

Employment protection legislation is generally blamed for reducing labor turnover and increasing the duration of unemployment. This paper argues that a proper evaluation of employment protection requires a model where there is need for it. The model in this paper gives an insurance role to employment protection in the absence of perfect insurance markets. It is shown that there is a role for both severance payments and advance notice of termination and that if they are chosen optimally, exogenous unemployment insurance does not influence equilibrium employment. Simulations show that if employment protection is chosen optimally, it does not reduce job creation when compared to an equilibrium without it.