Temporary Employment Contracts and Household Income

27 Pages Posted: 6 Dec 2018

See all articles by Inga Lass

Inga Lass

University of Melbourne - Melbourne Institute of Applied Economic and Social Research

Mark Wooden

University of Melbourne - Melbourne Institute of Applied Economic and Social Research; IZA Institute of Labor Economics

Date Written: December 6, 2018

Abstract

It is widely accepted that temporary jobs tend to be associated with low pay which, in turn, will have negative consequences for household income. Evidence in support of such claims, however, is surprisingly thin. This study seeks to fill this void. In particular, it is both the first study to examine the consequences of temporary employment for workers’ household income within a multivariate framework, and the first to quantify the relative importance of the different channels through which temporary employment affects income. Fixed-effects regression and decomposition analyses are applied to longitudinal survey data from Australia, a country where the incidence of temporary forms of employment, and especially casual work, are very high by Western standards. As expected, workers in casual and temporary agency employment are found to live in households with lower average incomes. In contrast, employment on a fixed-term contract is not associated with living in a household with a significantly lower income. The estimated size of the income penalty, relative to households of comparable permanent employees, is about 5% for temporary agency workers and 12% for casual employees. These differentials, however, are not primarily the result of lower wages, but instead are due to the fewer hours worked by these groups. In the case of casual workers, lower annual individual earnings are partly offset by higher incomes of other household members. This compensatory effect, however, is relatively modest in size – the income gap with permanent workers remains substantial.

Keywords: Casual work, decomposition analysis, HILDA Survey, household income, temporary employment

JEL Classification: D10, J41, J82

Suggested Citation

Lass, Inga and Wooden, Mark, Temporary Employment Contracts and Household Income (December 6, 2018). Melbourne Institute Working Paper No. 14/18. Available at SSRN: https://ssrn.com/abstract=3296751 or http://dx.doi.org/10.2139/ssrn.3296751

Inga Lass

University of Melbourne - Melbourne Institute of Applied Economic and Social Research ( email )

Level 5, FBE Building, 111 Barry Street
Parkville, Victoria 3010
Australia

Mark Wooden (Contact Author)

University of Melbourne - Melbourne Institute of Applied Economic and Social Research ( email )

Level 5, FBE Building, 111 Barry Street
Parkville, Victoria 3010
Australia

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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