The Effects of Marginal Employment on Subsequent Labour Market Outcomes

46 Pages Posted: 1 Aug 2006

See all articles by René Böheim

René Böheim

Johannes Kepler University

Andrea Weber

Vienna University of Economics and Business; Austrian Institute of Economic Research (WIFO); Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute)

Date Written: July 2006

Abstract

We analyse the consequences of starting a wage subsidised job, "marginal employment", for unemployed workers. Marginal employment is a type of wage subsidy paid to unemployed workers and they do not lose their unemployment benefits if the wage is below a certain threshold. We ask if the unemployed who start marginal jobs face better labour market outcomes than those who do not work. A priori it is not clear if those who work in marginal employment improve their labour market status, e.g. by signalling effort, or worsen it by reduced job search effort. We select unemployed workers and investigate the effect of marginal employment on their labour market outcomes, by means of propensity score matching. Our results suggest that selection into marginal employment is "negative", i.e. workers with characteristics we usually associate with low-productivity are more likely to select into such jobs. The unemployed who start to work in marginal employment during their unemployment spell suffer a (causal) penalty for doing so, relative to their peers who do not. The penalty, in terms of less employment, more unemployment, lower wages, lessens over time but is still present after three years.

Keywords: marginal employment, atypical employment, labour supply, propensity score

JEL Classification: J22, J64

Suggested Citation

Boheim, Rene and Weber, Andrea Michaela, The Effects of Marginal Employment on Subsequent Labour Market Outcomes (July 2006). IZA Discussion Paper No. 2221. Available at SSRN: https://ssrn.com/abstract=921386

Rene Boheim

Johannes Kepler University ( email )

Linz
Austria

Andrea Michaela Weber (Contact Author)

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

Austrian Institute of Economic Research (WIFO) ( email )

P.O. Box 91
Wien, A-1103
Austria

Institute for the Study of Labor (IZA)

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

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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