Why do firms (dis)like part-time contracts?

This paper investigates the costs for firms of employing women full-time versus part-time, in terms of differential hourly wages. To this end, we use administrative matched employer-employee data on the universe of female workers in Italy over a period of 33 years and rely on regression models that control for worker, firm, and job match fixed effects, in addition to several worker-, job-, and firm-level time-varying factors. We find that, when a worker switches from a full-time to a part-time contract within the same firm, she benefits from an increase in the hourly wage. Over the last three decades, these wage premiums have significantly reduced, although they remained positive and significant up to 2015. We also find that the part-time premium is pervasive and stable across many different labor market segments and independent of the workers’ intrinsic productivity levels. These and other findings appear to be compatible with developments in wage bargaining institutions, whereby more generous conditions can be granted to part-time workers. Coupled with the detrimental effect of part-time work on firm productivity documented by Devicienti et al. (2018), our results contribute to explaining why firms are often unwilling to concede part-time positions to those employees who request such arrangements.