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Compensation of On-call and Fixed-term Employment: the Role of Uncertainty

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  • Marloes de Graaf-Zijl

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    (Faculty of Economics and Econometrics, Universiteit van Amsterdam)

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    Abstract

    In this paper I analyse the use and compensation of fixed-term and on-call employment contracts in the Netherlands. I use an analytical framework in which wage differentials result from two types of uncertainty. Quantity uncertainty originates from imperfect foresight in future product demand. I argue that workers who take over part of the quantity uncertainty from the employer get higher payments. Quality uncertainty on the other hand originates from the fact that employers are ex-ante unable to fully observe a workers ability and results in lower wages. Using a combination of propensity score and Mahalanobis matching I analyse wage differentials and find that on-call workers receive compensation for providing quantity flexibility. Compensation of fixed-term contracts on the other hand is dominated by the negative wage effect of quality uncertainty. I investigate whether this relation still holds after the 1999 policy change that had a substantial impact on the attractiveness of on-call and fixed-term workers from the employers perspective. I find that the policy change has not only influenced the use of on-call and fixed-term contracts, but unintentionally also their compensation.

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    Bibliographic Info

    Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 05-120/3.

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    Date of creation: 19 Dec 2005
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    Handle: RePEc:dgr:uvatin:20050120

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    Web page: http://www.tinbergen.nl

    Related research

    Keywords: temporary employment; wage differentials; uncertainty;

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    References

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    1. Alison L. Booth & Marco Francesconi & Jeff Frank, 2002. "Temporary Jobs: Stepping Stones or Dead Ends?," LABORatorio R. Revelli Working Papers Series 8, LABORatorio R. Revelli, Centre for Employment Studies.
    2. Lewis M. Segal & Daniel G. Sullivan, 1998. "Wage differentials for temporary services work: evidence from administrative data," Working Paper Series WP-98-23, Federal Reserve Bank of Chicago.
    3. Susan N. Houseman & Arne L. Kalleberg & George A. Erickcek, 2003. "The role of temporary agency employment in tight labor markets," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 57(1), pages 105-127, October.
    4. Moretti, Enrico, 2000. " Do Wages Compensate for Risk of Unemployment? Parametric and Semiparametric Evidence from Seasonal Jobs," Journal of Risk and Uncertainty, Springer, vol. 20(1), pages 45-66, January.
    5. John T. Addison & Christopher J. Surfield, 2005. "‘Atypical Work’ and Compensation," GEMF Working Papers 2005-14, GEMF - Faculdade de Economia, Universidade de Coimbra.
    6. Hwang, Hae-shin & Mortensen, Dale T & Reed, W Robert, 1998. "Hedonic Wages and Labor Market Search," Journal of Labor Economics, University of Chicago Press, vol. 16(4), pages 815-47, October.
    7. Heckman, James J. & Lalonde, Robert J. & Smith, Jeffrey A., 1999. "The economics and econometrics of active labor market programs," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 31, pages 1865-2097 Elsevier.
    8. Kevin Lang & Sumon Majumdar, 2004. "The Pricing Of Job Characteristics When Markets Do Not Clear: Theory And Policy Implications," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(4), pages 1111-1128, November.
    9. Hagen, Tobias, 2003. "Do Fixed-Term Contracts Increase the Long-Term Employment Opportunities of the Unemployed?," ZEW Discussion Papers 03-49, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    10. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    11. Kevin Lang & Sumon Majumdar, 2003. "The Pricing of Job Characteristics When Markets Do Not Clear: Theory and Implications," NBER Working Papers 9911, National Bureau of Economic Research, Inc.
    12. O Blanchard & A Landier, 2002. "The Perverse Effects of Partial Labour Market Reform: fixed--Term Contracts in France," Economic Journal, Royal Economic Society, vol. 112(480), pages F214-F244, June.
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    Cited by:
    1. Marloes de Graaf-Zijl, 2005. "The Anatomy of Job Satisfaction and the Role of Contingent Employment Contracts," Tinbergen Institute Discussion Papers 05-119/3, Tinbergen Institute.
    2. Marloes de Graaf-Zijl, 2005. "The Attractiveness of Temporary Employment to Reduce Adjustment Costs," Tinbergen Institute Discussion Papers 05-121/3, Tinbergen Institute.
    3. Marloes de Graaf-Zijl, 2005. "The Attractiveness of Temporary Employment to Reduce Adjustment Costs," Tinbergen Institute Discussion Papers 05-121/3, Tinbergen Institute.

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