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Starting Your Career with a Temporary Job: Stepping Stone or "Dead-End"?

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  • Dimitris Pavlopoulos

Abstract

This paper uses panel data from the UK (BHPS) and Germany (GSOEP) to investigate the wage effect of entering the labour market with a temporary job. Further than the previous literature that studied the effect of the contract type on wage dynamics in the explained part of a wage regression, we also investigate the effect of the starting contract on the variance of unobserved individual effects and random earnings shocks. For this purpose, we decompose earnings into a component determined by initial unobserved earnings ability and experience-related heterogeneity and a component determined by earnings shocks. Our results for Germany, verify the existence of a wage penalty for entering the labour market with a temporary contract. This penalty disappears after 12.5 years for male workers and after 6.5 years for the female workers. In the UK, a similar wage penalty is found for male workers that persists over their working career. In contrast, no wage penalty is found for the British female workers. In the UK, the initial unobserved earnings capacity is higher for workers starting off with a permanent job, while no such difference emerges in Germany. However, this initial unexplained wage inequality decreases faster for workers starting their career with a temporary contract than their colleagues that entered the labour market with a permanent job. Finally, the persistence of earnings shocks is higher for workers entering the labour market with a temporary contract.

Suggested Citation

  • Dimitris Pavlopoulos, 2009. "Starting Your Career with a Temporary Job: Stepping Stone or "Dead-End"?," SOEPpapers on Multidisciplinary Panel Data Research 228, DIW Berlin, The German Socio-Economic Panel (SOEP).
  • Handle: RePEc:diw:diwsop:diw_sp228
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    File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.342787.de/diw_sp0228.pdf
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    References listed on IDEAS

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    Cited by:

    1. Adrián Nieto, 2018. "Permanent employment and fertility: The importance of job security and the career costs of childbearing," Discussion Papers 2018/01, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    2. Wolfgang Auer & Natalia Danzer, 2016. "Fixed-Term Employment and Fertility: Evidence from German Micro Data," CESifo Economic Studies, CESifo, vol. 62(4), pages 595-623.
    3. Giovanni S.F. Bruno & Floro E. Caroleo & Orietta Dessy, 2013. "Stepping stones versus dead end jobs: exits from temporary contracts in Italy after the 2003 reform," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 121(1), pages 31-62.
    4. Auer, Wolfgang, 2015. "Health Consequences of Starting a Career on a Fixed-Term Contract," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113080, Verein für Socialpolitik / German Economic Association.
    5. Wolfgang Auer & Natalia Danzer, 2015. "Uncertainty in the labour market: How does fixed-term employment affect fertility and mental health of the young generation?," IBS Working Papers 6/2015, Instytut Badan Strukturalnych.

    More about this item

    Keywords

    temporary employment; wages;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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