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Are Estimates of Non-Standard Employment Wage Penalties Robust to Different Wage Measures? The Case of Zero Hours Contracts in the UK

Author

Listed:
  • Farina, Egidio

    (Queen's University Belfast)

  • Green, Colin P.

    (Norwegian University of Science and Technology (NTNU))

  • McVicar, Duncan

    (Queen's University Belfast)

Abstract

A range of evidence suggests that non-standard jobs, including fixed-term and other temporary jobs such as casual jobs, pay lower wages than more standard, permanent jobs, even after controlling for differences in worker and job characteristics. A recent literature suggests this is also the case for zero hours contracts (ZHCs), a growing form of non-standard employment in several developed countries, including the UK. These studies typically rely on derived wage variables – derived from survey responses to questions on earnings and hours data – which are prone to various forms of measurement error, some of which may be correlated with employment contract. Many relevant surveys, however, also include stated-rate hourly wage questions which, although also likely measured with error, are not subject to the same measurement issues. This suggests potential for sensitivity in non-standard employment wage penalty estimates depending on the wage measure used. Using the example of ZHCs in the UK, we first use derived wages to replicate the ballpark conditional ZHC wage penalty typical of existing studies. We then show that there is no conditional ZHC wage penalty, on average, when using the stated-rate hourly wage measure. This also holds for other non-standard employment types, including casual and fixed-term employment. Further, whereas the derived wage measure suggests, in line with existing literature, that the ZHC wage penalty is largest at the bottom of the wage distribution, we show the opposite to be the case when using the stated-rate wage measure. We discuss implications for policy, our understanding of labour market behaviour, and also for the wider literature on non-standard work wage penalties.

Suggested Citation

  • Farina, Egidio & Green, Colin P. & McVicar, Duncan, 2020. "Are Estimates of Non-Standard Employment Wage Penalties Robust to Different Wage Measures? The Case of Zero Hours Contracts in the UK," IZA Discussion Papers 13548, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp13548
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    Cited by:

    1. Bernardo Fanfani & Filippo Passerini, 2024. "Do Alternative Work Arrangements Substitute Standard Employment? Evidence from Worker-Level Data," Working Papers wp1190, Dipartimento Scienze Economiche, Universita' di Bologna.
    2. Egidio Farina & Colin Green & Duncan McVicar, 2024. "Zero hours contracts and self‐reported (mental) health in the UK," British Journal of Industrial Relations, London School of Economics, vol. 62(1), pages 50-71, March.
    3. Cindy Biesenbeek & Maikel Volkerink, 2023. "The Price of Flexible Jobs: Wage Differentials between Permanent and Flexible Jobs in the Netherlands," De Economist, Springer, vol. 171(4), pages 367-401, December.

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    More about this item

    Keywords

    atypical employment; zero hours contracts; casual jobs; non-standard employment; wages; precarious employment;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy
    • M55 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Contracting Devices

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