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Precarious and Less Well Paid? Wage Differences between Permanent and Fixed-term Contracts across the EU

Listed author(s):
  • Dias da Silva, António

    ()

    (VU University Amsterdam)

  • Turrini, Alessandro

    ()

    (European Commission)

We analyse wage differences between permanent and fixed-term contracts across the EU using data from the European Structure of Earnings Survey. We find that, after controlling for individual and job characteristics, workers on permanent contracts earn on average about 15% more than workers on fixed-term contracts with similar observable characteristics. The permanent contract wage premium is higher for men, workers at middle age and with middle education, and performing non-elementary occupations. We also find that permanent workers enjoy a higher wage premium for education and age. We explore cross-country differences in the wage premium for permanent workers and correlate them with indicators of labour market institutions. In particular, results indicate that the wage premium is higher the stricter is employment protection for permanent contracts and the higher the share of temporary employment, which supports the view that workers with fixed-term contracts suffer from a negative wage gap due to lower bargaining power.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Policy Papers with number 105.

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Length: 36 pages
Date of creation: Aug 2015
Handle: RePEc:iza:izapps:pp105
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