Earnings, Education, and Fixed‐Term Contracts
| Date | 01 September 2003 |
| DOI | http://doi.org/10.1111/1467-9485.5004007 |
| Published date | 01 September 2003 |
EARNINGS, EDUCATION, AND
FIXED-TERM CONTRACTS
Sarah Brown
n
and John G. Sessions
nn
Abstract
We explore the relationship between earnings, education, and fixed-term contracts
using data from the 1997 British Social Attitudes Survey. We find that the log
hourly wage of workers employed under such contracts is approximately 13%
lower than that of their ‘permanent’ counterparts, even after controlling for a
plethora of personal and job characteristics. Standard decompositions indicate that
the vast majority of this differential (more than 70%) is attributable to price
effects, which may reflect discrimination on the part of the employer. Such findings
may, therefore, suggest that employment protection is appropriate for individuals
employed under fixed-term contracts.
I Intro duction an d Backgroun d
Fixed-term contracts may be regarded as a barometer of labour market
flexibility.
1
They afford employers significant freedom from institutional rigidity
and allow the entrepreneurial rents that govern a firm’s life cycle to remain
unfettered by bureaucratic regulation. It should follow, then, that such contracts
would prove especially popular in relatively ‘hostile’ environments. This has
indeed been the case, with fixed-term employment becoming increasingly
commonplace in the heavily regulated French, Italian, and Spanish labour
markets, but making less impression in the relatively unencumbered UK and
USA.
2
In terms of the UK, however, the figures are still significant with some 1.7
million workers being employed on fixed-term contracts in 1998 (Labour Market
Trends, 1999). And there are signs that such employment may become more
prevalent – one in five jobs offered by medium to large employers in the early
1990s were on a fixed-term basis, 65% of which were for one year or less (Labour
n
University of Leicester
nn
University of Bath
1
We interpret the term ‘fixed-term’ as an employment contract of definite duration.
2
The proportion of workers on fixed-term contracts in France, Italy, Spain and the UK
increased respectively from 4.7%, 4.8%, 15.6% and 7.0% in 1985 to 13.1%, 8.2%, 33.6%, and
7.9% in 1997. Approximately 12% of the 150 million strong European Union workforce were
employed on fixed-term contracts in 1997 (European Commission, 1999).
Scottish Journal of Political Economy, Vol. 50, No. 4, September 2003
rScottish Economic Society 2003, Published by Blackwell Publishing, 9600 Garsington Road, Oxford OX4 2DQ, UK
and 350 Main Street, Malden, MA 02148, USA
492
To continue reading
Request your trial