Job Security, Financial Security and Worker Well‐being: New Evidence on the Effects of Flexible Employment
| Date | 01 May 2013 |
| Published date | 01 May 2013 |
| DOI | http://doi.org/10.1111/sjpe.12005 |
JOB SECURITY, FINANCIAL SECURITY
AND WORKER WELL-BEING:
NEW EVIDENCE ON THE EFFECTS
OF FLEXIBLE EMPLOYMENT
Colin P. Green* and Gareth D. Leeves**
ABSTRACT
This paper uses panel data drawn from the Household, Income and Labour
Dynamics in Australia (HILDA) survey to provide new evidence of the links
between unemployment, wages, job security, financial security and workers’ well-
being for workers in flexible employment. Our findings indicate that workers in
flexible employment encounter more unemployment and experience increased job
insecurity; unemployment is associated with wage penalties. Lower wages, job
insecurity and financial insecurity affect well-being. However, these negative out-
comes are mitigated by longer job tenure. Our results have implications for
moves towards a flexicurity model of employment
II
NTRODUCTION
The prevalence of flexible employment contracts has grown markedly across
many OECD countries (Booth et al., 2002; Bradley et al., 2003; Gagliarducci,
2005). While ‘flexibility’ can encompass a range of employment conditions, a
common feature is less security in the employment relationship. One manifes-
tation of this is the move in some countries from job security as a policy aim
to employment security, the so-called ‘flexicurity’ model (European Commis-
sion, 2007), which envisages multiple employment contracts across the work-
ing life. An implication of this model is that individuals are likely to
experience more frequent transitions between unemployment and employment.
A concern is that for some individuals, these more flexible and insecure work
histories can consist of unemployment interspersed with periods of employ-
ment in poor quality and low-paying jobs.
1
Indeed, unemployment and con-
cerns about job security have been directly linked with subsequent wage
penalties (Arulampalam, 2001; Campbell et al., 2007). This paper extends this
line of investigation by examining the broader impact of these characteristics
*Economics Department, Lancaster University
**School of Business, Monash University Sunway Campus
1
This has been characterized as a process of social exclusion (Bradley et al., 2003).
Scottish Journal of Political Economy, Vol. 60, No. 2, May 2013
©2013 Scottish Economic Society. Published by Blackwell Publishing Ltd, 9600 Garsington Road, Oxford,
OX4 2DQ, UK and 350 Main St, Malden, MA, 02148, USA
121
of flexible work arrangements on worker well-being. In particular, we consider
the impact of unemployment, job insecurity and wages on worker well-being
and the ability to conduct and manage personal finances. In addition, we
investigate the extent to which financial management issues are themselves a
source of decline in worker well-being. This potential indirect effect of unsta-
ble employment histories could be an additional influence on well-being that
has not been the subject of previous research.
Existing evidence on the effect of flexible employment on well-being has
focused almost entirely on one dimension, job satisfaction. Earlier research
suggested that flexible working contracts were associated with lower levels of
job satisfaction (Booth et al., 2002). More recent research suggests that these
subjective differences in overall job satisfaction can be compensated in part by
other characteristics of employment (Green et al., 2010). Nevertheless, there
appears to be growing evidence that a relative dissatisfaction with a lack of
job security is a key concern for flexible contract workers (Theodossiou and
Vasileiou, 2007; Origo and Pagani, 2009; Green and Heywood, 2011). In the
flexicurity framework, it is argued that measures such as generous social secu-
rity, high spending on active labour market programs and low employment
protection legislation can offset concerns related to declining job security (Ori-
go and Pagani, 2009).
2
How more flexible employment may influence general well-being is complex.
As indicated above, a key implication of a move to more flexible contracts is
a loss of employment protection and hence job security. Existing evidence
demonstrates that workers who experience greater feelings of job insecurity
experience lower life satisfaction (Green, 2009).
3
Lower employment protec-
tion will also, over time, influence individual work histories and these are
likely to play an important role in current labour market outcomes. For
instance, there is substantial evidence that more frequent and persistent unem-
ployment is associated with state dependence in unemployment or scarring
(Muhleisen and Zimmerman, 1993; Arulampalam et al., 2000; Clark et al.,
2001; Knights et al., 2002)
4
; past unemployment is a predictor of current
unemployment. Scarring can occur through employers identifying previous
spells of unemployment as periods where human capital and experience have
deteriorated (Pissarides, 1992). Alternatively, the intermittent work history
may provide a signal of unobservable worker characteristics such as poorer
aptitude and motivation (Lockwood, 1991). The experience of unemployment
may also lead workers to take any job that is offered and these jobs are likely
to be less secure. In addition, previous unemployment spells lead to a wage
penalty upon re-employment and this effect can be long lasting (Arulampa-
2
In this regard, Denmark, is held up as the benchmark of a flexicurity model.
3
There is the possibility that these contracts offer benefits to workers, such as more flexible
hours. These could be traded-off in an individuals well-being function against negative
aspects of the job such as lower job security.
4
The finding of state dependence in unemployment occurence was not so evident in earlier
cross-sectional stuides. US studies by Corcoran and Hill (1985) and Heckman and Borjas
(1980) failed to find any evidence of state dependence. However, a study of young British
males by Narendranathan and Elias (1993) found strong evidence of state dependence.
122 COLIN P. GREEN AND GARETH D. LEEVES
Scottish Journal of Political Economy
©2013 Scottish Economic Society
To continue reading
Request your trial