The evidence shows that two-tier EPL reforms have dramatically raised the proportion of new recruitments made on temporary contracts (Cahuc and Postel-Vinay, 2001). Based on micro data from the Spanish Labour Force Survey covering the period 1987 to 1994, Bovez and Gomez (2004) found that exit rates from unemployment into temporary contracts are ten times larger than exit rates into permanent ones. Thus temporary contracts play a particularly important role as a mode of entry into the labour market, particularly for young workers (Chart 12).
Chart 12 presents figures for the share of temporary workers among employees with short tenure in their current job (i.e. less than one year). Using short tenure employees as a proxy for new recruitments, this measure provides an indication of the extent to which firms use temporary contracts, which should, in principle, be greater in countries that have pursued more vigorous two-tier EPL reform strategies.
Chart 12 shows a considerable crosscountry variability in the incidence of temporary contracts for short-tenured employees, with higher rates in countries that have implemented two-tier EPL reforms through the liberalisation of temporary contracts, i.e. Germany, Greece, Spain, France, Italy, Portugal and Sweden, all of which have figures greater than 45%, with peaks of 80% in Spain and 70% in Portugal. Conversely, temporary contracts account for a relatively low share of new recruitment in Romania (about 10%), in the Baltic countries, in the UK (about 17%), Ireland (about 19%) and Denmark (about 25%).
The incidence of temporary work in the EU has a marked age profile (Chart 13), which also provides evidence of the large-scale use of temporary contracts as a hiring tool, especially concentrated among the youngest segment of the labour force. On average, in the period 2005-2008, slightly more than one in every two youths aged 20 or less in work in the EU had a temporary contract. The incidence of temporary contracts gradually declines with age, but still remains above the average of all employees until about 30 years of age.
The age profile of temporary contracts takes around ten years to converge towards the overall average, suggesting that, in some Member States, young people have considerably more difficulty moving into permanent jobs than they do in others. Chart 14 plots those Member States that have an age profile 20% or more above the EU average (Spain, Poland, Portugal, Slovenia, Finland and Sweden).
The evidence also shows that, although the share of temporary contracts in Germany and France converge to the EU average rather rapidly (at around age 25, Chart 15), only at around 30 years of age does it converge towards the respective national averages (Table 3).
The longitudinal component of EU SILC (21) can be used to specifically identify the distribution of the type of labour contract used in the first regular job (Chart 16). (22)
In a large majority of the 21 Member States for which data are available for the period 2004/2005 to 2007, the use of permanent labour contracts is the more common type of labour contract for the first regular job. However, the incidence of temporary work is relatively important in many Member States. In four Member States (Spain, Poland, Portugal and Slovenia) temporary contracts are more common than permanent ones, and in two Member States (France and Luxembourg) figures are quite similar between the two(23).
LFS data from the anonymised microdata set for 2007 was used to calculate the share of workers in temporary and permanent jobs by gender, qualification and years since leaving school. Although there are large national differences, the following patterns emerge:
These patterns are broadly consistent with OECD’s (2008) results in that temporary work serves as a major entry mode into permanent jobs for many young people, since the share of recent school leavers in temporary jobs declines rapidly during the first five years after initial education, particularly in the countries where this share is initially very high. However, in some countries a considerable proportion of working young are still in temporary jobs five years after leaving school, suggesting that they become trapped.
The large sample size of the LFS anonymised microdata set for 2007 makes it possible to analyse the impact of gender and education levels. The data suggests that early school leavers are particularly at risk of becoming trapped in temporary jobs because, five years after finishing initial education, more than 40% of low qualified young workers are in temporary contracts in Germany, Spain, France, Italy, Poland, Portugal, Slovenia and Sweden.
(21) | EU Statistics on Income and Living Conditions (EU SILC). |
(22) | Using the variables PL190 (When began first regular job); PL140 (Type of contract); and PX020 (Age at the end of the income reference period). |
(23) | The reader should be aware that Chart 16 captures something different from Chart 12, as the latter considers all recruitments, i.e. not only those in first jobs. Moreover, the reference population is the total number of employees in Chart 12, whereas it is total employment (i.e. also including self-employment) in Chart 16. |