Employment, Social Affairs & Inclusion

News 13/07/2016

Temporary employment in the EU: springboards or career dead ends?

The share of temporary workers has increased in most EU Member States since 2008. Flexible contractual arrangements have been extensively used since the crisis, their major attraction for employers being their less strict dismissals rules.

Temporary employment in the EU: springboards or career dead ends?

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Between 2008 and 2014 the share of temporary workers as a percentage of the total number of employees increased by more than two percentage points in Cyprus, Slovakia, Malta, Hungary and Czech Republic. Temporary jobs may have helped people back into the labour market, but empirical evidence shows that temporary contracts are generally associated with lower levels of job satisfaction compared to permanent contracts. In addition, temporary workers have worse access to training, paid sick leave, unemployment insurance and pension, and lower salaries.

Whether this increase in the use of temporary contracts over recent years is good or bad news depends on whether they are a stepping stone into stable employment, or career dead ends, or a revolving door between unemployment and precarious jobs. A look at recent data on upward job mobility yields a worrying picture.

The chart below shows a drop in transition rates from temporary to permanent jobs (blue bar) in most EU countries. In addition, the transition rate from temporary jobs to unemployment rose in the majority of EU Member States between 2008 and 2014. These changes in transition rates occurred alongside an increase in the share of temporary employees in the total number of employees in most EU countries (green dash).

 Notes: Changes in transition rates are not available for IE, HR and DK. 2008 data on transitions are not available for UK and have been replaced by 2007 data. 2014 data on transitions from temporary to permanent jobs for SK are not available and have been replaced by 2013 data. 2014 data on transitions from temporary jobs to unemployment for DK and SK are not available and have been replaced by 2013 data. Data on the share of temporary employees have a break in the time series for FR in 2014. In addition, transitions data for EE have limited reliability.

Diversity across Member States

The chart below presents the situation in 2014. Spain stands out in that it had the second highest share of temporary employees in the EU28 in 2014: 24.0%, after Poland with 28.4% (represented by the size of the bubbles). Spain also had one of the lowest rates of transition to more stable jobs (12.0%), as well as one of the highest transition rate towards unemployment (20.7%). The situation for temporary employees was also bad in Croatia, Portugal, Italy, Denmark and Bulgaria which are also to be found in the top left-hand corner of the chart. In these countries, temporary employees were particularly vulnerable in 2014 due to their relatively low chances of moving to more secure jobs and the high risk of becoming unemployed. In addition, France, Greece and Finland also exhibited low transition rates from temporary to permanent jobs, while about one in ten temporary employees became unemployed in 2014

Temporary employees in Malta, the Netherlands, Poland and Cyprus (in the bottom-left corner of the chart) were far less at risk of becoming unemployed, but seemed stuck in their temporary jobs with little chances of getting a permanent contract. Latvia and Lithuania (top-right corner of the chart) stand out as the two EU Member States where temporary employees were most mobile in 2014, showing both high transitions towards permanent jobs and unemployment.

Finally, Austria, Estonia, UK and Romania (bottom-right corner of the chart) combine high transitions toward permanent jobs and low transitions to unemployment. In these countries, the share of temporary employment is also relatively low.

 Notes: Data on EU-SILC transitions are not available for IE. Transitions data for EE and the share of temporary employees for FR have a break in time series. The bubble size represents the share of temporary employees in the total number of employees in each Member State: the higher this share, the bigger the bubble. Figures refer to yearly transition rates (status in 2013 to status in 2014). Red horizontal and vertical lines denote the unweighted EU28 average.

It should be noted that this chart reflects the situation in one year. Transition rates are strongly influenced by the economic situation, whereas the share of temporary employees tends to be more structural. Information on transition rates is still limited and not very timely. However, the data available suggest a deterioration of upward mobility chances of temporary workers during the latest years. At this stage, it is not possible to ascertain whether this is a short-term phenomenon linked to the business cycle or part of a longer-term trend towards greater segmentation of EU labour markets. If it was a sign of structural polarisation this would be worrying, not only in view of its social consequences, but also because strong labour market segmentation may depress investment in human capital and hence productivity growth.

A comprehensive analysis on this topic can be found in the recently published Analytical Web Note "Labour Market Transitions".

Author: A. Fulvimari is a socio-economic analyst at the Thematic Analysis unit of DG EMPL.

The views expressed in this article are those of the author and do not necessarily reflect the views of the European Commission.

Editor's note: this article is part of a regular series called "Evidence in focus", which will put the spotlight on key findings from past and on-going research at DG EMPL.

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