Fixed-term employment in Poland: correlates and consequences

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Presentation by Anna Kiersztyn (University of Warsaw, Institute of Sociology) on the occasion of the EESC LMO conference on "Typical and atypical work contracts - advantages and disadvantages from the labour market perspective" in Warsaw, Poland, on 8/9 April 2013.

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Fixed-term employment in Poland: correlates and consequences

  1. 1. Fixed-term employment inPoland: correlates and consequences dr Anna Kiersztyn Institute of Sociology University of Warsaw
  2. 2. The main question What are the consequences of fixed-term employment (FTE) for employees in Poland?The answer depends on the specific reasons for FTE use by employers, especially whether: FTE is treated mainly as a way of screening candidates for stable employment on the basis of open-ended contracts (OEE)? FTE is used mainly to cut down on labor costs and facilitate worker dismissal? („Flexibility at the margin”)
  3. 3. PremisesIt has been found that in countries where regular employment ishighly protected and in periods of higher uncertainty, in increase inFTE reflects an attempt to achieve flexibility at the margin andresults in a dual labor market. Under such conditions FTE is morelikely to offer lower job security and fewer training opportunities.In Poland: Despite relatively low levels of the OECD strictness of EPLindicator, there is a widespread opinion that in practice, the firingof employees on open-ended contracts is very difficult and costly. According to Polish LFS data, the fastest growth in the incidenceof FTE took place in 2001-2004, a period of economic slowdown,high unemployment and economic uncertainty for companies.
  4. 4. HypothesisI expect that in the Polish context, fixed-term contractsare associated with insecure, secondary sector jobs –rather than jobs which serve as entry-points to highquality, stable employment. The analysis:Correlates of FTE (to what extent is it concentrated amongindividuals with the lowest labor market position: women, theyoung, low qualified workers, low status occupations)?Economic consequences of FTE for workers and theirhouseholds: wages, the risk of poverty, social / financialexclusion (access to mortgage loans).Individual dynamics of FTE: stepping stone or trap?
  5. 5. The dataEuropean Survey of Income and Living Conditions (EU-SILC), Polish data covering the years 2005-2008; on arepresentative sample of 14-16 thous. households. Allhousehold members aged 16 and above were surveyed.Analysis on a sample of production age respondents inpaid employment (sample sizes in the successivewaves: N=12126; 11787; 11607; 11452).
  6. 6. Incidence of FTE 60% Total Male Female 50%Percent in FTE 40% 30% 20% 10% 0% 2005 2006 2007 2008
  7. 7. Correlates of FTE: age 2005 2006 2007 2008 80% 70%Percent in FTE 60% 50% 40% 30% 20% 10% 0% 18-24 25-29 30-34 35-39 40-44 45-49 50-54 55-64 Age categoryThis relationship cannot be fully explained by the fact that manyyoung people are still in education, and have lower tenureEven when both variables are controlled for (logistic regressionmodels), workers aged under 30 are almost 3 times more likely tobe in FTE, compared to those aged 35-54
  8. 8. Correlates of FTE: education 60% 2005 2006 2007 2008 50%Percent in FTE 40% 30% 20% 10% 0% Elementary and Vocational / high College / universi- below school ty
  9. 9. Correlates of FTE: occupation 60% 2005 2006 2007 2008 50%Percent in FTE 40% 30% 20% 10% 0% ISCO-1,2 ISCO-3 ISCO-4 ISCO-5 ISCO-6,7,8 ISCO-9 Occupational category ISCO- 1,2 Managers and professionals ISCO- 3 Technicians and associate professionals ISCO- 4 Clercs ISCO- 5 Service and sales workers ISCO- 6,7,8 Skilled manual workers ISCO- 9 Elementary occupations
  10. 10. FTE means lower wages Average gross monthly wage of full-time employees in 2008 (zloty) 0 500 1000 1500 2000 2500 3000 3500 2229 All employees 1556 3107 Managers and professionals 2190 2438Technicians and associate professionals 1768 1964 Clercs 1438 1475 Service and sales workers 1211 1978 OEE Skilled manual workers 1672 FTE 1379 Elementary occupations 1255Wages of FTEs are, on average, 30% lower than those of open-ended employees (OEEs). However, the difference betweenFTE and OEE wages is generally smaller in lower status jobs
  11. 11. FTE and wages: OLS resultsOLS regression models (dependent variable: log monthlywages) controlling for other determinants of earnings levels(gender, age, education, occupation, industry branch, workhours etc.) confirmed the relationship between FTE andlower wages.For example, according to the OLS models, employee Xemployed on the basis of an open-ended contract, receivingaverage wages in 2008, would earn – on average – 411zloty more than an identical fixed-term employee Y (19%difference).If both X and Y were full-time workers, the estimateddifference in their expected wages would be 14%. Thisdifference can be considered a specific „penalty” suffered byFTEs, wholly attributable to their employment contract!
  12. 12. Working poor among FTEsAt risk of poverty indicator (equivalised household disposableincome after social transfers below 60% of country median)Material deprivation index – identifies households which declarethey cannot afford to satisfy certain needs (according to theoperationalization adopted in the EU-SILC)Financial exclusion indicator – identifies households which do notown a bank account nor have access to credit or loan due to anactual or anticipated denial on the part of the bank (2008 only) Individual-level poverty indices by type of employment, 2008 At-risk of poverty OEEMaterial deprivation FTEFinancial exclusion 0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
  13. 13. Conditional relationships Poverty indices by sources of income at the household level, 2008 All households (100%) Stable employment only (20,5%)Stable and temporary employment (6,2%) Temporary employment only (5,8%) Retirement / disability benefits (31,9%) No stable sources of income (3,6%) 0% 10% 20% 30% 40% 50% 60% 70% Financial exc- Material depriva- At-risk of poverty lusion tionThe negative consequences of FTE concern mostly householdsin which FTE is the only source of fairly stable income. Livingtogether with someone holding stable employment offsets therisk of poverty and social exclusion among FTEs
  14. 14. Access to mortgage loansHowever, despite common assumptions, today FTE does not, bydefinition, preclude access to mortgage loans...(...for banks, it is actually more desirable than other kinds of non-standard work arrangements: civil agreements, self-employment)Today, what is most important – for both FTEs and OEEs –is sufficiently high income, and also: Tenure with the current employer must be at least 3 months (insome banks, 6 months or even more), it is better if this is not thefirst employment contract with the current employer The number of months left before the contract expires shouldbe at least 6 (in some banks, 12). Even when this is not the case,if the employee obtains a notice confirming the employerswillingness to prolong the current contract, he / she can still getthe loan...
  15. 15. FTE – stepping stone or trap?Analysis of the panel subsample in the EU-SILC: productionaged respondents, initially in FTEIn the successive waves of the EU-SILC, between 26% and29% of FTE was in open-ended employment one year later.(Between 54% and 58% remained in FTE, and an additional13-16% exited employment.)However, in the long term the percentage of FTE making thetransition to open-ended employment increases (to almost40% after 2 years), especially among higher educated workers.In the case of former FTEs, open-ended contracts do notalways lead to stable employment: 12% of initial FTE, whobecame OEE a year later, returned into FTE after an additionalyear (for initial OEE, the respective percentage was 3%)
  16. 16. ConclusionsThe results show that FTE is concentrated in the lowersegments of the Polish labor market: among the leasteducated and in low level occupations, and young workers.The relationship between age and the likelihood of FTE holdswhen tenure is controlled for, implying cohort effectsFTE significantly lowers workers wages, independent of otherfactors (14% „penalty” wholly attributable to FTE...)FTE increases the risk of poverty and material deprivation –but mostly in households which do not have access to incomefrom OEE. Living together with OEEs protects against poverty...however, it does not, by itself, rule out access to mortgageloans. In practice, lack of access may be more likely amongFTEs, but due to lower wages.A significant group of workers appear trapped in FTEFTE exacerbates existing labor market inequalities
  17. 17. Thank you for your attention!
  18. 18. Correlates of FTEModele regresji logistycznej; zmienna wyjaśniana: formazatrudnieniaZmienne wyjaśniające:płeć, wiek (kategorie), wykształcenie (wg klasyfikacji ISCED:podstawowe , średnie, wyższe; średnie obejmuje też zasadniczezawodowe), status edukacyjny, status emerytalnymiejsce zamieszkania (obszar gęsto, średnio i słabo zaludniony wgdefinicji Eurostat), bezrobocie w roku poprzedzającym badanie,staż pracy (łączny – również poprzednie prace – czy krótszy niż 3lata)Cechy aktualnej pracy respondenta: skala statusu zawodu (ISEI –International Socio-Economic Index of Occupational Status),stanowisko kierownicze, branża firmy zatrudniającej respondenta(sezonowe – rolnictwo, budownictwo, hotele; handel; pozostałebranże); wielkość firmy (do 10 i powyżej 50 pracowników)
  19. 19. FTE and poverty / deprivationWskaźniki charakteryzujące gospodarstwa domowerespondentów:Ubóstwo dochodowe: sytuacja, w której ekwiwalentny dochód dodyspozycji w gospodarstwie domowym (po transferach socjalnych)jest niższy od 60% mediany ekwiwalentnych dochodów dodyspozycji w badanych gospodarstwach.Deprywacja materialna: występują co najmniej 3 spośródnastępujących 9 przejawów trudności materialnych: brak środkówna sfinansowanie tygodniowego wypoczynku rodziny raz w roku,jedzenie mięsa lub ryb co drugi dzień i ogrzewanie mieszkaniaodpowiednio do potrzeb; brak telefonu, telewizora kolorowego,pralki automatycznej , samochodu; kłopoty z terminowymuiszczeniem czynszu, opłat za gaz, elektryczność, wodę, itp., bądźspłatą rat kredytów i pożyczek.
  20. 20. Wykluczenie finansowe dotyczy gospodarstw, w których – zgodnie z deklaracją respondentów – żaden z członków nie posiada bieżącego rachunku bankowego i nie ma dostępu do kredytu (w postaci karty kredytowej, pożyczki na dowolny cel czy możliwości dokonywania zakupów w ratach), ponieważ:• gospodarstwa nie stać na pokrycie opłat za prowadzenie konta czy rat kredytu• bank odmówił założenia rachunku bądź udzielenia pożyczki członkom gospodarstwa• w ocenie respondenta, gdyby ktoś z członków gospodarstwa podjął próbę założenia konta bądź uzyskania kredytu, spotkałby się z odmową.Informacje pozwalające obliczyć powyższy wskaźnik dostępne były jedynie dla roku 2008 – analogiczne pytania nie były

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