1. New Approaches to Economic Challenges
Seminar on Project B2, 17 February 2014
JOBS, WAGES AND
INEQUALITY:
THE ROLE OF
NON-STANDARD WORK
Michael Förster, Wen-Hao Chen, Ana Llena-Noza
OECD Directorate for Employment, Labour
and Social Affairs (ELS), Social Policy Division
www.oecd.org/social/inequality.htm

2. Background and context of the project
on “Non-standard Work and Inequality”
This on-going ELS project looks at the drivers of
labour market inequalities and how those
translated into earnings and income inequalities.
It is
• Input to the broader OECD project on “Job
Quality, Labour Market Performance and WellBeing” (ELS and STD)
• Follow-up to the inequality work documented
in Divided we Stand (OECD 2011)
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3. Ad i). Aims of the OECD project on job quality,
labour market performance and well-being
• Propose an operational framework for analysing job quality in the
context of labour market performance and overall well-being
• Document the key dimensions of job quality across countries,
demographic groups and over time, and analyse their
determinants
• Reassess labour market performance whilst taking explicitly
account of job quality in addition to the quantity of jobs
• Examine the role of policies and institutions for the quality and
quantity of job opportunities
• Two-year undertaking (Oct. 2013 to Oct 2015) by Directorate of
Employment, Labour and Social Affairs and Statistics Directorate
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4. Ad ii). The necessity to follow up labour
market inequalities
Background
• Changes in earnings and labour market conditions are the most
important direct key driver of rising income inequalities (OECD, 2011)
• Policy trade-offs: Many regulatory reforms and institutional changes
tended to increase employment opportunities, at the same time they
were associated with wider wage inequality
Questions
• To which extent are labour market inequalities driven by gaps between
“typical” and “atypical” forms of employment?
• Do non-standard jobs pay less and are of poorer quality?
• To what extent are “atypical” jobs “stepping stones” to improved
labour market prospects, or rather “traps”?
• How do atypical work patterns affect household earnings and income
inequality?
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5. Structure of the presentation
1. Development and characteristics of non-standard employment
• Defining non-standard work (NSW) and documenting trends and
characteristics
• Are non-standard workers in lower-paid or lower-quality jobs?
2. Labour market prospects of non-standard workers
• Are NSW jobs “stepping stones” or “dead ends”?
• Employment transitions, wage penalties and upward earnings mobility
3. How does NSW affect household income inequalities and poverty?
• How is non-standard work distributed at the household level?
• The distributional position of non-standard workers
• In-work poverty risks
4. Conclusions
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6. What is “non-standard” / “atypical”
work: some words on definitions
• The notion of non-standard work (NSW) remains a fuzzy
concept, with a range of country-specific conventions and
involving data comparability issues
• In its broadest terms, NSW is defined by what it is not, i.e. any
departure from full-time dependent employment with an
indefinite duration contract
 NSW includes all temporary and all part-time employees and
own-account self-employed
• This broad definition is also used by other international
organisations: ILO, WB, Eurofund
• NSW is not a normative concept, and different from the notion
of precarious employment
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7. Different forms of non-standard work:
example Germany
Source: OECD 2014 (forthcoming); EU-LFS
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8. The share of non-standard work is
sizeable and ranges from 15% to 55%
Share of non-standard employment in total employment, 2010 or close
Note: Sample restricted to paid and self-employed (own account) workers aged 15-64 years old, excluding employers, student workers
and apprentices.
Source: OECD (2014); EULFS; KLIPS for Korea, LFS for Japan, HILDA for Australia and LFS for Canada.
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9. Part-time workers are a heterogeneous
group
Part-time employment, by type, 2010 or closest
Note: Sample restricted to paid and self-employed (own account) workers aged 15-64 years old, excluding employers, student workers
and apprentices.
Source: OECD (2014); EULFS; KLIPS for Korea, LFS for Japan, HILDA for Australia and LFS for Canada.
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10. Non-standard work played an important role for
employment changes prior, and during the crisis
Employment growth, by type of contract, 1995-2007 and 2007-10
Source: OECD (2014); EULFS; KLIPS for Korea, LFS for Japan, HILDA for Australia and LFS for Canada.
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11. Non-standard work patterns evolved
during the crisis
• In the very first phase of the Great Recession
(2008/09), non-standard jobs have been hit harder
and the number of non-standard workers per
household declined
• In the second phase (2009/10), the number of NSW
rebounded, suggesting household coping strategies
and “added worker” effects at play
• The crisis had an impact not only on numbers but
also on dynamics: NSW were less likely to maintain
their status (and fall into joblessness), compared with
their SW counterparts
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12. Do atypical jobs pay less?
Ratio of median hourly wages (standard workers = 1), 2010
Source: OECD (2014); EULFS; KLIPS for Korea, LFS for Japan, HILDA for Australia and LFS for Canada.
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13. Do atypical jobs provide less job
security?
Ratio of reported probability of job loss within the next 6 months
(standard workers = 1), 2010
Source: OECD (2014); EWCS 2010.
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14. Growth in non-standard work also
shaped trends to job polarization
Growth in standard and non-standard employment shares by job
decile, percentage point changes 1995 - 2010
Source: OECD (2014)
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15. Structure of the presentation
1. Development and characteristics of non-standard employment
• Defining non-standard work (NSW) and documenting trends and
characteristics
• Are non-standard workers in lower-paid or lower-quality jobs?
2. Labour market prospects of non-standard workers
• Are NSW jobs “stepping stones” or “dead ends”?
• Employment transitions, wage penalties and upward earnings mobility
3. How does NSW affect household income inequalities and poverty?
• How is non-standard work distributed at the household level?
• The distributional position of non-standard workers
• In-work poverty risks
4. Conclusions
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16. “Stepping stones or dead ends”: are those
in NSW likely to move into standard jobs?
• Controlling for characteristics and initial employment status,
temporary workers are 6-8 points more likely than the
unemployed to be in standard work after one year
• For part-timers, transition rates into standard jobs are higher
for those with permanent job contracts
• In most countries, self-employed have a lower probability to
move into standard work
• Mixed evidence of stepping-stone effect of NSW by workers’
characteristics:
- In many countries, stepping-stone effects are mainly visible for
prime-age and older workers, but not for young temporary
workers;
- For part-timers, transition probability to SW is generally higher
for women.
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17. Does NSW lead to higher risks of nonemployment?
• Temporary workers are at higher risk of both
unemployment and inactivity than those in SW
in ¾ of countries
• Part-timers are more likely than SW to move out
of the labour force
• Self-employment is not associated with higher
risks of unemployment but risk of inactivity is
higher for women in half of the countries
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18. Is there a wage penalty for NSW, controlling
for individual and job characteristics?
• Temporary workers face a wage penalty, ranging between 3% to
19% lower hourly wages, in 2/3 of the countries
– The wage penalty is higher for women, for the young and for
low-skilled workers
– The wage penalty tends to disappear at older ages.
• Hourly wages for part-timers tend to be higher in half of the
countries for men and in 2/3 for women
– but mostly among older workers
– and more often for those with permanent contracts
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19. What are the prospects for temporary
workers in terms of earnings mobility?
Comparing with workers remaining in standard work
over two years:
– Staying in a temporary job is associated with greater
earnings instability
– Moving from a standard job to a temporary contract
leads to higher risks of downgrading in earnings
– Moving from a temporary contract to a standard job
leads to upward mobility in almost all countries
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20. Structure of the presentation
1. Development and characteristics of non-standard employment
• Defining non-standard work (NSW) and documenting trends and
characteristics
• Are non-standard workers in lower-paid or lower-quality jobs?
2. Labour market prospects of non-standard workers
• Are NSW jobs “stepping stones” or “dead ends”?
• Employment transitions, wage penalties and upward earnings mobility
3. How does NSW affect household income inequalities and poverty?
• How is non-standard work distributed at the household level?
• The distributional position of non-standard workers
• In-work poverty risks
4. Conclusions
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21. Will the growth in NSW lead to higher
income inequality and poverty?
An increase in the share of non-standard workers is likely to
contribute to increased individual earnings dispersion, but
the impact on household income depends on:
• “Demography”: in which household do NSW live, and are
they main or secondary earners
• “Earnings”: what is the contribution from NSW earnings at
the household level and how are they distributed
• “Incomes”: what is the position of NSW workers in the
overall income distribution and how do different work
arrangements affect the risk of poverty
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22. Non-standard work is a common feature at
the household level
41% of all working households include a non-standard worker
Source: OECD (2014); EU-SILC, KLIPS for Korea, HILDA for Australia and SLID for Canada.
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23. Many non-standard workers are the main
income earner in their household
Half of all non-standard workers are main household earners
Source: OECD (2014); EU-SILC, KLIPS for Korea, HILDA for Australia and SLID for Canada.
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24. Households with only non-standard worker(s)
earn (much) less
Median earnings ratio (one earner SW households = 1), 2010
One earner NSW households
2 adults (+)
Single
Single-parent
Two earners households with NSW
2 NSW
Mixed SW/NSW
2.0
1.5
1.0
0.5
0.0
Source: OECD (2014); EU-SILC, HILDA for Australia , KLIPS for Korea and SLID for Canada.
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25. Earnings from non-standard work can smooth or
increase household earnings inequality
Changes in household earnings inequality by successively adding
different household employment types
Source: OECD (2014); EU-SILC, KLIPS for Korea, HILDA for Australia and SLID for Canada.
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26. Individual NSW are not necessarily at the lower end of
the distribution when looking at household income
2/3 of NSW in the bottom quintile of individual earnings move
up the distribution in terms of household income
Note: Quintiles of individual earnings are based on all workers, while quintiles of household income are based on the whole working-age
population.
Source: OECD (2014); EU-SILC.
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27. But the distributional position of NSW depends
largely on the work type of other household members
For low-earnings NSW it is more likely to remain at the
bottom of the income distribution if they are in households
with only NSW:
• The share of those remaining in the bottom quintile who live
with standard workers is 13%, while the share for those living
in with non-standard workers is 41%
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28. Almost one third of the poor and two thirds
of the working poor are in NSW households
Distribution of income poverty by household employment type
NSW
SW
Mixed SW/NSW
Jobless
100%
80%
60%
40%
20%
Working poor
0%
Note: The poverty line is defined at 50% of the median equivalised household income for the entire population.
Source: OECD (2014); EU-SILC, HILDA for Australia , KLIPS for Korea and SLID for Canada.
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29. Households with only NSW have much
higher poverty rates than those with SW
Income poverty rates by employment pattern
Jobless 34%
NSW 22%
Mixed 3%
Note: The poverty line is defined at 50% of the median equivalised household income for the entire population.
Source: OECD (2014); EU-SILC, HILDA for Australia , KLIPS for Korea and SLID for Canada.
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30. Take away (I)
• Employment in non-standard work arrangements in a broad sense
is widespread: it accounts for one third of total employment. 41%
of working households include a non-standard worker;
• NSW has increased over the years, though less rapidly than often
assumed;
• NSW contributed to job polarization;
• On some measures of job quality, NSW are worse off than full-time
permanent employees. In particular, on cross-section, hourly
wages are 20-30% lower and job insecurity is higher;
• Also household earnings are lower when non-standard workers are
present (40% for households where there are only NSW earners).
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31. Take away (II)
• Stepping-stone effects for non-standard work exist in most
countries, but they depend on the type of NSW and there are
trade-offs involved;
• The probability for temporary workers to move into a standard job
is relatively high, but they often face considerable wage penalties,
experience greater earnings instability and upward earnings
mobility requires a move to standard work;
• Prospects also differ greatly by the characteristics of non-standard
workers, with prime-age and older workers facing better chances
to use non-standard jobs as “stepping stones”;
• These findings point to labour market segmentation within nonstandard workers.
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32. Take away (III)
• In the first phase of the crisis, non-standard jobs were hit harder
but in the second phase their number increased again linked to
household coping strategies;
• Households with non-standard work arrangements, especially oneearner households, were less likely to maintain their employment
status during the crisis;
• Earnings from non-standard work are more dispersed than those
from standard jobs;
• Low-earning NSW are likely to be at the bottom of the household
income distribution, especially if they live with another nonstandard rather than with a standard worker;
• The risk of poverty is not associated with non-standard work per
se. 2/3 of the working poor live in households where all earnings
are drawn from non-standard work.
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33. Thank you for your attention!
www.oecd.org/social/inequality.htm