Firms’ Use of Temporary Employment and Permanent Workers’ Concerns about Job Security: Evidence from German Linked Employer-Employee Data

Abstract

This research note addresses the question of how permanent workers perceive their individual job security if their firm employs temporary workers with fixed-term contracts and temporary agency workers. One the one hand, the core-periphery hypothesis predicts that permanent workers should have fewer concerns about job security if the firm employs temporary workers to deal with demand fluctuations. On the other hand, a counteracting substitution effect might increase concerns about job security. Using linked employer-employee data and estimating regression models at the worker level with establishment fixed effects, evidence supports the core-periphery hypothesis for temporary agency work but not for fixed-term contracts.