Abstract
This study analyses the relationship between flexible employment, productivity and wages, along their distributions. We use an original firm-level dataset, which combines information on workplace characteristics from Rilevazione su Imprese e Lavoro (RIL) with the Analisi Informatizzata delle Aziende Italiane (AIDA) balance sheet information for the universe of Italian non-agriculture/financial corporations. We employ different quantile regression models to panel data and find, first, that use of temporary contracts is associated to a reduction in labour productivity and wages at each point in the corresponding distribution; and second, that the negative relationship between labour productivity and wages decreases in magnitude along the quantiles of the productivity and wage distributions, suggesting that low-productive/low-wage firms use temporary employment to permanently staff positions and to compress labour costs.
Highlights
Productivity growth has been weak in Italy since the late 1990s
We aim to provide evidence of an association between increasing use of numerical flexibility at the firm level—that is, intensive use of flexible work arrangements—and labour productivity and wages, taking explicit account of the differences in productivity levels and the wages paid to workers across businesses
The present analysis focuses on how adoption of short-term contractual arrangements affects both labour productivity and wages
Summary
Productivity growth has been weak in Italy since the late 1990s. Several concurrent phenomena contribute to explaining the slowdown of productivity growth in the Italian economy including segmentation of the productive system as the result of increasing firm heterogeneity (Bugamelli et al 2018). In the third case of systematic and continuous use of temporary employees to staff all positions, productivity is likely to decrease through disinvestment in human capital and weakening of the firm’s organizational capabilities (see among others, Abraham and Taylor 1996; Houseman 2001; Vidal and Tigges 2009; Aleksynska and Berg 2016) Against this background, we aim to provide evidence of an association between increasing use of numerical flexibility at the firm level—that is, intensive use of flexible work arrangements—and labour productivity and wages, taking explicit account of the differences in productivity levels and the wages paid to workers across businesses.
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