The higher educated, the lower paid: the fixed-term wage penalty within highly educated workers in Italy

Abstract

ABSTRACT This paper explores the temporary-permanent wage gap experienced by Italian graduate workers. To evaluate the wage gap along the entire wage distribution and account for heterogeneous effects of temporary employment, we apply the Recentered Influence Function (RIF) regression approach. The results suggest that the monthly net wage earned by Italian highly educated workers having a temporary contract is lower than that of their ‘permanent’ counterparts even after controlling for a plethora of individual and job characteristics. More than 50% of the wage gap is due to unobserved characteristics. The field of study, more than the location of the University, explains this discrimination effect due to contractual arrangement. Although the latter is verified along the entire distribution, major effects arise among high-paid and low-paid jobs depicting a U-shape pattern. Results are robust to self-selection, endogeneity, and gender controls.