Dual Labor Market Research Articles

Two is worse than one. The mediating role of precariousness of life in the association between qualitative job insecurity and distress among Italian temps

Nowadays, the labour market’s instability and flexibility has led to increased feelings of uncertainty, insecurity and precariousness in the workforce. With respect to psychological health, to date studies focused mainly on the consequences of the fear of losing the job as a whole (i.e. quantitative job insecurity), in comparison to the consequences of threat of losing valued job features (i.e. qualitative job insecurity). Understanding the psychological mechanisms that explain the process of stress experiences, deriving from qualitative job insecurity, may contribute to identify how to promote healthier workplaces. The present study aimed to examine the mediating role of precariousness of life in the relationship between qualitative job insecurity and mental distress, i.e. emotional exhaustion and psychological symptoms. Precariousness of life is a pervasive syndrome among temporary employees affecting their daily life. The Conservation Of Resources (COR) and dual labour market theories were used as theoretical framework to draw the research hypotheses. The sample was composed of 272 white and blue collar Italian temporary employees. The results of structural equation modelling revealed that qualitative job insecurity was positively and significantly related to emotional exhaustion and psychological symptoms. Furthermore, these relationships were mediated by precariousness of life: Goodness of fit indices of mediation model was satisfactory and indirect effects were significant, therefore supporting our hypotheses. This study provided additional evidence to the literature concerning job insecurity as it focused on temporary workers, examining the effect on mental health by qualitative job insecurity via precariousness of life. Practical implications were discussed.

Dual-Labor Market and Unemployment Compensation

Abstract This paper discusses the impact of unemployment compensation on the employment and wages of regular and non-regular labor in a dual-labor market. The model in this paper assumes an effective demand constraint and an imperfectly competitive market. The results obtained are as follows. An increase in unemployment compensation increases the wages of regular labor to maintain its productivity. However, this temporarily decreases the employment of regular labor, so that the productivity and wages of non-regular labor decrease. The result is an increase in the relative wage rate of regular labor and the relative amount of non-regular labor employed. This result is independent of any economic regime. In terms of the impact on employment volume, the existence of two regimes, one wage-driven and one profit-driven, is confirmed. However, the effect on employment is weaker if unemployment compensation is financed by taxing profits.

Working poverty, nonstandard employment and political inclusion

Are labour market outsiders also political outsiders? The labour market dualization literature offers inconsistent evidence as to the effects of nonstandard employment on political demobilization. This article shows that thus far unaccounted for exposure to poverty among workers in nonstandard employment varies considerably across labour markets, and that this variation carries implications for political inclusion. Analyses of five waves of the European Social Survey indicate that exposure to working poverty absorbs much of the predictive power of nonstandard employment, suggesting that working poverty, rather than labour market per se, leads to political demobilization. The findings help explain the hitherto inconsistent results in studies of labour market dualization and lend support to the argument that future research should account for cross-national variation in working poverty.

Striking a balance: Optimal tax policy with labor market duality

We develop a dynamic general equilibrium model where employers may avoid making social security contributions by offering some workers “secondary contracts.” When calibrated using aggregate tax revenue data, the model delivers estimates of secondary “off the books” employment that are consistent with survey evidence for the EU14 and United States. We investigate the fiscal and welfare effects of varying the avoidable and unavoidable shares of labor income tax while keeping the total wedge constant, and find that increasing the employer component raises hours worked, output, and welfare. Partial labor tax evasion makes tax revenues more elastic, but full tax compliance need not be a welfare enhancing policy mix.

Hiring Temps but Losing Perms? The Effects of Temporary Hiring on Turnover in a Dual Labor Market

We study the effect of hiring temporary workers on the voluntary turnover of permanent employees within the context of a dual labor market. Using a unique longitudinal dataset with individual-level monthly payroll data for an average of 60,000 individuals belonging to 278 organizations in Spain during an eight-year period, we find a positive association between temporary worker inflows and the voluntary turnover of permanent workers. We also find that recent permanent worker downsizing reduces this positive association. Thus, the costs of disruption and identity threat associated with temporary hiring seem to outweigh the potential benefits of helping hands for permanent workers. These findings suggest that the shift toward employment flexibility may have affected the mindset of permanent employees: hiring temporary workers may be changing the social contract even in a regulatory environment characterized by strong protection for permanent workers.

Growth and development with dual labor markets

AbstractThis paper develops a formal growth model in an open economy environment that captures dual labour market characteristics. The mechanism involves economic growth driven by capital accumulation in a country with a Lewisian labour market leading to increasing labour participation at a near constant wage. The model shows that surplus labour plays a critical role in explaining different economic growth paths and structural changes in both developing and developed countries.

Status and features of the Korean labor market (2008-2018)

This article examines the status and structural characteristics of the Korean labor market since the global financial crisis in 2008. Even though the Korean labor market was resilient in the wake of that crisis, there are issues that require attention, which is including high earnings inequality, an aging labor force, increasing non-regular jobs, and rising youth unemployment rates. The Korean workforce has clearly divided not only by type of employment, but also by size of firms (large corporations and SMEs). Therefore, the main problem of employment is basically originated from the deepening dual structure in the labor market. This paper presents a brief characterization of the Korean’s labor market, analyzing in detail the main employment indicators. It also analyzes wage gap, and working conditions by employment type and firm size, focusing on the dual labor market. Additionally, examines the current situation of platform work, which has emerged as a major area of the labor market, and the trend of minimum wage, which has fluctuated in the last two years

Female outsiders in South Korea’s dual labour market: Challenges of equal pay for work of equal value

South Korea has a persistent gender pay gap despite its ratification of the Equal Remuneration Convention of the International Labour Organisation (ILO 100) and regulatory commitments to equal pay. This article identifies the extent to which the South Korean gendered dual labour market structure, notably the marked and gendered division between regular and irregular work, presents barriers to gender pay equality, and specifically to the implementation of equal pay principles. A layered examination of employment data, narrowing from aggregate statistics to occupations within two sub-industry groups, is used to examine how pay differences between women and men in work that is similar in content and educational requirements arise from their mode of employment, whether they are employed as regular or irregular workers. These structural divisions in the South Korean labour market are underpinned by a divided wage-setting system within which irregular workers are mostly excluded from benefits such as wage increases arising from seniority, and objective assessments of work value are lacking. In combination, these features help to explain why the principle of equal pay for equal work is breached and why limited progress has been made in meeting the requirements of equal pay for work of equal value.

Early-Career Complexity Before and After Labour-Market Deregulation in Italy: Heterogeneity by Gender and Socio-economic Status Across Cohorts

Labour-market deregulation may have generated more unstable and complex employment life courses. As exposure to highly volatile early-career trajectories has long-lasting consequences for the working lives of individuals, it is especially important to consider how these processes have affected younger workers in countries like Italy. Here, deregulation ‘at the margins’ of the labour market has been characterized by a strong age divide and has exacerbated the separation between insiders and outsiders. We contrast the individualization of risk perspective with the persistent inequality hypothesis by looking at differentials by gender and socio-economic status in the degree of early-career complexity of workers who entered the labour market before and after deregulation. The use of an innovative longitudinal dataset (AD-SILC) which combines administrative records on employment episodes and survey data on individuals’ socio-economic characteristics allows this study to apply advanced methods in sequence analysis to calculate the complexity of 7-year-long early career trajectories. Complexity is measured by considering the number of transitions between employment states and the length of each episode. We find that early-career complexity increased across cohorts, especially for those more exposed to deregulation. Against the scenario of a generalized increase in labour market dualization, this non-linear dynamic especially affected medium and low-educated individuals and was particularly pronounced for women. Although our analytical strategy does not allow for a causal interpretation of mechanisms engendering the observed trends, this empirical evidence is highly relevant for the implication of changes in early career patterns across cohorts for stratification research.

Do anti-discrimination laws alleviate labour market duality?

PurposeThis paper examines whether and how labour market duality can be alleviated through legislation that prohibits discrimination based on employment type.Design/methodology/approachIn 2007, the Korean government undertook a labour reform banning discriminatory treatment against fixed-term, part-time and dispatched workers. By exploiting a gradual implementation of the anti-discrimination law by firm size targeting a subset of non-regular workers, the paper identifies the treatment effects of the anti-discrimination law, taking a difference-in-difference-in-differences approach.FindingsThe results suggest that the anti-discrimination law significantly increases hourly wages and the probabilities of being covered by national pension, health insurance, and employment insurance for targeted non-regular workers in small firms relative to other workers. Anticipatory behaviours of employers and selective transitions of employees in response to the implementation of the anti-discrimination law do not underlie the estimated effects. The presence of labour unions contributes to reducing gaps in labour conditions between regular workers and targeted non-regular workers.Originality/valueThe main contribution of this paper is to provide empirical evidence on causal impacts of equal pay legislation on the gaps in labour conditions between different categories of workers, using a difference-in-difference-in-differences estimation.

Flexibilization at the Core to Reduce Labour Market Dualism: Evidence from the Spanish Case

AbstractInstitutionalist explanations of the high non‐standard employment rate in the Spanish labour market have pointed to the relevance of flexibilization at the margin, that is, the deregulation of non‐standard jobs. Using Spanish social security micro data, we find evidence that the liberalization reforms of 2010 and 2012 had flexibilization at their core, that is, greater instability due to open‐ended and full‐time contracts (erosion of employment protection) and a rise in turnover among periphery workers, increasing the segregation gap. We conclude that there is a high level of deregulation and simultaneous dualization due to the combination of flexibilization at the margin (until 2008) and the core (2010–2012).

Dual Labor Markets in Higher Education? The Case of Two Schools at the University of Buenos Aires

The dual labor market theory (DLM) posited the existence of two distinct labor markets working in parallel. A primary one is a place where high wages, employment stability and high opportunities for advancement are the norms. On the other hand, low wages, arbitrariness and less desirable working conditions determine a secondary market. The main object of this investigation is to see if differences between schools at the University of Buenos Aires, the most important and populated institution in Argentina, are stark enough to conclude the presence of DLMs. Although some authors have analyzed the higher education market using the DLM theory, in general these approaches have emphasized the presence of two markets in relation to tenured versus non-tenured professors, or between full-time versus part-time faculty members. However, few studies, if any, have tackled the issue of market segmentation in relation to fields of study.

Buy flexible, pay more: The role of temporary contracts on wage inequality

We investigate the role of temporary contracts in shaping wage inequality in a dual labour market. Based on Italian individual-level administrative data, our analysis focuses on new hires in temporary and open-ended contracts for the period of 2005–2015. To estimate the presence of differentials over the daily wage distribution, we follow Firpo (2007) and implement an inverse probability estimator, which allows us to control for labour market history, including lagged outcomes, over the last 16 years. Our results show the existence of a premium for temporary contracts over the full distribution of daily remuneration at entry, confirming the economic theory of equalizing differences. The wage premium is greater when permanent contracts are more valuable, such as for ‘marginalised’ categories like female, young, and low-paid temporary workers, and during the years of the economic crisis. The gap remains substantial after taking into account differences in working hours between workers.

How stable is labour market dualism? Reforms of employment protection in nine European countries

Labour market segmentation is at the forefront of national and European policy debates. While the European Commission and the OECD claim to promote what they see as more inclusive policies, academic observers remain sceptical. The dualization literature in particular points to stable equilibria that sustain divisions between labour market insiders and outsiders. In this article, we trace recent reform trajectories in a diverse group of nine European countries marked by a high share of temporary employment: France, Germany, Italy, the Netherlands, Poland, Portugal, Slovenia, Spain and Sweden. Our case studies show that recent reforms of employment regulation involve much more dynamism than one would expect based on the experiences of the two preceding decades, or from dualization or insider–outsider theories. The reform trajectories display rather contradictory approaches, sometimes in close succession.

Labour market dualism and immigration policy preferences

ABSTRACTWhat are the effects of labour market deregulation and increased immigration inflows on public attitudes towards immigration? Despite increased levels of dualism and free movement of labour in European countries over the last two decades, the effects of these policy developments are still unclear in the literature. This study argues that high concentrations of migrant workers in non-standard forms of employment decrease economic redistribution towards, and labour competition with, immigrants. Consequently, the politicisation of immigrant-native conflicts is paradoxically lower when immigration and labour market dualism cluster together at the occupational level. These claims are validated cross-nationally, and in a difference-in-differences setting analysing the impact of the 2005 German Immigration Act.

A stochastic estimated version of the Italian dynamic General Equilibrium Model

This paper aims at identifying the main drivers of the Italian economic cycle. To this end, we estimate a small-open economy model based on a dual labor market, which captures the main features of the Italian economy. Our results indicate that labor market rigidities are important structural features of the Italian economy, but they provide a limited contribution in explaining the business cycle fluctuations. Long-term dynamics are mostly driven by supply factors (productivity and markups). However, demand factors, including monetary and fiscal policies, play a sizeable role in the short run. Policy experiments show that expansionary fiscal policies crowd out private consumption and investment. The paper also contributes to the recent debate on fiscal consolidation. Estimated fiscal multipliers support the view that plans aimed at reducing the public debt should be based on tax increases rather than expenditure cuts.

Striking a Balance: Optimal Tax Policy with Labor Market Duality

We develop a dynamic general equilibrium model in which firms may evade the employer contribution component of social security taxes by offering some workers contracts. When calibrated, the model yields estimates of secondary labor market participation consistent with empirical evidence for the EU14 countries and the US. We investigate the optimal mix of the avoidable and unavoidable components of labor taxes and analyze the fiscal and macroeconomic effects of bringing the composition to the welfare optimum. We find that partial labor tax evasion makes tax revenues more elastic, but full tax compliance need not be a welfare enhancing policy mix.

Offshoring to a Developing Nation with a Dual Labor Market

We present a model of offshoring of tasks to a developing nation, which is characterized by a minimum wage formal sector and a flexible wage informal sector. Some offshored tasks are outsourced by the formal sector to the lower wage informal sector. An improvement in the productivity in performing offshored tasks in the developing country raises offshoring, but not necessarily formal-to-informal outsourcing, and, in response, the developed nation wage can fall. Productivity improvements in the informal sector expand both offshoring and outsourcing, and the developed nation wage must rise. When the minimum wage is reduced, the developed nation wage falls when most of the efficiency gains accrue to the informal sector.

Dual Labor Market, Inflation, and Aggregate Demand in an Agent-Based Model of the Japanese Macroeconomy

This paper presents a stock-flow-consistent agent-based model calibrated on Japanese data. The goal is to investigate the effects on the joint dynamics aggregate demand and price of the use by Japanese firms of secondary employees (temporary, part-time, or agency). Empirical evidence point to financial distress and market uncertainty as factors affecting firms’ hiring decisions, but their connections with inflation and its sensitivity to employment and output are still under-investigated. In particular, the hiring of secondary workers with lower wages can result in sluggish inflation even during boom periods. The paper aims to provide three main contributions. The first is to identify and test a possible cause of deflation, which is related to firm-level financial distress and uncertain business environment. The study of firms’ hiring policies can also shed light on the modifications in the relationship between wage and employment dynamics testified by the flattening of the Phillips curve. The second contribution is the analysis of a range of possible countervailing policies, alternative or complementary to the conventional interest rate policy pursued by the monetary authority. Finally, the paper contributes to the recent developments in the estimation of agent-based models by presenting an original technique, which relies on the identification and optimization of meta-models. The numerical results of the model are quantitatively comparable to the main features of the Japanese economy in the last twenty years. The flattening of the Phillips curve appears to be mostly due to the use of secondary employment as a buffer to reduce financial distress in an uncertain business climate. In terms of policy indications, a strong indexation of minimum wage emerges as the most effective policy to increase inflation. The sensitivity analysis also sheds light on possible reasons why monetary policy may have uncertain effects on inflation.

Offshoring to a Developing Nation with a Dual Labor Market

We present a model of offshoring of tasks to a developing nation characterized by a minimum-wage formal sector and a flexible-wage informal sector. Some offshored tasks are outsourced by the formal sector to the lower-wage informal sector.