Non‐standard Employment and Rent‐sharing

Abstract

In this paper, we analyse how non-standard (or non-regular) employment affects the capacity of regular workers to appropriate rents. In this context, we first extend the theoretical framework of Estevão and Tevlin to account for the heterogeneity of labour (regular and non-regular workers). The predictions of the model are then tested with detailed industry-level data over four decades for Japan, where, similar to the majority of advanced OECD countries, the role of standard employment has declined significantly. After controlling for worker characteristics (gender, age, education) and using an array of econometric approaches, our results indicate that in contexts characterized by a higher share of non-regular employment, rent-sharing by regular workers is lower. This might have contributed to the long-run wage stagnation observed in Japan in recent decades.

Does Temporary Employment undermine the Quality of Permanent Jobs?

“…The second empirical exercise that we carry out takes a closer look at the task content of the occupations available within firms, in order to clarify whether the knock-on effect on the quality of permanent jobs translate also into a levelling down of the skills and competences required to the workers. Indeed, as already recalled, the low-road employment hypothesis suggests that firms pursuing a low-road employment strategy tend to increase the degree of substitutability between the two categories of workers in order to weaken the bargaining power of core employees (Fukao et al, 2022;Basu et al, 2021). As a consequence, this hypothesis entails a homogeneity between the cognitive competencies and the skills required to permanent and temporary workers, and therefore predicts a convergence in the activities carried out by the two categories of employees.…”

“…Osterman (2000), for instance, using establishment-level US data documents that firms relying on functional flexibility for core occupations are significantly less likely to make use of temporary employment compared to other firms. Similarly, Fukao et al, (2022) find that in Japan a growing presence of temporary workers weakens the ability of permanent employees to appropriate rents, which contrasts with the idea that core employees feel somewhat "protected" thanks to the presence of peripheral workers. Analogous evidence contrasting the core-periphery view has been reported by other studies using data from various countries (e.g.…”

“…self-realization, social recognition) will be low too. Second, in presence of asymmetric information and incomplete contracts, low-road firms have an incentive to maintain temporary and permanent jobs as substitutable as possible, as this strengthens their bargaining power vis-à-vis the latter (Fukao et al, 2022;Basu et al, 2021). In our setting this argument, which reminds the traditional radical position supporting the use of contractual forms as disciplinary device (Marglin, 1974;Braverman, 1974;Gintis, 1976, Bowles, 1985, implies that the tasks and quality of permanent occupations will tend to match quite closely those of the temporary ones, with the possibility of a negative knock-on effect on the quality of all jobs.…”

“…In contrast, the approaches supporting the so-called low-road employment hypothesis suggest that when firms decide to pursue competitive strategies based on low labour costs and temporary employment, they have strong incentives to design jobs of relatively low quality for all types of employees, independently of their contract. By doing so, in fact, firms can economize on costly skills and exert effective discipline on permanent workers by virtue of their close substitutability with temporary ones (Osterman, 2018;Fukao et al, 2022;Basu et al, 2021). Thus, in such cases increases in the use of temporary work are expected to be associated with the creation of permanent positions of similar low quality, pointing towards a knock-on effect that negatively affects the quality of all jobs (Bellani and Bosio, 2021).…”