Recurring Temporary Contracts and Labour Market Attachment

Abstract:

Temporary contracts are considered stepping stones into permanent position as they increase the labour market attachment of employees and serve as a screening device for employers. Recent empirical evidence shows that the increase in the probability of transition into a permanent position by accepting a temporary job is decreasing in the number of such jobs held. In addition to theories of learning about match quality, this paper focuses on the role of employability to account for this fact. As workers’ employability increases only slightly in temporary jobs and diminishes at layoffs, temporary employment spells without transition into a permanent position can adversely influence workers’ future labour market success. Therefore, multiple and interrupted temporary employment spells might lead to a persistent loss of attachment to the regular labour market.