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This study analyzes the prevalence and characteristics of fixed-term and part-time employment in five Latin American countries and assesses their impact on wages and labor conditions.
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Non-Standard forms of employment in Latin America. Prevalence, characteristics and impacts on wages Roxana Maurizio Universidad de General Sarmiento, IIEP and CONICET Argentina 4th Regulating for Decent Work Conference ILO, Geneva, 8-10 July 2015
Motivation • NSFE have grown globally in the last decades, associated to technological change, labour flexibility, new forms of industrial organisation and higher female labour participation. • Latin America has experienced a process of significant improvement in the labour market during the last decade. • However, LACs continue to suffer from deficits in their labour markets. Even within formal work, significant prevalence of non-permanent contracts and part-time jobs. • Debate about the causes, role and consequences of non-standard types of employment. • Unlike developed countries, there is scarce literature on incidence, evolution and characteristics of NSFE in Latin America.
Objetives Analyse fixed-term and part-time employment in five Latin American countries: Argentina, Brazil, Chile, Ecuador and Peru. • In particular, • Estimate the incidence of these phenomena in salaried employment and in different subgroups of workers. • Analyse their evolution along the last decade. • Assess the extent to which NSFE implies wage gaps and precarious labour conditions.
Data Microdata from household surveys. First decade of the new millennium. Wage-earners. • Argentina. Encuesta Permanente de Hogares (EPH). 2003-2013. Urban areas. • Brazil. PesquisaMesal de Emprego (PME). 2003-2013. Urban areas. • Chile. Encuesta de Caracterización Nacional(CASEN). 2000, 2003, 2006, 2009, 2011. • Ecuador. Encuesta Nacional de Empleo, Desempleo y Subempleo(ENEMDU). 2004-2012. • Peru. Encuesta Nacional de Hogares(ENAHO). 2004-2012.
Approach and Definitions Empirical identification of formality/informality: • Argentina: formal if his/her employer pays social security contributions. • Brazil/Chile: formal if he/she has signed a labour contract. • Ecuador: formal if he/she receives social insurance. • Peru: formal if he/she is affiliated to a pension system. Measurement of temporary employment: Two types of approaches: a broader one that focuses on whether the job has an end date (Argentina and Chile) and a more specific one that inquire into the type of contract, whether or not it is open-ended (Brazil, Ecuador and Peru). Definition of part-time employment: Employedworkingless than 35 hours per week. Voluntary and involuntary underemployment.
Estimation of wage gaps associated with NSFE • Heckman’s Two Step. It allows estimating the effects of the covariates only on the mean wage. • Unconditional Quantile Regression (UQR)to assess the impact of covariates on different quantiles of the wage distribution. The concept behind this method is the RecenteredInfluence Function (RIF), defined as: Where is the non conditional r-th quantile of wages and is the influence function. This function measures the effect of slight changes in the distribution on the different functionals of the dependent variable. IF is defined as: where ; and where is a distribution that only puts mass at the point value . Once the RIF is calculated, it is possible to perform OLS estimation using it as the dependent variable and the same covariates as in standard Mincer equations.
Evolution of informality and hourly wage inequalityLatin American countries, ca. 2000-2009
Prevalence of temporary employment in formal and informal wage-earners
Probability of being temporary worker • Informal workers face higher probabilities of having a temporary job than formal workers. • Construction activities has the highest use of temporary contracts. In Chile and Ecuador this kind of contract is also important in agricultural activities. • There is not a clear correlation between fixed-term job and gender. In Argentina and Peru, men have a higher probability of being temporary workers. • Negative correlation between the probability of being a temporary worker and the skill level. • Having a part-time position has a strong positive correlation with it being temporary. Econometric results confirm that wage-earners with a less favourable vector of characteristics have a higher probability of having a temporary job. It will be probably associated with lower labour income and also with higher income instability, due to the fixed term of these contracts.
Probability of being part-time worker • Informal workers have greater probability to work part-time, both voluntarily and involuntarily. • Women exhibit higher chances than men of working part-time both voluntarily and involuntarily. The argument that women are only partially devoted to the labour market to find a balance between labour and non-labour activities fails to explain the greater incidence of involuntary underemployment that also affects them. • The U-shaped profile that links the probability of part-time work to age is stronger for involuntary underemployment. • Positive impact of education on the probability of having a part-time job, mostly associated with voluntary underemployment. This would suggest that, wage-earners with higher qualifications have greater bargaining power to achieve a reduced workday.
Wage gaps associated to temporary employment • Arguments: • Once the worker fills an open-ended position, she/he is in a better position to bargain for labour conditions due to the existence of firing costs (Blanchard and Landier’s, (2002). • Permanent workers could receive more on-the-job training (unobserved here). • Higher level of unionization among permanent workers. • Labour legislation stipulates that temporary workers should have equal treatment in wage determination. In these countries labour inspections usually have limited scope; therefore, the use of temporary contracts might weaken labour rights. • Temporary workers do not receive bonuses and premiums that companies do pay to permanent workers.
Wage gaps associated to temporary employment along the wage distribution Argentina: the penalty falls through the wage distribution. Brazil, Ecuador and Peru: increasing profile in the penalty along wage deciles. Chile: there is not a monotone pattern.
Proportion of temporary wage-earners by hourly wage quintile
Wage gaps associated to part-time employment • Arguments: • Contrast between these results and those widely obtained for developed countries. • In LA, it could be associated with the existence of a certain lower bound for wages, even though they do not stem from higher legal minimum hourly wages for part-time wage-earners. It would be rather associated to the fact that in a context of generally low wages, those paid to part-time workers are higher than the ones that would proportionally correspond to full-time workers. • Compensating differences could also explain these premia.
Wage gaps associated to part-time employment along the wage distribution In all cases, both for formal and informal workers, the premium rises with wage, although the profile is not always monotone
Final remarks • During the last decade, LA has experienced a process of significant improvement of the labour market. However, high informality and NSFE. • Temporary employment is most important than part-time employment. Higher incidence in some specific groups of workers: informal workers, women, young and low-skilled workers. • Significant wage penalty associated with fixed-term jobs. This suggests correlation between low and unstable wages. It is even more problematic considering low or none protection from unemployment in these countries. • Underemployment, particularly involuntary, has a lower incidence than temporary employment. However, women and young people are particularly affected by this type of jobs. • An interesting result to be further studied is the fact that part-time jobs exhibit a wage premium which even rises across the distribution.
