2014.02.17 - NAEC Seminar_The Role of Non Standard Work

JOBS, WAGES AND INEQUALITY: THE ROLE OF

NON-STANDARD WORK

New Approaches to Economic Challenges Seminar on Project B2, 17 February 2014

Michael Förster, Wen-Hao Chen, Ana Llena-Noza OECD Directorate for Employment, Labour and Social Affairs (ELS), Social Policy Division www.oecd.org/social/inequality.htm

http://www.oecd.org/social/inequality.htm

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This on-going ELS project looks at the drivers of labour market inequalities and how those translated into earnings and income inequalities. It is

• Input to the broader OECD project on “Job Quality, Labour Market Performance and Well-Being” (ELS and STD)

• Follow-up to the inequality work documented in Divided we Stand (OECD 2011)

Background and context of the project on “Non-standard Work and Inequality”

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Ad i). Aims of the OECD project on job quality, labour market performance and well-being

• Propose an operational framework for analysing job quality in the context of labour market performance and overall well-being

• Document the key dimensions of job quality across countries, demographic groups and over time, and analyse their determinants

• Reassess labour market performance whilst taking explicitly account of job quality in addition to the quantity of jobs

• Examine the role of policies and institutions for the quality and quantity of job opportunities

• Two-year undertaking (Oct. 2013 to Oct 2015) by Directorate of Employment, Labour and Social Affairs and Statistics Directorate

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Ad ii). The necessity to follow up labour market inequalities

Background

• Changes in earnings and labour market conditions are the most important direct key driver of rising income inequalities (OECD, 2011)

• Policy trade-offs: Many regulatory reforms and institutional changes tended to increase employment opportunities, at the same time they were associated with wider wage inequality

Questions

• To which extent are labour market inequalities driven by gaps between “typical” and “atypical” forms of employment?

• Do non-standard jobs pay less and are of poorer quality?

• To what extent are “atypical” jobs “stepping stones” to improved labour market prospects, or rather “traps”?

• How do atypical work patterns affect household earnings and income inequality?

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1. Development and characteristics of non-standard employment • Defining non-standard work (NSW) and documenting trends and

characteristics

• Are non-standard workers in lower-paid or lower-quality jobs?

2. Labour market prospects of non-standard workers • Are NSW jobs “stepping stones” or “dead ends”?

• Employment transitions, wage penalties and upward earnings mobility

3. How does NSW affect household income inequalities and poverty?

• How is non-standard work distributed at the household level?

• The distributional position of non-standard workers

• In-work poverty risks

4. Conclusions

Structure of the presentation

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• The notion of non-standard work (NSW) remains a fuzzy concept, with a range of country-specific conventions and involving data comparability issues

• In its broadest terms, NSW is defined by what it is not, i.e. any departure from full-time dependent employment with an indefinite duration contract

NSW includes all temporary and all part-time employees and own-account self-employed

• This broad definition is also used by other international organisations: ILO, WB, Eurofund

• NSW is not a normative concept, and different from the notion of precarious employment

What is “non-standard” / “atypical” work: some words on definitions

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Different forms of non-standard work: example Germany

Source: OECD 2014 (forthcoming); EU-LFS

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The share of non-standard work is sizeable and ranges from 15% to 55%

Note: Sample restricted to paid and self-employed (own account) workers aged 15-64 years old, excluding employers, student workers and apprentices. Source: OECD (2014); EULFS; KLIPS for Korea, LFS for Japan, HILDA for Australia and LFS for Canada.

Share of non-standard employment in total employment, 2010 or close

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Part-time workers are a heterogeneous group

Part-time employment, by type, 2010 or closest

Note: Sample restricted to paid and self-employed (own account) workers aged 15-64 years old, excluding employers, student workers and apprentices. Source: OECD (2014); EULFS; KLIPS for Korea, LFS for Japan, HILDA for Australia and LFS for Canada.

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Non-standard work played an important role for employment changes prior, and during the crisis

Employment growth, by type of contract, 1995-2007 and 2007-10

Source: OECD (2014); EULFS; KLIPS for Korea, LFS for Japan, HILDA for Australia and LFS for Canada.

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• In the very first phase of the Great Recession (2008/09), non-standard jobs have been hit harder and the number of non-standard workers per household declined

• In the second phase (2009/10), the number of NSW rebounded, suggesting household coping strategies and “added worker” effects at play

• The crisis had an impact not only on numbers but also on dynamics: NSW were less likely to maintain their status (and fall into joblessness), compared with their SW counterparts

Non-standard work patterns evolved during the crisis

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Do atypical jobs pay less?

Ratio of median hourly wages (standard workers = 1), 2010

Source: OECD (2014); EULFS; KLIPS for Korea, LFS for Japan, HILDA for Australia and LFS for Canada.

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Do atypical jobs provide less job security?

Ratio of reported probability of job loss within the next 6 months (standard workers = 1), 2010

Source: OECD (2014); EWCS 2010.

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Growth in non-standard work also shaped trends to job polarization

Growth in standard and non-standard employment shares by job decile, percentage point changes 1995 - 2010

Source: OECD (2014)

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characteristics








4. Conclusions


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• Controlling for characteristics and initial employment status, temporary workers are 6-8 points more likely than the unemployed to be in standard work after one year

• For part-timers, transition rates into standard jobs are higher for those with permanent job contracts

• In most countries, self-employed have a lower probability to move into standard work

• Mixed evidence of stepping-stone effect of NSW by workers’ characteristics:

- In many countries, stepping-stone effects are mainly visible for prime-age and older workers, but not for young temporary workers;

- For part-timers, transition probability to SW is generally higher for women.

“Stepping stones or dead ends”: are those in NSW likely to move into standard jobs?

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• Temporary workers are at higher risk of both unemployment and inactivity than those in SW in ¾ of countries

• Part-timers are more likely than SW to move out of the labour force

• Self-employment is not associated with higher risks of unemployment but risk of inactivity is higher for women in half of the countries

Does NSW lead to higher risks of non-employment?

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• Temporary workers face a wage penalty, ranging between 3% to 19% lower hourly wages, in 2/3 of the countries

– The wage penalty is higher for women, for the young and for low-skilled workers

– The wage penalty tends to disappear at older ages.

• Hourly wages for part-timers tend to be higher in half of the countries for men and in 2/3 for women

– but mostly among older workers

– and more often for those with permanent contracts

Is there a wage penalty for NSW, controlling for individual and job characteristics?

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Comparing with workers remaining in standard work over two years:

– Staying in a temporary job is associated with greater earnings instability

– Moving from a standard job to a temporary contract leads to higher risks of downgrading in earnings

– Moving from a temporary contract to a standard job leads to upward mobility in almost all countries

What are the prospects for temporary workers in terms of earnings mobility?

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characteristics








4. Conclusions


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Will the growth in NSW lead to higher income inequality and poverty?

An increase in the share of non-standard workers is likely to contribute to increased individual earnings dispersion, but the impact on household income depends on:

• “Demography”: in which household do NSW live, and are they main or secondary earners

• “Earnings”: what is the contribution from NSW earnings at the household level and how are they distributed

• “Incomes”: what is the position of NSW workers in the overall income distribution and how do different work arrangements affect the risk of poverty

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Non-standard work is a common feature at the household level

41% of all working households include a non-standard worker

Source: OECD (2014); EU-SILC, KLIPS for Korea, HILDA for Australia and SLID for Canada.

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Many non-standard workers are the main income earner in their household

Half of all non-standard workers are main household earners


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Households with only non-standard worker(s) earn (much) less

Median earnings ratio (one earner SW households = 1), 2010

0.0

0.5

1.0

1.5

2.0

2 adults (+) Single Single-parent 2 NSW Mixed SW/NSW

One earner NSW households Two earners households with NSW

Source: OECD (2014); EU-SILC, HILDA for Australia , KLIPS for Korea and SLID for Canada.

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Earnings from non-standard work can smooth or increase household earnings inequality

Changes in household earnings inequality by successively adding different household employment types


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Individual NSW are not necessarily at the lower end of the distribution when looking at household income

2/3 of NSW in the bottom quintile of individual earnings move up the distribution in terms of household income

Note: Quintiles of individual earnings are based on all workers, while quintiles of household income are based on the whole working-age population. Source: OECD (2014); EU-SILC.

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But the distributional position of NSW depends largely on the work type of other household members

For low-earnings NSW it is more likely to remain at the bottom of the income distribution if they are in households with only NSW:

• The share of those remaining in the bottom quintile who live with standard workers is 13%, while the share for those living in with non-standard workers is 41%

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Almost one third of the poor and two thirds of the working poor are in NSW households

Distribution of income poverty by household employment type

0%

20%

40%

60%

80%

100%

NSW SW Mixed SW/NSW Jobless

Working poor

Note: The poverty line is defined at 50% of the median equivalised household income for the entire population. Source: OECD (2014); EU-SILC, HILDA for Australia , KLIPS for Korea and SLID for Canada.

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Households with only NSW have much higher poverty rates than those with SW

Income poverty rates by employment pattern

NSW 22%

Mixed 3%

Jobless 34%

Note: The poverty line is defined at 50% of the median equivalised household income for the entire population. Source: OECD (2014); EU-SILC, HILDA for Australia , KLIPS for Korea and SLID for Canada.

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• Employment in non-standard work arrangements in a broad sense is widespread: it accounts for one third of total employment. 41% of working households include a non-standard worker;

• NSW has increased over the years, though less rapidly than often assumed;

• NSW contributed to job polarization;

• On some measures of job quality, NSW are worse off than full-time permanent employees. In particular, on cross-section, hourly wages are 20-30% lower and job insecurity is higher;

• Also household earnings are lower when non-standard workers are present (40% for households where there are only NSW earners).

Take away (I)

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• Stepping-stone effects for non-standard work exist in most countries, but they depend on the type of NSW and there are trade-offs involved;

• The probability for temporary workers to move into a standard job is relatively high, but they often face considerable wage penalties, experience greater earnings instability and upward earnings mobility requires a move to standard work;

• Prospects also differ greatly by the characteristics of non-standard workers, with prime-age and older workers facing better chances to use non-standard jobs as “stepping stones”;

• These findings point to labour market segmentation within non-standard workers.

Take away (II)

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• In the first phase of the crisis, non-standard jobs were hit harder but in the second phase their number increased again linked to household coping strategies;

• Households with non-standard work arrangements, especially one-earner households, were less likely to maintain their employment status during the crisis;

• Earnings from non-standard work are more dispersed than those from standard jobs;

• Low-earning NSW are likely to be at the bottom of the household income distribution, especially if they live with another non-standard rather than with a standard worker;

• The risk of poverty is not associated with non-standard work per se. 2/3 of the working poor live in households where all earnings are drawn from non-standard work.

Take away (III)

Thank you for your attention!

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2014.02.17 - NAEC Seminar_The Role of Non Standard Work

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