Step or trap? Transition from fixed-term contracts in Central Eastern Europe

Abstract

This article investigates the transition from fixed-term contracts to permanent jobs from the viewpoint of the 'stepping stone versus trap' theoretical framework. The main contribution of this research is that it examines what function fixed-term contracts have in the EU new member states, countries that have not yet been investigated in this regard. This research tests which individual characteristics influence the transition to permanent employment and how labour market institutions can help in understanding the differences among countries. The analysis covers the eight post-communist countries which joined the EU in 2004. The period analysed is 2005-10. We make use of the EU-SILC dataset and employ multinomial logistic regression to perform the analysis. The findings reveal that, on average, a temporary job is more a trap than a stepping stone, although considerable differences exist across countries. Surprisingly, most of the individual demographic and human capital characteristics do not have an effect on the transition to permanent employment. Only the age category and work experience significantly increase the chances for a successful transition. Institutions such as employment rigidity and industrial relations explain a considerable amount of the country variations. More rigid labour markets and stronger trade unions lower the probability of successful transition. We argue that the reason is that companies use FTCs as a tool to increase flexibility in rigid labour markets. The concluding part discusses some limitations of the research, links it back to the theoretical literature and suggests some challenges for future research.

Inequalities During and After Transition in Central and Eastern Europe

“…1 As regards the analysis of the impact of labour market institutional variables, we considered the following three indicators: (i) Hiring regulations and minimum wage from the Fraser Institute Economic Freedom World (EFW) database, which is essentially a summary indicator of labour market deregulation, particularly with regard to temporary jobs, and of the strength of minimum wage provisions; (ii) Union density from the Visser Institute for Advanced Labour Studies database (Version 2, January 2009); (iii) the level of Coordination of wage bargaining, also from the Visser Institute (see Visser, 2011). These institutional indicators guarantee (compared to the Organisation for Economic Co-operation and Development (OECD) labour market institutions indicators) a wider coverage of the NEUMs of principal interest here, and their employment has become common practice in the empirical research on Eastern Europe (e.g., Babos, 2014;. The choice of the three indicators is due to the specific focus of the analysis, and is aimed at capturing the evolution of institutional settings related to temporary employment (i) and to asymmetries in the protection of their jobs compared to those of permanent employees (ii and iii).…”

“…Higher collective bargaining coverage is associated with a higher risk of temporary employment, and this is interpreted as a result of insider/outsider patterns reinforced by collective wage setting institutions. The second important reference paper in the field is that by Babos (2014), in which the function of temporary contracts (the stepping-stone versus the trap hypothesis) in Eastern Europe (between 2005 and 2009) is studied in relation to individual and institutional variables. Despite some notable cross-country variations, temporary employment tends to be more of a trap than a stepping-stone, successful transition to permanent jobs only being associated with individuals' age and experience.…”

Positive and negative implications entailed by fixed-term employment contracts

“…For other groups of workers, the fixed-term contract marks the so-called "stepping stone" or the transition to permanent employment (Babos, 2014), as well as an opportunity to gain experience and benefits concerning the training and professional development, if they are inexperienced in that type of work (Blanpain et al, 2010) 10 . However, there are categories of persons who are greatly affected by this type of employment: mainly young people (aged between 15 and 29), women, as well as persons without higher education and less skilled professionally.…”

“…Generally, fixed-term employment contracts are seen as a stepping stone to permanent employment (Babos, 2014) 3 ; they have become popular among the flexible forms of work contracts, and are the object of an increasing number of debates and assessments, investigating both the respective legislation and the specific consequences on the parties concluding a fixed-term employment contract. Despite the positive aspects of temporary employmenta positive effect on the rate of employment, and the common perception of such contracts as a preliminary step to permanent employment (Burgoon & Dekker, 2010), as well as the flexibility they bring to the labor marketone cannot ignore the negative implications of fixed-term contracts on the nature of the employment relationship, the system of social protection, the working conditions, the economic security, and the job stability.…”

“…The workers having concluded such atypical contracts, are considered "vulnerable workforce" from the standpoint of labor law, because of poor jobs offering low payment and scarce benefits, limited social protection, low training and skills, and lack of opportunities for promotion. Also, the insufficient stability of jobs and income, the insecurity concerning the future prospects for the workers on this type of employment contractmost of the times, entrapped in temporary jobs undertaken repeatedly or even leading to unemployment, rather than resulting in permanent employment on a steady position (Babos, 2014) -are aspects that increase the vulnerability of temporary employees with fixed-term contracts.…”