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How important is the type of working contract for job satisfaction of agency workers?

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Abstract

Previous research finds that agency workers are less satisfied with their job than regular workers. This paper analyzes whether this difference can be explained by the duration of the working contract agency workers are employed on. The analysis leads to three results. First, agency workers’ contract type does not explain their lower job satisfaction. Second, agency workers on permanent contracts are significantly less satisfied with their job than regular workers on the same contract. Third, agency workers on fixed-term contracts do not differ in job satisfaction from regular workers on both fixed-term and permanent contracts. The difference in job satisfaction between permanently employed agency and regular workers can partly be explained by changes in the reference point. Overall, the results, however, lend support to the conclusion that agency workers on fixed-term contracts regard their employment as stepping stone while those on permanent contracts appear to be trapped in this type of employment.

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Notes

  1. Similar results are found for other Western countries in 2015, such as the United Kingdom (3.8%), the Netherlands (3.0%), France (2.1%), the United States (2.2%), or Japan (2.0%) (CIETT 2017).

  2. Such a “standard” employee–employer relationship is henceforth referred to as “regular”.

  3. Note, however, that evidence on agency contracts as a stepping stone into permanent employment is mixed. Autor and Houseman (2008), for example, find that agency work does not have such a function.

  4. One exception is Green and Heywood (2011) who find no difference in job satisfaction between agency workers and regular workers on permanent contracts.

  5. Detailed information are provided in Antoni and Jahn (2009) or Burda and Kvasnicka (2006).

  6. Starting on April 1, 2017, the maximum period of assignment has been again restricted to 18 months.

  7. Socio-Economic Panel (SOEP), data for years 1984–2016, version 33.1, SOEP, 2018, https://doi.org/10.5684/soep.v33.1. Further details on the SOEP are provided in Wagner et al. (2007).

  8. Jahn (2015) shows that this argument applies to female agency workers in Germany as well.

  9. Note that the same qualitative statements can be drawn if the subsequent analysis is based on the female subsample. The results are available on request.

  10. Originally there are five subjective health categories in the SOEP questionnaire. However, due to small numbers in some categories, I follow Jahn (2015) and collapse “very good” and “good” into the category “good” and “not good” and “bad” into the category “bad”. The third category is “satisfactory”.

  11. Note that with regard to agency workers a shortcoming of the SOEP coding is that it is not clear whether tenure refers to tenure at the agency or the user firm.

  12. In the 2016 SOEP questionnaire, for example, job change is assessed by: “Have you changed jobs or started a new one since December 31, 2014?” The question includes employer change as well as internal job move such as a promotion. With regard to agency workers, the question is also answered in the affirmative when agency workers moved to another user firm.

  13. To assess whether the following estimates are not the result of a selected sample, I replicate all estimations not differentiating agency workers according to their contract type. With regard to sign and significance, the results derived are comparable to previous studies on this issue, such as Green and Heywood (2011) or Jahn (2015). But since Green and Heywood (2011) employ an ordered probit model, the magnitude of the fixed effects coefficients can be compared to Jahn (2015) only; my estimates are about the same as the coefficients reported in Jahn (2015). The results are available on request.

  14. Note that these results do not alter when the 1-digit industry fixed effects are neither controlled for.

  15. For brevity, I do not report estimates of the control variables. The estimated coefficients of the covariates are similar to those measured in previous studies (for example, Green and Heywood 2011; Jahn 2015). A full list of all controls is available on request.

  16. Apart from (extra) wages, work autonomy, and other job characteristics, health status might be another endogenous covariate, because agency work might determine agency workers’ health status after becoming an agency worker. However, dropping workers’ health status in each regression of Table 2 does not alter the results.

  17. The Hausman test rejects the null hypothesis that the regressors are uncorrelated with the error term.

  18. This result has been obtained by testing whether the sum of fixed-term effect and agency main effect is significantly different from zero. The null hypothesis can be rejected at the 1% level in column (5) and at the 5% level in column (6) using the F statistic.

  19. This procedure has been applied inter alia in Winkelmann and Winkelmann (1998) who calculate the relative increase in income that is needed to compensate an individual for the drop in life satisfaction resulting from unemployment.

  20. Given that monthly net income of agency workers on permanent contracts is on average around 1400 Euro, it follows that income needs to be raised by 630 Euro per month to make up for the lost job satisfaction resulting from being an agency worker on a permanent contract rather than a regular worker on such a contract.

  21. Unfortunately, with the data at hand it is neither possible to test empirically the claim that regular employees might enjoy more (non-monetary) benefits nor that they might have higher exchange with peers and colleagues.

  22. Sample statistics for the full sample are available on request.

  23. More precisely, I construct a binary indicator that equals one if the respondent participated in the next SOEP wave.

  24. Perceived job security is captured by “How concerned are you about the following issues: Your job security (if employed). Respondents can either check “very concerned”, “somewhat concerned”, or “not concerned at all”. Following Jahn (2015), I consider respondents to perceive their job as insecure if they check “very concerned” or “somewhat concerned”. Instead of collapsing job insecurity into a binary variable, I also treated it as categorical. Yet this neither had an impact on the estimates presented in Table 2.

  25. About 70% of the increase in unemployment in Germany during the financial crisis was due to the mass layoffs in the agency sector (Jahn 2015).

  26. Moreover, compared to the reference year 2003, the time fixed effects are negative in each of the previous regressions and mostly insignificant. Not controlling for time fixed effects or including a dummy for the financial crisis (2007–2009), as well as an interaction between agency status and the crisis dummy, neither change the results.

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Acknowledgements

The author would like to thank two anonymous referees, Andrew E. Clark, Caterina Giannetti, Anthony Lepinteur, Christoph Metzger, as well as participants of the Workshop on Subjective Survey Data in Labour Market Research (IAAEU Trier), the 13th Workshop on Social Economy for Young Economists (University of Bologna), the Doctoral Seminar in Public Finance and the Walter Eucken Seminar of Empirical Economics (both at University of Freiburg) for review, discussions, and excellent input that improved the paper.

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  1. Institute for Public Finance and Social Policy, Research Center for Generational Contracts, University of Freiburg, Rheinstr. 10, 79104, Freiburg i. Br., Germany

    René Petilliot

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Petilliot, R. How important is the type of working contract for job satisfaction of agency workers?. Int Rev Econ 65, 359–379 (2018). https://doi.org/10.1007/s12232-018-0300-4

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