Chasing the carrot – actual working hours of fixed-term employees

ABSTRACT

Fixed-term contracts can serve as a screening device to reveal the true ability of workers. To achieve promotion to a permanent position, fixed-term employees have an incentive to prove themselves by providing higher effort than competing co-workers by means of longer working hours. Applying fixed effects estimation to the German register data, we find that employees work longer hours on fixed-term contracts. This effect is stronger for labour market entrants and employees that are newly hired. We further show that actual hours of work are particularly large when there is competition among co-workers to receive promotion to a permanent position.

KEYWORDS:

• Fixed-term contracts
• effort
• working hours
• incentives

JEL CLASSIFICATION:

• J24
• J41
• M51

Acknowlegement

For helpful comments and suggestions, we thank the participants of the 2017 Colloquium on Personnel Economics, the 2017 Spring Meeting of Young Economists and the 2017 Conference of the Society of Labor Economics.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ In line with these studies, results from our data sample corroborate the finding that fixed-term employees face a substantial wage penalty. These results can be made available upon request.

² Using the German Linked Personnel Panel, a positive link between actual working hours and work engagement corroborates the positive association of working hours and productivity. Results are available upon request.

³ An analysis of the heterogeneities with respect to full-time and part-time contracts and by gender is available upon request.