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.

Acknowledgements

This work was supported by the Slovak Research and Development Agency under contract No. APVV-0413-11. This research makes use of the European Union Statistics on Income and Living Conditions, 2005–09. Eurostat has no responsibility for the results and conclusions; these are solely the author's.

Notes

^1. Multinomial probit models were also tested and the results in terms of probability were almost identical.