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Institutions and Wage Formation in the New Europe

Edited by Gabriel Fagan, Francesco Paolo Mongelli and Julian Morgan

Institutions and Wage Formation in the New Europe addresses the role played by institutions in European wage formation with a focus on EMU and institutional change in labour markets.
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Chapter 3: Labour as a buffer: Do temporary workers suffer?*

Alison L. Booth, Marco Francesconi and Jeff Frank


Alison L. Booth, Marco Francesconi and Jeff Frank Under a European directive put into force in the UK in October 2002, firms are required to offer fixed-term workers the same treatment with regard to pay and benefits (including, for example, holiday pay and maternity benefits) as permanent workers, along with the same rights to be protected against discrimination. After a year fixed-term workers also gain redundancy and unfair dismissal rights. The Commission has now proposed (March 2002) that equal treatment be extended to agency workers as well. The UK government Department of Trade and Industry (DTI) estimates that there are perhaps 700 000 agency workers in the UK. One possible rationale for these extensions of employment rights is that fixed-term and agency workers (as well as parttime workers, also covered by European directives) are predominantly women. Differential pay and benefits for fixed-term and agency workers might therefore be viewed as a form of gender discrimination, ceteris paribus. Another rationale for employment rights is to improve the training of temporary workers. The DTI consultative document on agency workers estimates a productivity gain from improved training (required by the directive) of between £98 million and £272 million per year. In this chapter we investigate two issues. First, are fixed-term workers disproportionately female or from other ‘equal opportunities’ groups such as ethnic minorities? Second, do fixed-term workers receive less pay than comparably qualified permanent workers? To answer these questions, we use three data sets: a representative panel survey spanning ten years and two...

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