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Category: Project

Description: A central argument for the deregulation of employment contracts is that fixed-term contracts boost employment of job seekers with uncertain productivity by giving employers a tool to screen such applicants over a longer period of time before permanent hire. We test this proposition by comparing the risk of entering fixed-term employment for individually laid off workers with that for individuals who have left their previous job for other reasons. This strategy is based on the assumption that in the German context individual layoffs create uncertainty about job seekers' productivity. We use data on work exits and subsequent labour market re-entry of the prime-age workforce in Germany from waves 2000-2013 of the Socio-Economic Panel. Our results show that the risk of fixed-term employment is substantively smaller after voluntary job exits but reveal only a small and statistically insignificant risk difference between individual layoffs and workplace closures after adjusting for differences in socio-economic background and characteristics of the previous job. These findings challenge the view that employers use fixed-term contracts as an instrument to screen specific groups of workers whose productivity is highly uncertain, at least with regard to recent career disruptions.