Patterns of Labour Market Inequality in Continental Europe: Data and Operationalization

I analyze labour market inequality in Germany, France, Spain and Italy from 2005-2012 with two questions in mind. First, have labour market risks become more unequally distributed in terms of unemployment and temporary employment? In other words, has the difference between insiders and outsiders widened because insiders have become even more shielded or because outsiders have become more vulnerable? For this, I compare the labour market risks of insiders with the labour market risks of outsiders to see whether the gap has widened. The second question concerns the structure of labour market inequality. Have labour markets become riskier for different age or skill groups or between men and women? Does the importance of these determinants change over time, that is, do we observe young adults benefiting at the expense of lower- skilled individuals?

There are several ways to conceptualize labour market inequality depending on one’s specific research question. I understand labour market inequality as an unequal distribution of labour market risks between insiders and outsiders. Labour market risks are the probabilities of becoming unemployed or being temporarily employed. These probabilities are determined by the unemployment (temporary employment) rates of the individual’s reference group minus the national rate of unemployment (temporary employment). To control for the general labour market condition, I subtract the national mean of unemployment (temporary employment). The indicators are therefore the deviations from the national mean and a relational measure of labour market risks (see Chap. 3 on the distinction and relation between absolute and relative inequality). Accordingly, risk exposure is assumed to be high for individuals whose group-specific rate of unemployment (temporary employment) is above the national average (see Schwander and Hausermann 2013 for a more extensive discussion of the relationship between labour market vulnerability, labour market risks and the incidence of atypical employment and unemployment among an occupational reference group, as well as

Rehm and Kitschelt 2005 on measuring occupational unemployment risks). To analyze the development of labour market inequality, I rely on various waves of the EU-SILC (survey on income and living standards).1 Unemployment is a binary variable indicating whether a respondent is unemployed. Temporary employment, also a binary variable, takes the value 1 if the respondent holds a non-permanent employment contract.

More specifically, I show the distribution of labour market risks between those social groups known for their weak labour market attachment (i.e., potential outsiders: women, young adults, older workers and low-skilled workers) and social groups that hold a firm position in the labour market (i.e., potential insiders: men, workers in their prime age and higher-skilled individuals). Age and education are measured in three categories: 18-35 years denotes the cohort of young adults (a group of potential outsiders); 36-49 years denotes the cohort of prime- aged individuals; and those above the age of 50 are older workers.[1] [2] Note that the analysis is restricted to individuals of working age. The second group of potential outsiders consists of individuals with low skill levels, that is, a degree below completed secondary education. A skilled individual has a secondary or post-secondary degree, and high-skilled individuals hold a tertiary degree.

  • [1] This survey is unrivalled by the number of respondents per country and wave. Since I want toanalyze labour market risks of different socio-structural groups, and unemployment and temporaryemployment are labour market conditions that affect nevertheless a minority group of individuals,a large number of respondents is essential for a thorough analysis of labour market risks.
  • [2] The reason for setting the age threshold for young adults at 35, although, of course, arbitrary, isthe prolonged period of education in post-industrial societies. Most European countries still havea considerable number of young adults in education at the age of 30 (Ferrera and Gualmini 2004).Given that it takes another few years to acquire a stable position in the labour market, it is reasonable to assume that a substantial share of young adults below age 35 must still be counted as labourmarket entrants.
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