Fixed-Term Employment: Springboard or Dead End?

It is assumed that offering the same positions on a permanent basis is the superior alternative. However, since firms’ demand for labour differentiates between flexible and inflexible employment, there is a clear risk that, in the absence of the term-fixing option, either other instruments will be used to achieve the same flexibility or demand for labour will decrease. The sociodemographic group most affected by fixed-term contracts is that of younger workers at the start of their careers. As can be demonstrated by analyses of the Socio-Economic Panel (SOEP), if the use of fixed-term contracts is rendered more difficult, this group may lose any chance of entering the labour market at all. Nor is there any evidence that entering into fixed-term employment precludes a subsequent transition to permanent employment and thus entails the risk of entrapment in permanently precarious circumstances. Within a period of three years, more than half of fixed-term employees switch to permanent employment. An analysis based on propensity score matching shows that, for the previously inactive, taking up fixed-term employment increases the likelihood of immediate success on the labour market. After three years, those entering fixed-term employment have spent over seven months longer in full-time work and seven months less in unemployment. In addition, they have achieved a cumulated salary that is €32,000 higher than that of a control group of similar persons who have not taken this step.