The Part-Time Pay Penalty in a Segmented Labor Market

• BSE Working Paper: 112336 | September 15
• Keywords: Fixed-term and permanent contract , hourly wage levels and growth , prime-aged women , fixed-effects estimator , differential measurement error of LHS variable , underlying channels
• JEL codes: J13, J16, J21, J22, J31, J62, C23
• Fixed-term and permanent contract
• hourly wage levels and growth
• prime-aged women
• fixed-effects estimator
• differential measurement error of LHS variable
• underlying channels

This paper is the first to examine the implications of switching to PT work for women’s subsequent earnings trajectories, distinguishing by their type of contract: permanent or fixedterm. Using a rich longitudinal Spanish data set from Social Security records of over 76,000 prime-aged women strongly attached to the Spanish labor market, we find that PT work aggravates the segmentation of the labor market insofar there is a PT pay penalty and this penalty is larger and more persistent in the case of women with fixed-term contracts. The paper discusses problems arising in empirical estimation (including a problem not discussed in the literature up to now: the differential measurement error of the LHS variable by PT status), and how to address them. It concludes with policy implications relevant for Continental Europe and its dual structure of employment protection.