Higher education in non-standard wage contracts

Abstract Purpose – The purpose of this paper is to verify whether higher education increases the likelihood of young Italian workers moving from non-standard to standard wage contracts. Design/methodology/approach – The authors exploit a data set on labour market flows, produced by the Italian National Statistical Office, by interviewing about 85,000 graduate and non-graduate individuals aged 15-29 in transition between five labour market states: standard wage employment; non-standard wage employment; self-employment; unemployment; inactivity. From these data, an average six-year transition matrix was constructed whose coefficients can be interpreted as probabilities of moving from one state to another over time. Findings – As the authors find evidence for the so-called stepping stone hypothesis (that is, a higher probability of moving to a permanent job for individuals starting from a temporary job), the authors expect graduates to be more likely to pass from non-standard to standard wage contracts than non-graduates, because the signalling effect of education is enhanced by the stepping stone effect of non-standard wage contracts. Nevertheless, the authors find that non-standard wage contracts of graduates are more likely to be terminated as bad job/worker matches. Originality/value – This paper adds to the empirical literature on the probability of young workers moving from non-standard wage contracts to a permanent job. By separating graduates from nongraduates, it was found that education reduces the likelihood of passing from non-standard to standard wage contracts. The authors interpret this result as evidence of the changing labour market that makes it more difficult to infer the productivity of graduates as opposed to non-graduates. Keywords Italy, Graduates, Labor market, Employment, Temporary workers, Permanent workers, Labor market transitions, Non-standard wage contracts Paper type Research pape