Does temporary employment undermine the quality of permanent jobs? Evidence from the manufacturing industry

The article investigates the impact of temporary employment on the quality of permanent jobs. Specifically, it tests predictions derived from different theoretical frameworks regarding firms’ use of temporary workers—namely, the screening, core-periphery, and low-road approaches. Using an original panel dataset that matches yearly information at the occupation, worker, and firm levels for a large sample of manufacturing firms in Emilia-Romagna region (Italy), this study documents an average knockdown effect exerted by the inflow of temporary workers on the quality of permanent jobs. The results show that greater reliance on temporary employment is associated with lower-quality permanent positions. Furthermore, in firms that employ more temporary workers, permanent jobs tend to be more routinized and less complex, involve less training, and require less teamwork. These findings are consistent with the low-road employment hypothesis, suggesting that the deterioration in job quality is driven by work arrangements that minimize the use of individual skills. Managerial and policy implications are discussed.