Why do firms (Dis)like part-time contracts?

This paper investigates the full-time/part-time wage gap by using INPS (Italian Social Security Institute) administrative data on the entire population of workers and firms in Italy over a 32-year period (from 1984 to 2015). Relying on regression models that control for worker, firm, and match fixed effects, we find that part-time work attracts a wage premium compared to full-time work. We find a substantial part-time premium for females that, while declining, persists until the most recent years. A similar dynamic is observed for male part-timers, though their premium has eventually faded away. These trends may be related to both structural changes in the demand and supply of part-time work, as well as developments in labor market and wage bargaining institutions. In the early 1980s only a few workers held part-time positions, firms needing them were willing to pay a relatively high wage premium. As more workers started to ask for part-time positions, this wage premium gradually declined. Part-time premia are also related to the institutional rigidities in the labor market. While EU legislation generally dictates that part-timers should receive the same treatments as full-timers, sectoral collective agreements (and individual or firm-level bargaining) can introduce more favorable conditions for part-timers. Starting from the mid-1990s, the Italian labor market and system of industrial relations underwent a path towards liberalization and modernization. Gradually over time, sectoral collective bargaining incorporated these tendencies also in the case of part- time work, which may explain the observed decreasing trend in the part-time premium. Yet, even nowadays, collective bargaining and unions try to protect the weak segments of the labor force. That these groups typically include women on part-time is in line with our findings that a wage premium is still observed for females on part-time jobs. The existence of higher costs associated with part-time work, coupled with the detrimental effect of part-time work on firm productivity that we document elsewhere, largely explains the firms’ reluctance to offer more part-time jobs. We derive important policy implications. Tax reliefs may be useful to overcome the firm’s double disincentive (productivity losses and higher labor costs) to offer more part-time positions. These rebates could be particularly generous for people in real need, including people involved in childcare, elderly care, or education. Also, institutional reforms making wages more aligned to underlying workers’ productivities may contribute to increasing the number of people successfully obtaining part-time positions when asking for them.