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Australia – A strong association between casual employment and financial hardship

Employment and economic well-being are very closely related. Employment is the key means of generating income to both pay for current expenses and save for the future. Hence, volatile earnings and jobs can lead to severe financial stress. The past two decades have registered substantial changes in the overall structure of employment in many western countries. There has been a rise of various alternative forms of employment arrangements that differ from the standard permanent full-time employment in terms of continuity and hours worked in varying degrees. This growth in the share of ‘alternative or non-standard’ employment is often used as evidence that employment is now less secure and more precarious.

This study examines the relationship between non-standard employment arrangements that are non-ongoing or non-permanent in that they lack legal guarantee of a long-lasting employment relationship, and may produce financial hardship. Financial hardship includes experiencing problems such as the inability to pay rent/mortgage on time, the inability to pay utility bills on time, pawning, missing meals, asking friends/family for financial help and/or asking welfare organisations for financial help. The study considers two types of non- permanent employment arrangements – fixed-term employment and casual employment – and defines permanent employment as standard employment.

This paper uses rich longitudinal data from the HILDA survey to examine the association between non-permanent employment and financial hardship, separately among men and women. Results indicate that the relationship between non-permanent employment and financial hardship is heterogeneous.
The descriptive analyses reveal that the incidence of financial hardship is relatively high among those in non-permanent employment arrangements compared to those in permanent employment. Also, as expected, unemployed persons and those out of the labour force report significantly higher number of financial hardships compared to those employed in both permanent and non-permanent jobs. The descriptive analyses further reveal that there are significant differences among the people working in different employment arrangements in terms of their personal, demographic, economic and work related characteristics.

I start by describing how the incidence and characteristics of financial hardship vary by employment status and gender. The first row of panel A and panel B in Table 1 lists the means of the financial hardship index for men and women, respectively. It shows that men and women who are not in permanent employment arrangements report a higher incidence of hardships, on average, than men and women who are in permanent employment. The second component of panels A and B (part ii) presents the distribution of the financial hardship index by employment type for each gender. Among both men and women, around 20% of permanent employees, report facing one or more hardships. By contrast, among men, 40 % of casual employees and among women, 33% of casual employees report facing one or more types of hardships. The incidence of financial hardships does not, however, appear to be very different between fixed- term employees and permanent employees among both men and women.

The third component of panels A and B (part iii) presents the rates of different types of financial hardships experienced by men and women, respectively. Not being able to pay utility bills on time, mortgage/rent on time and asking friends/family for financial help are the three most commonly experienced hardships among both men and women. But compared with permanent employees, the incidence of each of the hardship is much higher among casual employees, the unemployed and those out of the labour force.

Gender differences also appear in types of hardships experienced by respondents. Male casual employees experience more financial hardship than female casual employees and so do men that are out of the labour force. This may reflect that typically, women are the secondary earner in the household.

The results from the multivariate models confirms the strong association between casual employment and financial hardship observed in the descriptive analysis, for both men and women in most household types. The finding from multivariate analysis also highlighted some exceptions, such as no significant association was observed between casual employment and financial hardship for men and women who are living alone. The results of multivariate analyses reveal that, for both men and women in all household types, fixed-term employment is not significantly associated with financial hardship.

These findings suggest that the results are not driven by the lack of permanency in a job. Factors like stable pay and certainty regarding the length of employment are important to overcome financial stress. Unlike casual employees, the level of earnings under fixed-term contracts is high and not variable during the contract period. In addition, while these jobs are for a fixed period, there is no uncertainty regarding the contract termination date which allows one to plan accordingly about getting the next job. Moreover, the majority of fixed-term employees have access to paid time off and work for 40 hours per week on average.

Results from additional analysis suggest that low level of income, insufficient hours of work, and experience of job loss and job change that might result in volatile/unstable income are important mechanisms which cause employees increased financial hardship. Once these factors are taken into account in the empirical models, the significant positive estimates of casual employment on financial hardship decline considerably in magnitude and significance for men in all sub-samples. A similar pattern is observed for partnered women without carer responsibilities and those living alone. For partnered women with carer responsibilities and lone mothers, these factors do explain some association, but still an association between casual employment and financial hardship remains.

There are some important caveats to findings in this paper. First, while the estimation methodology and rich nature of the HILDA data allows me to control for unobserved time- invariant factors, common shocks and an extensive set of time varying observed characteristics, there might still be other time-varying factors that are not controlled for, leaving the possibility of endogeneity arising from omitted variable bias. Second, one cannot completely rule out the possibility that experiencing severe hardships (such as going without food for long) could affect employment prospects for at least some people. In such case the results of this study do not necessarily merit a causal interpretation.

With these caveats I draw out the following implications for policy: First, the significantly higher number of hardships faced by the unemployed and those out of the labour force people clearly suggests that having a job is better than not having one to avoid financial hardships. Therefore, if casual jobs are “stepping stones” for people to (re-) enter the labour maket and eventually move to more stable/permanent employment, then these jobs might improve the economic well-being of people in the long-term. However, for workers that get trapped in casual or precarious jobs, the significant association between casual employment and financial hardships found in this study may provide sufficient grounds to provide these workers with some form of safety net. Mechanisms analysis suggests that this could come in terms of interventions that lower the vulnerability of casual workers to inadequate hours of work, and/or experience frequent job separations.

Chosen excerpts by Job Market Monitor. Read the whole story at The effect of non-permanent contractual employment on financial hardship

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