Earnings instability and non-standard employment: cohort-based evidence from the Italian labour market

This paper estimates trends in the transitory and permanent variance of male earnings in Italy using social security data from 1990 to 2016. Cohort-specific earnings variability is compared by the number of non-standard contracts to test the extent to which the increase in income instability is related to labour market deregulation for fixed-term contracts. Results show a relationship between the reforms that liberalised temporary contracts and increasing income instability, mainly affecting younger cohorts. In addition, younger workers exhibit an increase in the variance of permanent earnings as the number of atypical contracts increases. This is related to a decline in long-term mobility and an increase in long-term inequality. Results show that the reforms that liberalised temporary arrangements led to a short-run increase in earnings instability and a long-term increase in inequality.