Flexible Contracts and Subjective Well-being

If workers choose between permanent and flexible contracts, utility should equalize. Estimates of job satisfaction using the British Household Panel Survey reveal the critical role played by unmeasured worker heterogeneity. Accounting for such heterogeneity, shows that flexible contracts are a strong negative determinant of satisfaction with job security but are often a positive determinant of other dimensions of job satisfaction. As a consequence, flexible contracts have either a weak negative influence or no influence at all on overall job satisfaction, a finding broadly consistent with equalizing differences. This consistency emerges even more dramatically in estimates of overall life satisfaction in which flexible contracts have generally no influence.