Employment quality for younger employees in Portugal

Working conditions at labour market entry tend to affect the evolution of individuals’ careers (Oreopoulos et al., 2006). Higher job insecurity and a poorer wage, possibly accompanied by labour market shocks, often result in worse labour market outcomes compared to individuals who start their working life under more favourable conditions. The acknowledgement of a generalised deterioration of earnings for younger generations across developed and developing countries (Ritakallio, 2002), together with increasing working hours and lower employment security (Eurofound, 2014), have been rising strong concern about the possible consequences on labour market polarisation and overall inequality. However, the identification of similar trends in the labour market outcomes of younger entrants provides only partial information about their underlying drivers and the most suitable measures to correct undesired outcomes. For instance, within a common framework of worsening working condition for younger generations, Chauvel and Schröder (2014) outline stronger inter-cohort inequality in conservative, continental European welfare states, whereas intra-cohort differences tend to prevail in social-democratic and liberal welfare states. Consequently, a deeper understanding of the ongoing evolution of employment quality for younger employees has to take into account changes in the composition of labour supply (with increasing rates of urbanisation, feminisation, and education of the labour force) and labour demand (with transformations in industry and size distribution and in production technology across employers). The paper aims at apprising the quantitative impact of changes in the characteristics of labour supply and labour demand for younger employees on key outcome variables that identify employment quality according to the framework proposed by Holman and McClelland (2011) and Holman (2012). Based on shift-share techniques, overall changes in earnings, employment security, and employment flexibility observed for different age groups are decomposed into the effect of change in employees’ characteristics and employer’s characteristics. The empirical analysis focuses on Portugal due to the accelerated dynamics that in the last decades brought the country across a fast modernisation of social and economic systems, and consequently determined significant changes in the structure of both labour demand and labour supply. The empirical analysis takes advantage of Quadros de Pessoal (QdP), a longitudinal dataset that includes the population of Portuguese firms with at least one wage earner and their employees in private sectors. Thanks to unique employer and employee codes, QdP allows employer and employee information to be matched and employees’ careers to be followed across subsequent employers. Data are collected annually by the Portuguese Ministry of Employment and participation is compulsory for manufacturing and services firms. Compared to other administrative datasets QdP offers the important advantage of reporting employees’ educational qualification, besides standard information on employees, their occupation, and their employers. The observed period spans from 1995, when an enlarged offer of educated employees and a parallel polarisation of labour demand became visible in the Portuguese labour market (Centeno and Novo, 2014), to 2009, to include the effects of the Great Recession.