Many OECD countries have deregulated temporary employment over the last decades in order to boost flexible employment. This development arguably contributes to rising income inequality not only through dualization, but also through increasing wage pressure on insiders that compete with non-standard workers. However, existing research has neglected the question whether the distributional effects of flexible employment affect individual perceptions of labor market insecurity. In this paper, I explore whether deregulated temporary employment results in higher levels of subjective labor market insecurity among regular workers. Building on a theoretical framework that distinguishes how flexible employment affects the position of different income groups, I argue that middle-income workers are most at risk to feel threatened by increasing competition from non-standard employment. In particular, this applies to non-tertiary educated, older workers in manual jobs whose income prospects are constrained in a deregulated environment, where they face job replacement risks and wage losses in temporary employment.
The empirical analysis to test this proposition builds on survey data from the ISSP “Work Orientations” module for 13 OECD countries in 1989, 1997, 2005 and 2015. Regression results show that subjective labor market insecurity strongly varies across income groups: the higher the income, the lower the levels of insecurity. However, context differences with regard to flexible employment affect the relative distance in insecurity levels between income groups. In countries with deregulated temporary employment, middle-income workers tend to have high levels of insecurity indistinguishable from low-income workers. Furthermore, high-income workers in deregulated countries are better isolated from labor market insecurity compared to middle- and low-income workers.
The analysis has three main implications for the politics of flexible employment. First, the analysis connects flexible employment and the perception of labor market risks to developments in earnings inequality, speaking in particular to the debate about the “squeezed middle”. The analysis shows that flexible employment affects income prospects of those middle-class segments without the socio-economic background to be optimistic about future career advancement. Second, the consequences of flexible employment may materialize in relative rather than absolute levels of labor market insecurity. Flexibilization does not necessarily increase insecurity across the whole workforce, but it can shift insecurity among the middle class closer towards the generally higher insecurity levels of low-wage workers. Third, the spread of insecurity under flexible employment increases the likelihood for political reactions among middle-income groups that grow relatively more insecure. Where flexible employment contributes to earnings pressure and declining income prospects, there is a potential demand for political counter-measures against flexible employment.
