‘Atypical Work’ and Compensation

Atypical work, or alternative work arrangements in U.S. parlance, has long been criticized in popular debate as providing poorly-compensated employment. Although the early U.S. literature seemed to confirm this perception, more recent cet. par. analysis has offered a partial but somewhat more optimistic evaluation. The present paper builds on the latter body of research with a view to providing improved estimates of the effect of the full range alternative work arrangements on worker compensation. The improvements are basically two-fold. First, we account for the skewness in atypical worker earnings while retaining the Mincerian human capital earnings function. Second, we deploy additional waves of the main dataset on atypical workers (the CAEAS), while supplementing this cross-section analysis with longitudinal data from the NLSY. Our analysis covers earnings and (access to) health benefits. We report that although one group of atypical workers (contractors) seems to enjoy a wage premium, cross-section results from the CPS and NLSY for the better-known category of temporary workers point to a negative wage differential of some 6-15 percent. It emerges that much of the disparity stems from unobserved worker heterogeneity, accounting for which still supports a wage advantage for contracting work. As far as fringes are concerned, the appearance in cross section of a potentially large deficit in access to health benefits is again reduced after accounting for the permanent unobserved individual heterogeneity, although in this case the attenuation is much more modest.