Wage inequality of immigrants by type of contract in Spain

Purpose – The purpose of this paper is to approach a new aspect of the assimilation of immigrants in Spain. In particular, it is analyzed the effect of the type of contract on immigrant wages. The data used in this analysis come from the Spanish National Immigrant Survey, which was conducted by the Spanish Statistics Institute (INE) between 2006 and 2007. Design/methodology/approach – First, the methods and econometric specifications applied develop a wage model where the variable “contract type” is considered as an endogenous regressor. Second, the average wage gap between temporary and permanent workers is decomposed between a portion attributable to differences in characteristics and another to differences in coefficients. Findings – It is found that workers with a permanent contract received a wage premium with respect to temporary workers even for equal work and equal productivity. Social implications – Results indicate the importance of job stability for the integration and assimilation of immigrants in Spain, and offer an economic argument to support labour policies that encourage stable employment relationships. Originality/value – This paper takes a novel approach of the assimilation of immigrants in the Spanish labour market.