Why Do Governments Employ Irregular Workers? - Theory and Evidence from Japan

In many countries, governments sometimes employ irregular workers. Although their employment is fragile and is causing "working poor'' problem, local governments sometimes offer many temporary and irregular jobs and many people apply to them. To answer the reason why governments sometime employ irregular workers, we firstly investigate the factors to increase them by using data about Japanese municipalities. The empirical analysis finds that the increase of irregular workers does not relate to the fiscal situation of local governments while it relates to the increase of needs for public service, the increase of salary for regular workers and the decrease of the minimum wage level. Corresponding to this, we make an adverse selection model about job offer for regular and irregular workers. This theoretical model shows that the increase of irregular workers does not necessarily lead to reduction of labor cost