Uncertainty in the labour market: How does fixed-term employment affect fertility and mental health of the young generation?

Wolfgang Auer (Ludwig Maximilian University of Munich and Ifo Institute, Munich) and Natalia Danzer (Ludwig Maximilian University of Munich, Ifo Institute, Munich, and IZA Bonn) study the short- to medium-run effects of starting a career on a fixed-term contract on fertility and health outcomes. We focus on the career start since we expect that temporary contracts and their inherent economic uncertainty imply a path dependence which might have spill-over effects on other domains of life. Our empirical analysis is based on data from the German Socio-Economic Panel which provides information about individuals’ labour market history, fertility behaviour, and physical and mental health indicators. Our main results are that due to fixed-term employment at labour market entry women tend to: postpone first births, have fewer children within ten years after graduation and have lower mental health status within three years after graduation. These associations are strongest in the subsample of native women with secondary education. In contrast, we find no significant correlations for men. We argue that these findings are robust to potential endogeneity threats.