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Following the notable growth of temporary employment, a series of incentives were approved by the Spanish Government to promote both the hiring of workers on a permanent basis and the conversion of contracts from temporary to permanent employment. Nonetheless, hiring and dismissal cost reductions have had a small impact. This paper examines the determinants of Spanish employers’ reliance on temporary workers and their “temp‐to‐perm” conversions. Approved wage and dismissal cost reductions for permanent workers promote the hiring of permanent workers but have virtually no impact on contract conversions, which primarily respond to employers’ flexibility needs and unions’ pressures for increased employment stability.

Using Spanish establishment-level data on temporary and permanent job and worker flows, we examine firms’ relative usage of fixed-term contracts in response to changes in their prior net employment expectations for the short-run and the long-run – viewed as proxies of how a wide variety of future shocks are ultimately perceived by establishments. The employment response of establishments to changing net employment expectations for the short-run is, primarily, suggestive of their reliance on fixed-term contracts as a buffer to cushion short-run changes in demand as well as to shield permanent workers from downward workforce adjustments. In contrast, their response to changes in net employment expectations for the long-run mostly hints on the use of fixed-term contracts as a screening device. Therefore, policies providing financial incentives to convert fixed-term into permanent contracts – thus targeting firms’ using fixed-term contracts as a screening device, are likely to only have limited effectiveness.

Uses longitudinal data from the NLSY79 to examine the effect of a broad variety of performance‐based pay schemes and fringe benefits on male and female wages between 1988 and 1998. Specifically, analyzes whether the offer of various performance‐based pay schemes and fringe benefits functions as an alternative work incentive, eliciting greater effort and raising wages or, instead, it is accompanied by lower wages, as predicted by compensating wage theory. The results indicate that, while most performance‐based pay schemes are associated with higher wages to differing extents across gender, tips are commonly accompanied by lower wages among men. Similarly, while the offer of a retirement plan appears to as a work incentive raising male and female wages, workers are willing to trade wages for jobs offering life and medical insurance.