Flexible employment and household financial vulnerability: evidence from China

The share of flexible employment in the labour market has continued to rise, and its impact on household financial conditions has attracted growing attention. Using data from the China Household Finance Survey (CHFS), this paper employs a two-way fixed effects model to empirically examine the effect of flexible employment on household financial vulnerability. The empirical results show that flexible employment participation, transition into flexible employment, and sustained flexible employment all significantly reduce household financial vulnerability. Mechanism analysis reveals that flexible employment reduces financial vulnerability by easing credit constraints and strengthening social security coverage. Further analysis demonstrates that transitions from unemployment, farming, and entrepreneurship into flexible employment all significantly lower financial vulnerability. Moreover, high-quality flexible employment significantly reduces financial vulnerability. Importantly, flexible employment helps households cope with health and old-age risks, thereby narrowing their financial risk exposure and contributing to the reduction of vulnerability. Heterogeneity analysis shows that the negative effect of flexible employment on financial vulnerability is stronger for disadvantaged groups, including rural households and those with low physical capital, low human capital, liquidity constraints, and weak social networks. The conclusions of this paper offer valuable insights for policy formulation aimed at promoting high-quality employment and enhancing household risk resilience.