The aim of this paper is to analyse the wage differences among permanent workers in Spain, depending on whether their contracts benefit from reductions in payroll taxes. Data has been extracted from the 2005 version of the Continuous Sample of Working Histories (MCVL). Together with a descriptive analysis that reflects a wage differential in favour of non-benefitted contracts and differences between the wage determinants of the two types of workers, we carry out an econometric analysis and a decomposition of the difference that takes into account the censorship present in the data. Results assign at least 45% of the average difference to a greater return to the worker characteristics of those workers without a benefit in their contract. Quantile analysis shows that the wage differential increases and is due both to a higher discrimination and to the differences in wage determinants. As well as its possible influence on the volume of permanent contracts, the policy of subsidising payroll taxes has generated the presence of two types of workers with different characteristics and job types. A non-trivial discrimination towards benefitted workers appears at all wage levels.

Key words: Wage discrimination, benefitted contracts, censored data, quantile estimation.
JEL classification: J7, J31, J38.