Flexible Contracts and Human Capital Investments

Abstract

As suggested by human capital theory, workers with flexible contracts participate less often in training than those with permanent contracts. We find that this is merely due to the fact that flexworkers receive less employer-funded training, a gap they can only partly compensate for by their own training investments. Flexworkers particularly participate less in firm-specific training that is meant to keep up with new skill demands than workers with permanent contracts. However, for those who participate in employer-funded firm-specific training, a temporary contract appears to facilitate the transition to a permanent contract with the same employer. However, this does not hold for participation in self-paid training. This training, which is usually general training, does not help in finding a better job.

Training in two-tier labor markets: The role of job match quality

“…Arulampalam et al (2004) study work-related training in 10 European countries using the European Community Household Panel and find that temporary employment lowers training chances in Austria, Britain, Denmark and Finland by around 10%. In a more recent study, Fouarge et al (2012) demonstrate that flexible employees in the Netherlands are less likely to receive firm-sponsored training, which they only partly compensate for through their own investments in training.…”

“…Particularly, the training opportunities of these employees may be limited as firms are unwilling to pay for human capital investments when the time horizon over which they can recoup the training costs is relatively short. This concern is generally supported by empirical evidence from various countries, such as the UK (Arulampalam and Booth, 1998;Booth et al, 2002;Green, 1993), Spain (Albert et al, 2005), Ireland (O'Connell and Bryne, 2012), Belgium (Forrier and Sels, 2003) and the Netherlands (Fouarge et al, 2012). Since temporary contracts play a central role in the adjustment process of the labor market, training and retraining are especially important for workers in such contracts as they need up-to-date skills to find new jobs.…”

Labour market flexibility, self-employment and precariousness

“…However, figures that make a distinction between large companies and small companies show that the share of small companies providing training for their workers lags (substantially) behind that of large companies. In a similar vein much more workers with a permanent contract and/or working full time participate in adult learning than workers with a temporary contract and/or working part time (Fouarge et al, 2012;Sequeda et al, 2015). Based on data from the sixth European Working Conditions Survey (2015) Conen and De Beer (2019) find that compared to paid employed workers with temporary contracts who relatively often report to be in need of further training, self-employed workers relatively often report to have enough skills to deal with more demanding duties.…”

Short Notice, Big Difference? The Effect of Temporary Employment on Firm Competitiveness across Sectors

“…As for empirical evidence on the human capital of FTC workers, various studies suggest lower investments in human capital for FTC employment (Arulampalam and Booth 1998;Booth et al 2002;Fouarge et al 2012). Other authors show that FTC workers are generally less qualified and overrepresented among young people, which is in line with their lower labour market experience and tenure (see Eurostat 2012).…”