Skip to main content

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.

References

  • Acemoglu D., Pischke J.-S. (1998) Why do firms train? Theory and evidence. Quarterly Journal of Economics 113(1): 79–119

    Article  Google Scholar 

  • Albert C., García-Serrano C., Hernanz V. (2005) Firm-provided training and temporary contracts. Spanish Economic Review 7(1): 67–88

    Article  Google Scholar 

  • Allen J., De Grip A. (2012) Skill obsolescence, lifelong learning and labor market participation. Applied Economics 44(25): 3237–3245 (forthcoming)

    Article  Google Scholar 

  • Almeida-Santos, F., & Mumford, K. (2004). Employee training in Britain. IZA discussion paper, no 1197.

  • Arranz J., García-Serrano C., Toharia L. (2010) The influence of temporary employment on unemployment exits in a competing risks framework. Journal of Labor Research 31(1): 67–90

    Article  Google Scholar 

  • Arulampalam W., Booth A. (1998) Training and labour market flexibility: Is there a trade-off?. British Journal of Industrial Relations 36(4): 521–536

    Article  Google Scholar 

  • Autor D. (2001) Why do temporary help firms provide free general skills training?. Quarterly Journal of Economics 116(4): 1409–1448

    Article  Google Scholar 

  • Barron J., Black D., Loewenstein M. (1989) Job matching and on-the-job training. Journal of Labor Economics 7(1): 1–19

    Article  Google Scholar 

  • Bassanini A., Booth A., Brunello G., De Paola M., Leuven E. (2007) Workplace training in Europe. In: Brunello G., Garibaldi P., Wasmer E. (eds) Education and training in Europe. Oxford University Press, Oxford, pp 143–309

    Google Scholar 

  • Becker G. (1975) Human capital: A theoretical and empirical analysis, with special reference to education (2nd ed.). National Bureau of Economic Research, New York

    Google Scholar 

  • Bierings H., Cörvers F., Montizaan R., de Vries R. (2009) Bruikbaarheid longitudinale gegevens Enquête Beroepsbevolking. ROA-TR-2009/2. ROA, Maastricht

    Google Scholar 

  • Booth, A. L., & Chatterji, M. (1995). Training and contracts. Dundee discussion papers in economics, no 64.

  • Booth A. L., Francesconi M., Frank J. (2002) Temporary jobs: Stepping-stones or dead ends?. Economic Journal 112(480): F189–F213

    Article  Google Scholar 

  • Booth A. L., Snower D. J. (1996) Acquiring skills, market failures, their symptoms and policy response. Cambridge University Press, Cambridge

    Book  Google Scholar 

  • Crawford V. P. (1988) Long-term relationships governed by short-term contracts. American Economic Review 78(3): 485–499

    Google Scholar 

  • Crawford V. P. (1990) Relationship-specific investment. Quarterly Journal of Economics 105(2): 561–574

    Article  Google Scholar 

  • De Graaf-Zijl M., van den Berg G., Heyma A. (2010) Stepping stones for the unemployed: The effect of temporary jobs on the duration until (regular) work. Journal of Population Economics 24(1): 107–139

    Article  Google Scholar 

  • Dekker R. (2007) Non-standard employment and mobility in the Dutch, German and British labour market. Ridderprint, Ridderkerk

    Google Scholar 

  • Denktank Leren en Werken. (2009). Tijd voor ontwikkeling. Advies van de Denktank Leren en Werken over het stimuleren van een leven lang leren in Nederland. Den Haag: Ministeries van Onderwijs, cultuur en Wetenschap en sociale Zaken en Werkgelegenheid.

  • Draca M., Green C. (2004) The incidence and intensity of employer funded training: Australian evidence on the impact of flexible work. Scottish Journal of Political Economy 51(5): 609–625

    Article  Google Scholar 

  • Fouarge D., Schils T., de Grip A. (2009) Prikkels voor postinitiële scholing van laagopgeleiden. ECBO, Den Bosch

    Google Scholar 

  • Forrier A., Sels L. (2003) Temporary employment and employability: Training opportunities and efforts of temporary and permanent employees in Belgium. Work, Employment and Society 17(4): 641–666

    Article  Google Scholar 

  • Glassner, V., & Galgóczi, B. (2009). Plant-level responses to the economic crisis in Europe. ETUI WP 2009.01

  • Goux D., Maurin E. (2000) Returns to firm-provided training: Evidence from French worker firm-matched data. Labor economics 7(1): 1–19

    Article  Google Scholar 

  • Jonker, N., & de Grip, A. (1999). Do employees with flexible contracts receive less training? ROA Research Memoranda, ROA-RM-1999/1E.

  • Katz E., Ziderman A. (1990) Investment in general training: The role of information and labour mobility. Economic Journal 100(403): 1147–1158

    Article  Google Scholar 

  • Kerkhofs, M., Bierings, H., & de Vries, R. (2009). Werkloosheidsduren op basis van de Enquête Beroepsbevolking, 2002–2007. Den Haag/Heerlen: CBS.

  • Lazear E.P. (2009) Firm-specific human capital: A skill-weights approach. Journal of Political Economy 117(5): 914–940

    Article  Google Scholar 

  • Lee C. H., Bruvold N. T. (2003) Creating value for employees: Investment in employee development. International Journal of Human Resource Management 14(6): 981–1000

    Article  Google Scholar 

  • Loewenstein M. A., Spletzer J. R. (1997) Delayed formal on-the-job training. Industrial and Labor Relations Review 51(1): 82–99

    Article  Google Scholar 

  • Lynch L. (1993) The economics of youth training in the United states. The Economics Journal 103(420): 1292–1302

    Article  Google Scholar 

  • Murphy P., Latreille P., Jones M., Blackaby D. (2008) Is there a public sector training advantage? Evidence from the workplace employment relations survey. British Journal of Industrial Relations 46(4): 674–701

    Article  Google Scholar 

  • OECD: (2004) Employment outlook 2004. OECD, Paris

    Book  Google Scholar 

  • Parent D. (1999) Wages and mobility: the impact of employer-provided training. Journal of labor economics 17(2): 298–317

    Article  Google Scholar 

  • Pischke J. (2001) Continuous training in Germany. Journal of Population Economics 14(3): 523–548

    Article  Google Scholar 

  • Stevens M. (1994) An investment model for the supply of training by employers. Economic Journal 104(424): 556–570

    Article  Google Scholar 

Download references

Acknowledgments

The authors would like to thank Ahmed Elsayed, Olivier Marie, and anonymous referees from De Economist for their useful comments.

Open Access

This article is distributed under the terms of the Creative Commons Attribution Noncommercial License which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.

Author information

Affiliations

Authors

Corresponding author

Correspondence to Didier Fouarge.

Rights and permissions

Open Access This is an open access article distributed under the terms of the Creative Commons Attribution Noncommercial License (https://creativecommons.org/licenses/by-nc/2.0), which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.

Reprints and Permissions

About this article

Cite this article

Fouarge, D., de Grip, A., Smits, W. et al. Flexible Contracts and Human Capital Investments. De Economist 160, 177–195 (2012). https://doi.org/10.1007/s10645-011-9179-0

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10645-011-9179-0

Keywords

  • Flexible contracts
  • Employer-funded training
  • Self-funded training
  • Labour market mobility

JEL Classification

  • J24
  • J41
  • J62