Various studies have shown that temporary workers participate less in training than those on permanent contracts. Human resources practices are considered to be an important explanation for this difference. We develop a theoretical framework for employers’ provision of training that explicitly incorporates the costs and benefits associated with training investments in employees with different types of employment contracts. Our framework not only predicts employers to be less willing to invest in temporary workers due to the shorter time horizon associated with such an investment, but it also provides insights into how this willingness depends on characteristics of the training that are related to the expected costs and benefits of the training investment. A discrete choice experiment is used to empirically test the predictions from our theoretical framework. In line with our theoretical framework, we find that employers are less likely to invest in the training of temporary workers. This particularly holds when temporary workers do not have the prospect of a permanent contract with their current employer. Furthermore, we show that employers’ likelihood of investing in temporary workers indeed depends on aspects related to the costs and benefits of training, that is, a financial contribution to the training costs made by employees, a repayment agreement that applies when workers leave the organisation prematurely, and the transferability of the skills being trained. Our findings can be used to increase employers’ willingness to invest in temporary workers. However, similar effects are observed when looking at employers’ willingness to invest in permanent workers, suggesting that it will be difficult to decrease the gap in employers’ willingness to invest between temporary and permanent workers.
|Series||GSBE Research Memoranda|
- j24 - "Human Capital; Skills; Occupational Choice; Labor Productivity"
- j41 - Labor Contracts
- j62 - "Job, Occupational, and Intergenerational Mobility; Promotion"
- flexible contracts
- human capital investments
- stated preference experiment
- cost-benefit assessment