Temporary Work is Bad for Your Cognitive Health

[marmar]

By Antonio Cabrales, Juan Dolado, and Ricardo Mora. Originally published at VoxEU


The negative consequences of dual labour markets have been extensively documented, but so far little attention has been paid to their effects on workers’ on-the-job training and cognitive skills. This column discusses evidence from PIAAC – an exam for adults designed by the OECD in 2013. Temporary contracts are associated with a reduction of 8–16 percentage points in the probability of receiving on-the-job training, and this training gap can explain up to half of the gap in numeracy scores between permanent and temporary workers.

Starting with the seminal work by Saint-Paul (1996), there has been a large literature documenting the negative consequences of dual labour markets in several EU countries.1 Among them, Spain is often cited as the most extreme example, since its labour market is characterised by a large gap between the firing costs of workers with permanent and temporary contracts, and by lax regulation of the use of temporary contracts. Yet, so far not much attention has been paid to the effects of dual labour markets on workers’ on-the-job training (OJT) and the subsequent effect of the latter on cognitive skills.2 A new element to add to the ample evidence of the negative effects of duality on other dimensions of worker’s performance is provided by the Programme for the International Assessment of Adult Competencies (PIAAC), the exam for adults designed by the OECD in 2013, in the spirit of the PISA exams but for the working-age population.

Employment Protection Legislation and On-the-Job Training

In a recent paper (Cabrales et al. 2014), we present evidence suggesting that (everything else equal) workers under temporary contracts receive less employer-sponsored training than workers under permanent contracts and that, through this channel, labour market dualism also reduces the cognitive abilities of the former relative to the latter. One plausible mechanism leading to the gap in on-the-job training relies on the large turnover rate among temporary workers, which is induced by the much less stringent employment protection legislation they enjoy relative to permanent workers. Given this differential, whenever collective bargaining prevents neutralising severance pay (i.e. a transfer from employers to workers) through enough wage flexibility, firms will prefer to use temporary contracts in sequence rather than converting them into permanent contracts. As a result, the expected job duration of temporary workers becomes too short, making firms more reluctant to invest in their training. By contrast, the much stronger employment protection enjoyed by permanent workers increases their expected job duration, making firms more eager to invest in them. Thus, in countries with large employment protection gaps and wage rigidity, temporary contracts become dead-end jobs rather than stepping stones, as is often the case in those other countries where employment protection gaps are lower.

Spain is an interesting case study because, since the early 1990s, it has had a large share of temporary work among employees – around 33%. Even after the massive destruction of temporary jobs (almost 2 million) and the mild reduction in the employment protection gap after the labour market reform in 2012, it has fallen only to 24% – still one of the highest rates in the OECD. ....................(more)

The complete piece is at: http://www.nakedcapitalism.com/2014/12/temporary-work-bad-cognitive-health.html