Does Informal Workplace Learning in OECD Countries Differ By Contract Duration?

The expansion of temporary work has raised concerns about undesirable labour market inequality in many OECD countries. Several empirical studies have shown that employees in temporary contracts face a lower participation training than those who have a permanent contract. There is however no empirical literature on the difference between permanent and temp workers with respect to informal learning on-the-job. In this paper, we analyse this difference across twenty OECD countries using unique data from the recent PIAAC survey.

Human capital theory would expect both firms and employees to be less willing to invest in skills if workers are hired under temp contracts. Remarkably, we find that employees in temporary jobs engage in informal learning more intensively than their counterparts in permanent employment, although the former are indeed less likely to participate in formal training activities. In addition, we find evidence for complementarity between training and informal learning for both temp and permanent employees. In principal, this indicates that the higher informal learning investments of temporary workers do not intend to substitute the lack of formal training.

We obtain these results by using an instrumented control function model with endogenous switching. Thus, we account for the endogeneity of temporary contracts due to possible selection bias as well as for the binary nature of the endogenous regressor. These results are robust to changes in our model specification and shown to be more efficient in comparison to alternative 2SLS estimations.

On the assumption that workers prefer permanent contracts, we hypothesise that temp employees would engage more in informal learning so as to increase their possibilities of transition towards more stable jobs. Research on the ‘stepping stone’ effects of temporary employment is in line with this hypothesis. Human capital investments in on-the-job learning are seen as the main mechanism through which temporary employment offers a path into permanent jobs.

Our findings then suggest that temporary employment need not be dead-end jobs. Instead, temp jobs of high learning content could be a stepping stone towards permanent employment. However, our results also suggest that the policy objective of promoting flexicurity in several OECD countries is still a challenge since labour market segmentation also occurs within temporary employment due to the distinction between jobs with low and high learning opportunities.