Dual Labour Markets and (Lack of) On-the-Job Training:
Spanish and other EU Evidence based on PIAAC
Antonio Cabrales (UCL), Juan J. Dolado (EUI) & Ricardo Mora (UC3M)
(preliminary & incomplete)
Education, Human Capital and Labor Market Outcomes (CAGE, Venice 2014)
Outline
Motivation & Research question
Illustrative model
PIACC design
Descriptive stats
Empirical results (Spain, EU reference countries )
Conclusions
Motivation & Research
question
Large literature on the effects of the overall level of
Employment Protection (EPL) on On-the-Job Training (OJT)
[Favourable ( Lagos, 2006, Belot et al. , 2009) vs. Unfavourable (Saint-Paul, 2002)]
Less research on the effects of Dual EPL (Perms-Temps) on OJT.
[Favourable (Stepping Stones, Booth et al. , 2002) vs. Unfavourable (Dead Ends,
Dolado et. al, 2002, 2013)]
Available evidence focuses on country specific studies or crosscountry studies based on ECHP (1994-2001).
[Aralumpanam et al., 2004, Booth et al., 2002, Bassanini & Brunello, 2011]
PIAAC provides a more updated and harmonized sample to
test the relationship between fixed-term contracts, OJT and
lifelong learning
Focus on Spain relative to (some) EU reference countries with
similar and less segmented LMs
Why Spain ?
↑
100
80
60
40
20
0
15
20 Up to 20
25 y.o.
30
21-25
35y.o.
40 26-3045y.o.
Age
y.o.
50 31-3555
60
Dualism is a major concern
We will offer you a contract for
5 minutes and then we will see...
..I am fired every 3 months…then
am on the dole for 6 months, get
rehired for another 2 months...
What a mess!!… What´s your job ?
No clue, I have only been in the
labour market for 3 years
Labour contract dualism & OJT & Proficiency
Dual LM → OJT → Proficiency ?
Dual LM (Temps vs. Perms)
• Dual LM & Training Theories: Temps get less OJT due to:
(i) Higher turnover- Low temp-to-perm conversion rates
(ii) Lower union coverage
(iii) Concentration in lower value-added industries
• Training & Proficiency: Lifelong learning → ProducAvity
PIAAC Design
Programme for the International Assessment of Adult
Competencies (PIAAC_OECD): measures level and distribution of
skills among adult populations (15-65) in 22 countries (1st wave),
plus utilization of skills in different contexts.
Previous programmes focused on specific age groups:
PISA (15), PIRLS-TIMMS (10-12), etc.
PIACC evaluates proficiency in literacy, numeracy (+ problem
solving in IT-rich environments: not evaluated in Spain)
Scores ∈[0, 500] Six levels of proficiency
<L1:<176, L1:176-226; L2:226-276; L3: 276-326; L4:326-376; L5:>376
Standarized tests (about 1.5 h. long each)– sep. 2011-may 2012Spanish sample: # 6055 individuals
Participating countries (1st Round)
→
→
→
Available info in PIAAC
Demographics
Age, Gender, Nationality, Civil status, Children, Parental education
Labour status, education & training
Educational attainment, Labour status, Type of contract, Job
tenure, Wage, On-the-Job Training, Motivation
Focus: FT Employees : # 2513 individuals
Caveat: Cross-section, Lack of natural experiment
Approach: Wide set of controls to avoid omitted variables bias
A simple model
• Two periods (p1, p2)
• Ability (= productivity) : uniform dn.
• Firms (may) provide OJT in p1. Productivity of trained workers rises from θ
to ζ=hθ, with h>1, in p2
• Cost of training is decreasing in θ: C(θ) =
, k>0
• Untrained workers (u) produce θ in both 1 and 2
Trained (t) workers (t) produce
in 1 and
in 2
• Contracts: Perm (P) jobs involve firing cost F>0; Temp (T) jobs don´t
• Quit rate in T jobs : q∈[0, 1]
• In t=2, productivity shock ε (BC) hits s.t. that perceived ptvy dn. becomes
Note: ε ↑1: Recession; ε ↓0: Expansion
• Posted wages in t=1 and paid in t=2
t=1
t=2
--------------------I-----------------------↓
Training
↓
Shock , Quit , Pay
Asset values of firms:
Perms
)
Temps
Under a uniform dn. for shocks →
Perms
Temps
Asset values of workers (Vi >0)
Trained
Untrained
Similar but with
instead of
Decisions on OJT (Productivity thresholds,
Firms offer OJT whenever:
Perms
OJT for Perms: increasing in F
Temps
OJT for Temps: decreasing in q
)
OTJ gap between Perms and Temps
Descriptive stats
Outcomes of interest
Receiving OJT (binary)
OJT Intensity
[Probit]
[Neg. Binomial]
Need of more OJT (binary) [Probit]
[OLS]
Main treatment: TC
Share of Temporary Contracts by Age
60
50
40
30
20
10
0
15-25
26-30
31-55
+55
When Temporary contract becomes an additional control, its
coefficient turns out to be insignificant and the results on OJT
hardly change
Numeracy scores
DOJT
[1]
[2]
[3]
[4]
7.0548***
---
5.3412***
3.4651***
(1.7143)
(1.6912)
---
---
(1.7215)
nOJT
---
0.2693
(0.1655)
Temporary contract
-0.0365
-0.0843
-0.0728
-0.0652
(0.0956)
(0.0951)
(0.1094)
(0.1115)
Reference countries
• Other Dual LMs (FR, IT)
• Less Dual LMs (DK, UK)
• Indicators of LM Dualism
(i) Perm-temp EPL Gap (5 yrs PC vs. 5x1 yr.TC)
(Doing Businnes, 2014, Boeri et al., 2013)
(ii) Temp-Perm conversion rates
(OECD, 2013, EC , 2013, ELFS)
Conclusions
For the typical worker with a permanent contract, switching to a
temporary contract is associated with a reduction in the
probability of receiving OJT by 18 % (= -0.08/.44).
Ceteris paribus, the availability of OJT accounts for:
15 % (2 pp./14.2 pp.) and 28% (5 pp./18.6 pp.) of the raw score
gaps in literacy and numeracy, respectively.
Reference countries (FR, IT) with Dual LMs show similar
patterns but those with more unitary LMs (DK, UK) differ.
We abstain from making causal statements but the evidence is
suggestive of a plausible causal mechanism.
Thanks for your attention