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The Relation between Skills and Job Security: Identifying the Contractual Return to Skills

Author

Listed:
  • Diris, Ron

    (University of Leiden)

  • Van Vliet, Olaf

    (Leiden University)

Abstract
The last decades have shown that the traditional steady job with a permanent contract is on the decline. While permanent contracts and the insider position that they bring are highly valued by workers, research on the returns to human capital have predominantly focused on wages as subject of that return. This study uses PIAAC data from 29 countries to estimate how skills relate to the odds of obtaining a permanent contract, versus alternative contractual arrangements for employees. Our pooled analysis shows that skills substantially relate to having a permanent contract across the full sample. Numeracy skills contribute more than literacy skills; a difference that is largely driven by sorting to occupations and industries. We further identify substantial heterogeneities across countries, in which either no skills, only numeracy skills or only literacy skills significantly predict permanent employment at the country level, but never both. Moreover, this "contractual return to skills" differs substantially from the traditional wage return to skills across countries. We find suggestive evidence that these differences relate to demand factors and labour market institutions.

Suggested Citation

  • Diris, Ron & Van Vliet, Olaf, 2022. "The Relation between Skills and Job Security: Identifying the Contractual Return to Skills," IZA Discussion Papers 15513, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp15513
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    File URL: https://docs.iza.org/dp15513.pdf
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    skills; human capital; labour markets; temporary employment;
    All these keywords.

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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    This paper has been announced in the following NEP Reports:

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