Why Do Temporary Workers Have Higher Disability Insurance Risks Than Permanent Workers?

Pierre Koning, Paul Muller and Roger Prudon

No 15173, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Workers with fixed-term contracts typically have worse health than workers with permanent contracts. We show that these differences in health translate into a substantially higher (30%) risk of applying for disability insurance (DI) in the Netherlands. Using unique administrative data on health and labor market outcomes of all employees in the Netherlands, we decompose this differential into: (i) selection of workers types into fixed-term contracts; (ii) the causal impact of temporary work conditions on worker health; (iii) the impact of differential employer incentives to reintegrate ill workers; and (iv) the differential impact of labor market prospects on the decision to apply for DI benefits. We find that selection actually masks part of the DI risk premium, whereas the causal impact of temporary work conditions on worker health is limited. At the same time, the differences in employer commitment during illness and differences in labor market prospects between fixed-term and permanent workers jointly explain more than 80% of the higher DI risk.

Keywords: disability insurance; temporary work; employer incentives; worker health (search for similar items in EconPapers)
JEL-codes: H53 I1 J08 J22 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2022-03
New Economics Papers: this item is included in nep-cta, nep-eur, nep-hea, nep-ias and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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