FLEXIBLE WORK and DISABILITY RISKS
(VU UNIVERSITY AMSTERDAM)
NOVEMBER 11, 2020
Abstract: While the prevalence of temporary employment contracts has been growing steadily over the past two decades in the Netherlands, workers in these contracts show substantially higher risk of applying for Disability Insurance (DI) benefits. This raises the question whether higher disability risks are inherent with the contract type of workers -- with less employer commitment -- or the type of work and health of workers in flexible jobs. To shed light on this, we decompose the observed risk differential into: (i) sorting effects into temporary work arrangements; (ii) the causal impact of flexible work arrangements on worker health; (iii) the impact of differential employer incentives to prevent and restore health problems among employees with temporary and permanent contracts; and (iv) the degree to which labor market prospects affect the decision to apply for disability insurance benefits. We find that selection is less important than expected, while the other three mechanisms all contribute to the higher DI risk for temporary workers.