The impact of job training on temporary worker performance: Field experimental evidence from insurance sales agents

• Author: Elizabeth Lyons
• DOI: http://doi.org/10.1111/jems.12333
• Date: 01 January 2020
• Published date: 01 January 2020

J Econ Manage Strat. 2020;29:122–146.wileyonlinelibrary.com/journal/jems122

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© 2019 Wiley Periodicals, Inc.

Received: 20 June 2018

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Revised: 17 September 2019

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Accepted: 2 October 2019

DOI: 10.1111/jems.12333

INVITED REVIEW

The impact of job training on temporary worker

performance: Field experimental evidence from insurance

sales agents

Elizabeth Lyons

School of Global Policy and Strategy,

University of California, La Jolla, San

Diego, California

Correspondence

Elizabeth Lyons, School of Global Policy

and Strategy, University of California,

9500 Gilman Drive, MC 0519 La Jolla, San

Diego, CA 92093‐0519.

Email: lizlyons@ucsd.edu

Funding information

Center on Global Transformation,

University of California, San Diego; The

Center on Global Transformation and the

Policy Design and Evaluation Lab at UC

San Diego

Abstract

Despite the limited incentives they provide for idiosyncratic investment,

temporary work arrangements are becoming increasingly common. Using

evidence from a field experiment conducted among salespeople in a Kenyan

insurance firm, this paper examines the consequences of providing job training

for temporary workers. The findings show that providing access to training

significantly increases firm revenue, primarily due to performance increases

among higher‐ability workers. The findings from the study are consistent with

temporary workers willingness to invest in job training when the job‐specific

returns from doing so are sufficiently high.

KEYWORDS

contract workers, field experiment, training

JEL CLASSIFICATION

J24; J49; M53; O33

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INTRODUCTION

Short‐term work arrangements have increased drastically over the past two decades. For instance, alternative work

arrangements

1

accounted for 15.8% of employment contracts in the US in 2015, up from 10.1% in 2005 (Katz & Krueger,

2019).

2

Importantly, this type of employment is not restricted to routine tasks for which the required skills and

knowledge are relatively standardized across employers. Many complex jobs that were previously performed in‐house

are being contracted out.

3

These changes are driven in part by advances in information and communications

technology (ICT; Agrawal, Horton, Lacetera, & Lyons, 2015), and by labor market shifts following the Great Recession

(Brainard, 2016).

Although the current discussion surrounding the rise of nonstandard work arrangements sometimes suggests that

the growth in temporary work is boundless,

4

an important barrier to this growth, particularly in nonroutine jobs, may

be the importance of job training for ensuring satisfactory worker performance. Employer provided incentives and

opportunities to acquire knowledge is more limited for temporary workers than for permanent employees (e.g., Becker,

1962; Lazear, 2009).

5

Understanding the extent to which providing temporary workers with low‐cost opportunities to

invest in job training affects firm performance is critical for firm management of these work arrangements, and for

understanding the development of the contract labor market and the on‐demand economy more generally.

This paper contributes to a better understanding of the performance implications of job training among temporary

workers, and how this varies with their short‐run incentives to invest in this training. I present evidence from a field

experiment that randomly assigns job training access to salespeople employed for a 2‐month sales window by an

insurance firm in Kenya. Specifically, the experiment tests whether giving these workers the option to invest in job

training affects their performance, and how this varies with financial incentives from the current job to invest in the

training. To overcome difficulties associated with causally linking human capital investment to performance outcomes

(Card, 1999), the performance of insurance sales agents who were randomly assigned a job training mobile application

is compared with the performance of a control population who did not receive the application. Direct incentives for

training investment were randomly assigned among those given access to the job training application.

The population of workers in this study was hired for a 2‐month period to perform outside sales of insurance for

drought‐related livestock losses, and paid commission for their sales. Turnover among these agents is quite high;

between the sales window before the experiment and period of the experiment, only 38% of the sales agents were

retained. The sales agency model under which they work is similar to the sales agency model employed by many

American organizations, including insurance firms (e.g., Regan & Tennyson, 1996). It is also a distribution model that is

frequently employed in Sub‐Saharan Africa to overcome difficulties associated with infrastructure development and

human capital shortages that firms face when trying to serve rural markets (Dihel, 2011). Importantly, these sales

agents have a complex task that requires both general sales and accounting skills, and specific knowledge about the

insurance product they are selling.

Findings from my experiment demonstrate a positive impact of providing temporary workers access to job training

on firm revenue. Mean comparisons show that sales agents in my sample who were given access to job training had

approximately nine times the total sales of those who were not; approximately 40,000 KSH relative to 5,000 KSH in the

control.

6

However, there is substantial heterogeneity in the effects of providing job training across worker types.

Consistent with the benefits of offering training differing by trainee’s short‐term incentives for investing in it, I find

that providing the option to invest in job training improves firm outcomes by improving the performance of sales agents

who are most likely to benefit from the training in terms of higher earnings in their current jobs; specifically, higher‐

ability sales agents. Access to job training also increased the job tenure among these higher‐ability workers. Direct

incentives to invest in training (input‐based incentives) do not alter the performance effects of training provision among

these workers with relatively high output‐based incentives to invest in training. However, I find evidence that providing

financial input‐based incentives for job training has a positive impact on the performance of agents with lower ability.

Combined, the results from this study provide support for existing theories about the conditions under which job

training will receive investment (e.g., Becker, 1962; A. Booth & Chatterji, 1989; Carmichael, 1983; Jovanovic, 1979).

They also add nuance to these theories by demonstrating the specific importance of short‐term financial incentives for

investment in job training when longer‐term incentives are not present. Temporary workers are trading off the time

costs of investing in job training with the financial benefits it will generate for them in the current position and any

wage benefits it will generate in subsequent employment. Because temporary workers do not have the longer‐run job‐

specific incentives that full‐time employees do, if the general human capital returns from job training investment are

low, financial returns need to accrue quickly in order for them to invest in it. Alternatively, in the absence of financial

benefits in the current job, the general human capital gains that job training offers need to be sufficiently large to justify

the current‐period cost of investing in it. To my knowledge, this paper is the first to provide causal empirical evidence

on the effects of job training provision on worker performance. Moreover, this study has implications for the literature

on incentives for human capital investment more generally by demonstrating that the effectiveness of input‐based

incentives for investment in training may depend on individual expectations about the output‐based returns from

investment.

The results from this study also have practical implications for the management of temporary and contingent

workers. First, they point to the importance of ensuring these workers have relatively easy access to job training. Given

that temporary workers do not expect promotions or fear being fired as permanent employees do, incentives for

investment in job‐specific human capital may be limited and, thus, the costs of this investment to workers may need to

be lower than for permanent employees.

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Although job training almost certainly involves knowledge transfer that is not

job‐specific, my findings suggest that workers in this study do not interpret the training they were given as having

meaningful benefits for their returns from subsequent employers. Employers who cannot effectively use output‐based

pay contracts may be able to encourage job training investments among temporary workers by providing training that

will more obviously benefit these workers in their future jobs. Alternatively, my finding that input‐based pay for job

training investment may compensate for a lack of output‐based pay suggests that employers can employ direct

incentives for job training as a partial substitute for output‐based pay. More generally, my findings suggest that if the

need for investment in job training is properly managed it may not severely hinder the growth in temporary

employment. In addition, the success of app‐based job training in my research setting suggests that because ICT

LYONS

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