Employment protection legislation and on-the-job training in an informal labor market: Evidence from Peru

Training and learning on the job are two critical channels for human capital accumulation during work years. Several studies in developed countries have found that fixed-term contract (FTC) workers receive less training sponsored by their employers than open-ended contract (OEC) workers do. In contrast, FTC workers participate more actively in informal learning during their job spells. Using the PIAAC dataset for Peru as a case study, we test these two ideas and find no robust differences in training or learning across contract types. However, we find that informal workers – dependent employees without a contract – and the self-employed receive substantially less training of any type than formal workers. Further evidence from the Mexico points in the same direction, suggesting that this is a stylized fact for highly informal labor markets. These results expose a major structural weakness in emerging economies labor markets that can affect long-run growth and equity.