The internship contract (IC) was originally designed to promote an appropriate employment transition for young people with higher education from their formative years to their working lives. Employers are supposed to invest in human capital and, in correspondence, they can benefit from lower wages and from tax reductions. This report evaluates the impact of this Active Labor Market Policy. The evidence shows that the use made of the IC is contrary to the spirit of the law. First, employment under the IC reduces the probability of being retained by the firm; second, for those who stay in the firm after the IC, their probability of signing an indefinite contract is significantly lower than that for those who sign another temporary contract. However, for those who move to another firm, the probability of signing an indefinite contract is higher if they come from an IC. These results suggest that firms do not use IC as an instrument for investing in training young people, but rather as an instrument for reducing labour costs and/or increasing contractual flexibility.
Read the paper here.