Temporary agency employment in Germany: A strategic "buffer" for firms and regions in the crisis?

Uwe Neumann

No 727, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: In many European countries the number of employees hired via temporary work agencies has increased considerably over the past two decades, up to around 2% of the total workforce in the European Union today. Different studies have found the demand for agency employment to precede GDP growth. This paper explores to what extent firms utilised agency work as a strategic 'buffer' to adapt to variation in labour demand in Germany over the period 2006-2014, i.e. before, during and after the crisis of 2008/2009. Drawing on microdata from a representative employer survey (IAB Establishment Panel) and statistics on regional labour markets, the analysis finds only limited evidence on a systematic firm-level buffer function of temporary agency work. Rather, in many firms hiring from agencies is possibly part of a business strategy relying on flexible recruitment. An analysis of the average treatment effect on the treated (ATT) using a propensity score matching procedure suggests that particularly in regions with high unemployment, such flexibility during the crisis supported adaptation of client firms to economic change, since they were less reluctant than non-clients to hire after the crisis.

Keywords: Temporary agency work; regional labour markets; establishment data; propensity score matching (search for similar items in EconPapers)
JEL-codes: J23 L25 M54 R11 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-eur, nep-geo and nep-lma
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:727

DOI: 10.4419/86788847

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