The Impact of Temporary Agency Work on Trade Union Wage Setting: A Theoretical Analysis

Thomas Beissinger () and Philipp Baudy ()
Additional contact information
Philipp Baudy: University of Hohenheim

No 8802, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Focusing on the cost-reducing motive behind the use of temporary agency employment, this paper aims at providing a better theoretical understanding of the effects of temporary agency work on the wage-setting process, trade unions' rents, firms' profits and employment. It is shown that trade unions may find it optimal to accept lower wages to prevent firms from using temporary agency workers. Hence, the firms' option to use agency workers may affect wage setting also in those firms that only employ regular workers. However, if firms decide to employ agency workers, trade union wage claims will increase for the (remaining) regular workers. An intensive use of temporary agency workers in high-wage firms may therefore be the cause and not the consequence of the high wage level in those firms. Even though we assume monopoly unions that ascribe the highest possible wage-setting power to the unions, the economic rents of trade unions decline because of the firms' option to use temporary agency work, whereas firms' profits may increase.

Keywords: trade unions; temporary agency work; wage-setting process; labour market segmentation; dual labour markets (search for similar items in EconPapers)
JEL-codes: J23 J31 J42 J51 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2015-01
New Economics Papers: this item is included in nep-lab and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: The impact of temporary agency work on trade union wage setting: A theoretical analysis (2015)
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