The Relational Nature of Employment Dualization: Evidence from Subcontracting Establishments

Abstract

Scholars argue that the dual path to labor market flexibility protects the privileges of core workers at the expense of employees relegated to a peripheral employment sector. Yet whether core workers indeed benefit from workforce segmentation remains disputed. To scrutinize this question, I study how the wages of core workers with less than college education respond when their employer shifts employment out to subcontractors, using linked employer-employee panel data from Germany. Empirically, I find the effect of subcontracting on average to be either positive or neutral, but not negative. The presence and strength of the positive effect depends, first, on whether the type of subcontracting affords core workers with codetermination rights, second, on whether core workers are represented by a works council to exercise these rights, and, third, on whether these rights are exercised in a context that augments the bargaining position of core workers by rendering conflictual labor relations costly to the employer.

Labour market institutions and the challenge of allocating the right people to the right jobs: Evidence on the relation between labour market institutions and optimal skill matching from 28 industrial countries

“…on employment chances, school-to-work transitions, wages or type of contract (e.g. Barbieri, Cutuli, and Passaretta 2018;Ochsenfeld 2018;Van der Velden and Wolbers 2003). Studies that investigate the relation between institutional contexts and labour market matching mainly focus on education-to-job matches instead of skill matches (e.g.…”

“…Against the background of technological developments and changing demands for skills, the allocation of the right people to the right jobs and a full usage of talent have become more important as an issue of scientific but also political and societal concern. During the last decades many countries engaged in reforms of labour markets and social policies (Barbieri, Cutuli, and Passaretta 2018;Ochsenfeld 2018), aimingamong other thingsat a better alignment of labour market demands and skills supply. However, suboptimal matches between workers' skills and skill requirements of jobs seem to have increased in number over time (European Commission 2013;Verhaest and van der Velden 2013).…”

“…Labour market institutions seem to be of particular theoretical relevance when it comes to optimal skill matching as they may explain variation in allocation processes (Barbieri 2009;Gangl 2006Gangl , 2004Estévez-Abe, Iversen, and Soskice 2001;Hall and Soskice 2001). In the literature, there is a common understanding that employment protection legislation favours established employees ('labour market insiders'; Lindbeck and Snower 1988), leading to a situation in which particularly young workers are confronted disproportionally with adverse labour market situations and related risks (Ochsenfeld 2018;Giesselmann 2014;De Vreyer et al 2000). The institutional arrangements of labour markets (and especially unemployment benefit schemes) have been reconfigured during the last decades, particularly during the 'activation turn', a paradigm shift that was accompanied by deregulation and increasing flexibility (Bonoli 2010).…”

“…1 We enrich the PIAAC microdata with measures of social policies at the country level, more specifically, the degree of employment protection (EPL), unemployment benefits, and activating labour market policy (ALMP) of labour markets. While we base our analyses on statistical models for workers of all ages, we put a specific focus on the situation of young workers, comparing their situation to prime age and older workers (Ochsenfeld 2018;Fregin 2017;Palier and Thelen 2012;Giesselmann 2014;Lindbeck and Snower 1988). We do so because young workers form a specific group of workers as they have to compete for available jobs with those who have already gained experience with work and employment (e.g.…”

The Relational Nature of Employment Dualization: Evidence from Subcontracting Establishments

“…In all analyses, I use weights to account for the stratified sampling design and weight establishments by their size (number of employees). A replication package documents these and all other coding decisions in full detail and is publicly and permanently available at the Harvard Dataverse (Ochsenfeld, 2018). The resulting establishment-level dataset comprises 10,546 establishments (4,263 in manufacturing, mining and utilities, 6,283 in the less capitalintensive industries) with on average 4 years of data.…”