Affiliation:
1. Lukas Lehner is a Doctor of Philosophy candidate at the Department of Social Policy and Intervention, University of Oxford and the Institute for New Economic Thinking at the Oxford Martin School; and a Research Fellow at the Research Institute Economics of Inequality, Vienna University of Economics and Business and the Dondena Centre for Research on Social Dynamics and Public Policy, Bocconi University. Paul Ramskogler is a Research Economist at Oesterreichische Nationalbank, Vienna, Austria. Aleksandra...
Abstract
As temporary employment has become a pervasive feature of modern labor markets, reasons for wage growth have become less well understood. To determine whether these two phenomena are related, the authors investigate whether the dualized structure of labor markets affects macroeconomic developments. Specifically, they incorporate involuntary temporary workers into the standard wage Phillips curve to examine wage growth in 30 European countries for the period 2004–2017. Relying on individual-level data to adjust for a changing employment composition, their findings show, for the first time, that the incidence of involuntary temporary workers has strong negative effects on permanent workers’ wage growth, thereby dampening aggregate wage growth. This effect, which the authors name the competition effect, is particularly pronounced in countries where wage bargaining institutions are weak. The findings shed further light on the reasons for the secular slowdown of wage growth after the global financial crisis.
Funder
Economic and Social Research Council
Saven European fund
Scatcherd European fund