The existence of a large “gig economy” made up of temporary workers harms wage growth for all and has led to wage growth slowdown in Europe, new research from Vienna University of Economics and Business shows.
Lucas Lehner, Research Fellow at the Research Institute Economics of Inequality at Vienna University of Economics and Business, and his fellow researchers, found that temporary employment is a fixture of the modern world.
Working a temporary job means low wages. This means lower costs for employers. The benefits of temporary work disproportionately benefit employers, not workers. The incentives for companies to cut costs by switching roles to temporary work makes all work more precarious.
The number of involuntary temporary workers has increased manyfold in the last two decades, leading to high levels of involuntary temporary workers across Europe.
This pool of involuntary temporary workers then compete with permanently employed workers in the labour supply. This then elevates a sense of job insecurity for permanent workers and dampens their bargaining power.
The researcher’s empirical work demonstrates an economically significant point: that competition between involuntary temporary and permanent workers has suppressed wage growth in Europe.
‘Our analysis shows the important macroeconomic consequences of the dualized structure of labor markets. Despite the recent uptick in wage growth, the entrenchment of temporary employment calls for macroeconomic policies that are cognizant of the labor market structure’, the researchers write.