Reassessing the Pay Gap for Temps in Germany

As a consequence of the rapid growth of temporary agency employment in Germany, the debate on the remuneration of temporary agency workers has intensified recently. The study finds that the earnings gap of temporary help workers in Germany is indeed large and increased during the past decade. Decomposition reveals that the widening gap mainly is driven by changes in relative skill prices and less by differences in the workforce composition. Temps already have to accept a marked earnings decline before entering the temporary help sector. Nevertheless, after leaving the sector temporary help workers no longer have to accept a pay penalty. A recent reform set a high incentive for temporary help agencies to pay their workers according to a collective agreement. Surprisingly, the unionization of the sector could not bring thewidening earnings gap to a halt.Temporary agency employment, wage differential, decomposition, earnings, Germany, reform