Do Changes in Regulation Affect Temporary Agency Workers’ Job Satisfaction?

• Date: 01 July 2017
• DOI: http://doi.org/10.1111/irel.12184
• Published date: 01 July 2017

Do Changes in Regulation Affect Temporary

Agency Workers’Job Satisfaction?

HENNA BUSK, CHRISTINE DAUTH, and ELKE J. JAHN

This paper evaluates how a reform relaxing regulations of the temporary help

service sector in Germany affected job satisfaction of male temporary agency

workers. We isolate the causal effect of this reform by combining a difference-in-

difference and matching approach using rich survey data. We find that the regula-

tory change substantially decreased agency workers’job satisfaction while leaving

regular workers’job satisfaction unchanged. Further analysis reveals that the

negative effect on agency workers’job satisfaction can be attributed to a decrease

in wages and an increase in perceived job insecurity. These results are robust to

the use of different specifications and placebo tests.

Introduction

This paper investigates how a quasi-experimental reform deregulating the

law covering the temporary help service sector in Germany has affected job

satisfaction of temporary agency workers. The reform facilitated firms’use of

temporary agency workers by abolishing limits on assignment duration and

making it easier for temporary work agencies to rehire agency workers. At the

same time, the reform regulated agency workers’pay by introducing the equal

pay principle, which agencies can deviate from only if they have a collective

agreement in place (see the next section for details). The impact of this reform

on agency workers’job satisfaction is of potential interest for many other

European countries that have simplified the use of agency work over the past

*The authors’affiliations are, respectively, Pellervo Economic Research PTT, Helsinki, Finland. Email:

henna.busk@ptt.fi; Institute for Employment Research (IAB), Nuremberg, Germany. Email: christine.-

dauth@iab.de; and Institute for Employment Research (IAB) and University of Bayreuth, Nuremberg, Ger-

many. Email: elke.jahn@iab.de. The authors would like to thank Gerard van den Berg, Petri Böckerman,

Kristian Koerselman, Michael Oberfichtner, Gesine Stephan, Regina Riphahn, and Christoph Wunder for

their helpful suggestions. They further appreciate comments received from participants at the 2014 EEA

meeting, the 2014 EALE meeting, the 2015 IZA Summer School, and research seminars at the University of

Jyväskylä.

JEL: J28, J41, J88.

INDUSTRIAL RELATIONS, Vol. 56, No. 3 (July 2017). ©2017 Regents of the University of California

Published by Wiley Periodicals, Inc., 350 Main Street, Malden, MA 02148, USA, and 9600 Garsington

Road, Oxford, OX4 2DQ, UK.

514

three decades while leaving regulations on regular employment essentially

unchanged (Jahn, Riphahn, and Schnabel 2012; OECD 2013).

1

In line with the general trend toward increased employment flexibility

throughout Europe, temporary agency employment has grown steadily. In

1996, the temporary help service sector employed 0.7 percent of the EU work-

ing population, and by 2013, the share of agency workers had more than dou-

bled to 1.7 percent (CIETT 2015). Although the temporary help service sector

is still small overall, it has become a central focus of the policy debate over

labor market flexibility due to the rapid growth of agency jobs, the spot market

nature of agency work, the prevalence of poor working conditions in agency

jobs, and the concentration of low-skilled workers in this sector (e.g., Boeri

2011; Jahn, Riphahn, and Schnabel 2012). Indeed, there is ample evidence that

agency workers earn lower wages on average than regular workers (e.g.,

B€

oheim and Cardoso 2009; Hamersma, Heinrich, and Mueser 2014; Jahn

2010; Segal and Sullivan 1998), that they face higher unemployment risks

(Antoni and Jahn 2009; Autor and Houseman 2010), have less access to train-

ing (Nienh€

user and Matiaske 2006), and are more prone to work-related acci-

dents (Garcia-Serrano, Hernanz, and Tohria 2010).

To judge whether flexible employment forms are in general less favorable

than other contractual arrangements, the literature has relied to an increasing

degree on job satisfaction as an aggregate measure of how workers value vari-

ous job characteristics. The advantage of this measure is that it not only

reflects satisfaction with objective working conditions such as job stability and

wages, but also contains assessments of unobservable or unmeasurable job

characteristics such as the importance of inclusion in the work environment

(Clark 2001; de Graaf-Zijl 2012; Hamermesh 2001).

Our paper contributes to this research by bringing together two strands of the

literature on temporary agency employment. We draw, first, on studies investi-

gating the job satisfaction of agency workers, and, second, on literature evaluat-

ing the effects of flexible employment regulations. We combine these strands to

analyze how a reform of the law covering the temporary help service sector in

Germany in 2003 affected male agency workers’job satisfaction.

The relationship between job satisfaction and flexible employment arrange-

ments in general has been the subject of numerous previous studies (for a

meta-study, see Wilkin 2013). Flexible employment arrangements cover a

broad set of employment forms, including contingent employment, temporary

1

To ease readability, the terms “agency job”and “agency employment”are used as synonyms for “tem-

porary agency employment,”“agency worker”is used synonymously with “temporary agency worker,”and

“regular worker”is used to denote a worker employed outside the temporary help service sector with an

open-ended contract.

Regulation and Temporary Agency Workers’Job Satisfaction / 515