Wage fairness in a subcontracted labor market / Arnab K. Basu (Cornell University and IZA), Nancy H. Chau (Cornell University and IZA), Vidhya Soundararajan (Indian Institute of Management Bangalore) ; IZA Institute of Labor Economics
VerfasserBasu, Arnab K. ; Chau, Nancy H. ; Soundararajan, Vidhya
KörperschaftForschungsinstitut zur Zukunft der Arbeit
ErschienenBonn, Germany : IZA Institute of Labor Economics, September 2019
Elektronische Ressource
Umfang1 Online-Ressource (40 Seiten)
SerieDiscussion paper ; no. 12609
 Das Dokument ist öffentlich zugänglich im Rahmen des deutschen Urheberrechts.
Wage fairness in a subcontracted labor market [0.47 mb]
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Labor market subcontracting is a global phenomenon. This paper presents a theory of wage fairness in a subcontracted labor market, where workers confront multi-party employment relationships and deep wage inequities between regular and subcontractor-mediated hires. We show that subcontracting derives its appeal from a downward revision of workers' fair wage demand when producers delegate employment decisions down the supply chain. Furthermore, subcontracting creates a holdup problem, resulting in wages that workers deem unfair, along with adverse worker morale consequences in equilibrium. These insights reveal the efficiency costs of subcontracting as an employer strategy to redress workers' demand for fair wages.