Marginal Employment: Evidence from GermanyISER Internal Seminars

In this paper we investigate the role the low pay sector can play to increase labour market flexibility. In particular, we analyse the marginal employment sector in Germany during the period 2000-2010 in the context of the Hartz reforms. Using administrative match employer-employee data we study: (i) how the use of in-work benefit affected workers’ labour market participation and hours worked; (ii) whether there were any substitution effects between the creation of regular jobs and marginal jobs; (iii) how did wage and hours inequality evolved over time. We find that the Hartz II reform, which formalised the marginal employment sector, polarised labour market, but did not have any strong adverse effects on job creation. On the one hand, the increase in job availability in the marginal sector helped low skilled workers stay in employment, increasing their participation rate. On the other hand, induced already full-time workers to take up a marginal job as a secondary form of employment to benefit from the tax breaks and top-up wages. This moonlighting effect became so important that it explained why the marginal employment sector grew to become the second most important form of employment in Germany.

Presented by:

Carlos Carillo-Tudela (Dept of Economics. Joint with Andrey Launov and Jean-Marc Robin)

Date & time:

16 Mar 2016 13:00 pm - 16 Mar 2016 14:00 pm

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