Fraudulent Contracting of Work: Abusing the Posting of Workers (Belgium, Finland and Italy)

[Excerpt] Regulated at European level, the posting of workers is a practice used between companies located in different countries A worker is posted when their original employer sends them to work, for a temporary period, in another company. Posting has been defined as a specific form of labour mobility within the EU (Eurofound, 2014). Although posting only affects around 1% of the workforce in the EU, it has generated extensive debate due to fraudulent practices hampering the enforcement of, and compliance with, existing regulations. Changes in the location of work, raise various questions – namely, who is the employer and which national regulations apply. The use of temporary agencies, subcontracting and posting of self-employed workers gives rise to additional problems (Eurofound, 2016)

A Repeated Game Heterogeneous-Agent Wage-Posting Model

In the paper, we simulate a heterogeneous-agent version of the wage-posting model as derived by Montgomery (1991) with homogeneous workers and differently-productive employers. Wage policy of particular employer is positively correlated with employer’s productivity level and the wage policy of the competitor. However, it is a less productive employer whose wage posting could also outweigh the posting of a more productive employer, though only temporarily.Job-search model; Wage posting; Heterogeneous agents; Numerical optimization

Country Report: United Kingdom

This book chapter forms the basis of an expert UK county report submitted to the European Federation of Building and Woodworkers as part of a 12 country EU project. The project itself was dedicated to an analysis of the theory and practice of the functioning of the Posting of Workers Directive. The key focus was on the practical experiences of compliance authorities, labour inspectors and other controlling bodies. With one of the main conclusions of the project being that the use of the posting mechanism ranges from normal and decent long-established partnership between contracting partners to completely fake letter box practices of labour-only recruitment

Stochastic Search Equilibrium

We analyze a stochastic equilibrium contract-posting model. Firms post employment contracts, wages contingent on all payoff-relevant states. Aggregate productivity is subject to persistent shocks. Both employed and unemployed workers search randomly for these contracts, and are free to quit at any time. An equilibrium of this contract-posting game is Rank-Preserving [RP] if larger firms offer a larger value to their workers in all states of the world. We show that every equilibrium is RP, and equilibrium is unique, if firms differ either only in their initial size, or also in their fixed idiosyncratic productivity but more productive firms are initially larger, in which case turnover is always efficient, as workers always move from less to more productive firms. The RP equilibrium stochastic dynamics of firm size provide an explanation for the empirical finding that large employers are more cyclically sensitive (Moscarini and Postel-Vinay, 2009). RP equilibrium computation is tractable, and we simulate calibrated examples.Equilibrium job search, Dynamic contracts, Stochastic dynamics

Wage Posting as a Positive Selection Device: Theory and Empirical Evidence

We use the German Job Vacancy Survey to investigate whether firms are able to attract more suitable applicants by offering bargain wages rather than posting fixed wages. Contrary to the theoretical predictions provided by the literature, we find that the offer to bargain over pay decreases the share of suitable applicants. To explain these findings we develop a directed search model with asymmetric information about workers' types and incomplete contracts, which allows firms to condition their hiring decision on the match quality revealed at the job interview. We show that wage-posting and wage-bargaining firms coexist if pooling workers with different expected match quality is too costly for wage-posting firms and if the bargaining power is not too far away from satisfying the Hosios condition. In such an equilibrium wage-posting firms hire only workers with a high match quality and wage-bargaining firms hire workers with a high and a medium match quality

Spillovers of Equal Treatment in Wage Offers

We analyse a labour matching model with wage posting, where re flecting institutional constraints firms cannot differentiate their wage offers within certain subsets of workers. Inter alia, we find that the presence of impersonal wage offers leads to wage compression, which propagates to the wages for high productivity workers who receive personalised offers

Posting of Workers Directive reloaded

In view of levelling the playing field between foreign and local employers in the host country, the European Commission proposed in March 2016 to revise the Posting of Workers Directive (PWD) 96/71/EC. The amended PWD (EU) 2018/957, that was adopted mid-2018, introduces some significant changes in order to combat the shortcomings resulting from the original PWD, strengthening the importance of ensuring fair competition (between local and foreign employers) and improving the protection of workers. In a nutshell, the PWD aims at promoting the principle of equal pay for equal work in the same place, especially by extending the so-called hard nucleus of working conditions and introducing a provision for long-term postings. This new legislation will be implemented throughout the EU as of mid-2020. The following article aims to investigate the extent to which the changes demand national implementation from an Austrian point-of-view; the latter could serve as a guidance

Wage Posting Without Full Commitment

Wage posting models of job search typically assume that firms can commit to paying workers the posted wage. This paper investigates the consequences of relaxing this assumption. Under ``downward'' commitment, firms can commit only to paying at least their advertised wage. We show that wage posting is always an equilibrium, although in special cases other equilibria can exist. Surprisingly, the wage posting equilibrium in our economy is identical to the equilibrium when firms can commit to paying exactly their posted wage. When firms cannot even commit to paying at least their advertised wage, equilibrium exhibits job auctions with wage dispersion which generally is not constrained efficient.

Search, Wage Posting, and Urban Spatial Structure

We develop an urban-search model in which firms post wages. When all workers are identical, there is a unique wage in equilibrium even in the presence of search and spatial frictions. This wage is affected by spatial and labor costs. When workers differ according to the value imputed to leisure, we show that, under some conditions, two wages emerge in equilibrium. The commuting cost affects the land market but also the labor market through wages. Workers’ productivity also affects housing prices and this impact can be positive or negative depending on the location in the city. We then run some numerical simulations to reproduce some stylized facts about the labor-market outcomes of black and white workers. We find that a reduction in commuting costs for all workers reduces the unemployment rate of white workers and the profit of all firms but increases the wage of all workers (black and white) and raises the fraction of firms posting the high wage.Diamond paradox; urban land-use; spatial compensation; search frictions; wage dispersion