Wage effects of labour market entry via temporary work agency employment: Evidence from German apprenticeship graduates

Purpose The purpose of this paper is to investigate whether labour market entry via temporary work has any (persistent) effects on labour market outcomes. Design/methodology/approach Using unique data on several cohorts of graduates from the German apprenticeship system, the authors interpret labour market entry via temporary work agency (TWA) work as a treatment and apply propensity score matching and the control function approach to investigate corresponding effects. Findings The results indicate a pronounced wage gap but no significant wage disadvantage in the medium term for graduates who switch to regular employment. Nevertheless, approximately 30 per cent of the graduates do not manage to leave the temporary help sector and, as a result, suffer persistent wage penalties. Originality/value The numerous studies that investigate the consequences of TWA work on individual labour market performance have not considered the specific situation of young workers after graduation. The rapidly increasing percentage of TWA jobs and the above average share of young workers among temporary workers call for corresponding evidence.