Fair Wages and the Co-Employment of Hired and Rented Hands - An Experimental Study

A firm with stochastic demand can rely on hired hands when demand is low and rent additional labour when demand is higher. For high demand this implies the co-employment of hired hands, paid directly by the firm, and of rented hands who are paid by a rental agency. This may cause severe problems if wages differ systematically between hired and rented hands. Will rented hands accept lower wages than hired hands? Or will rented hands demand higher wages as a compensation for flexibility? Fairness norms might play an important role in wage-setting decisions. We will explore theoretically and experimentally possible fairness considerations of the involved parties.