Inter-firm Dependency and Employment Inequalities

Abstract

This article highlights the importance of power relations in subcontracting relationships and analyzes their impact on firms’ employment management practices. We show that the use of subcontracting creates a chain of inter-firm economic dependency because it leads the principal contractor to plan and control the activities of the subcontractors. The hypothesis is that this chain of dependency influences both the skill structure and wage levels. Empirical tests carried out on French data confirm that firms that subcontract outsource execution tasks and that the hierarchy of firms impacts employees’ wage levels.