Companies Use of Free Labour/Labour with Wage Subsidies According to Active Labour Market Policies

Katrine Kim Sangster

Student thesis: Master thesis


Due to the interest in labour law and personnel economics, a curiosity about companies use of free labour and labour with wage subsidies according to active labour market policies is the foundation of this thesis. The interest is based on the, presumable different interest between the aim of the active labour market policies and the company’s interest to maximize profits. This thesis therefor sets out to investigate to what extend the legislation gives the companies an opportunity to use the legislation to gain competitive advantages and reduce the cost of labour on the behalf of the worker. It also sets out to investigate the interest of the unemployed workers and why they would be willing to work for less than the prevailing wage. The reasoning behind the thesis has arrived from the desire to understand why the government are willing to allow different price schemes and to what extend. It is also of interest, if the companies are seeking to maximize profits and the employee is rational, why these “underbidding’s” can take place. Since there seems to be underbidding taking place, it is also of interest as to why the companies are not seeking to reduce labour costs from only hiring free labour or at least workers with wage subsides. When underbidding can take place, there must, nevertheless, be some workers who are not willing to work at a lower price, and the thesis sets out to understand how these workers are able to maintain their job when refusing to work for less than the prevailing wage, when others are willing to, or the legislation make it possible from offering wage subsidies for unemployed workers. For the purpose, the Human Capital theory and the insider-outsider theory will be used to explain and understand the basis of the functioning behind the idea of the wage subsides set out by law and how incumbent workers will not be replaced, even if they are not willing to work for less. Kalder Hicks will be used to understand to which extend the legislation is efficient. Additionally empirical data shows, that the younger workers might have a bigger impact on the workforce and to what extend they are able to use the wage subsides to gain experience in order to find work.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
Publication date2018
Number of pages90
SupervisorsPeer Schaumburg-Müller