The posting of Workers in the European Area: Law and Economics

One of the patterns European firms follow to work in various European countries is that of providing services in countries different from the country of origin. This can occur through the temporary mobility of workers – the posting of workers. The posting of workers gives rise to a mutual conflict between legal systems, because it allows firms to exploit inter-country differences in pay and stringency of labour law standards, and to enter new markets without complying with regulations and local rules. In other words, the posting of workers could be a shortcut to the exploitation of the benefits of a less protective labour law (social dumping) and could be exploited to provoke the destabilization of national social rights. In this article we study, from a legal and economic point of view, the relationship between the phenomenon of the posting of workers and labour market regulation in the EU area. We first describe the issue in the light of current law; then we propose an empirical analysis of the causal relationship between the number of workers posted across Europe, at country level, and disaggregated indicators of labour market regulation (OECD) for each country. The econometric analysis is carried out on an original dataset. The results show that inter-country temporary worker mobility rises, in general, with increasing employment regulation. More specifically, company posting of workers occurs more frequently when hosting countries have stricter regulations on temporary work.