The pay gap of temporary agency workers - Does the temp sector experience pay off?

It is a well-known fact that temporary agency workers accept high wage penalties compared to permanent workers. However, remarkably little is known about the wages of workers who regularly take jobs in the temp sector or who do temp work for a substantial period of time. Based on a rich administrative data set, the effect of the intensity of agency employment on the temp wage gap in Germany is estimated. Using a two-stage selection-corrected method within a panel data framework, the paper shows that the wage gap for temps with low treatment intensity is high but decreases with time spent in the sector, presumably reflecting that temporary agency workers are able to accumulate human capital while employed in the temp sector. However, agency employment seems to stigmatize those workers who move frequently from one temp job to the next.