Whereas in the internal market an unstable equilibrium of sorts over working-time control can directly result between employer and employee, in the external labour market the problem of information costs develops. It has often been said that this is why the temporary agency will appear, because of the search costs that both sides of the temporary employment contract must incur in order to locate the complementary arrangement (see Magnum et al. (1985)). However, it has not been shown how instrumental the demand by the firm for flexibility and the supply-side issues of working-time control may together increase the search costs which facilitate a market mediated labour market – the temporary agency. Again, this is an important point of this book – to reassert the significant influences that supplyside preferences for elements like working-time control by expert employees may have in labour market arrangements, segments, organizations and in compensation packages. In this example, their effects are felt through search costs.

The role of search costs

In general, the analysis of external labour markets (the temporary agency) is stylized for clearer presentation. It will proceed in the following manner: assuming an instantaneous increase in the demand for labour services for a predetermined length, we will compare the difference in search costs incurred by the firm when searching in three different groups of labour service supply. The first group will generally be distinguished by an abundant labour supply with consistent, similar, time-insensitive preferences; the second group by a less abundant labour supply with consistent, similar, time-insensitive preferences; and the third group by a labour supply with inconsistent