Abstract: We develop a labour market model in which workers are compensated in wages as well as workplace public goods such as safety, group insurance, leisure, childcare, etc. A critical assumption is the possibility of contract renegotiation after training costs have been sunk, giving rise to a hold-up problem. Hold-up not only creates underemployment but also under-provision of workplace public goods. Wage subsidies and mandated minimum provision laws have a complementary effect — they boost both employment and working conditions. Unionization can also increase employment and efficiency. Our analysis presents an efficiency-based argument for intervention in the labour market, such as introduction of statutory safety standards and work hour regulation.