The Temporary Staffing Industry and U.S. Labor Markets: Implications for the Unemployment Insurance System (original) (raw)
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The Role of Temporary Help Employment in Tight Labor Markets
Social Science Research Network, 2001
This paper examines the reasons why employers used and even increased their use of temporary help agencies during the tight labor markets of the 1990s. Based on case study evidence from the hospital and auto supply industries, we evaluate various hypotheses for this phenomenon. In high-skilled occupations, our results are consistent with the view that employers paid substantially more to agency help to avoid raising wages for their regular workers and to fill vacancies while they recruited workers for permanent positions. In low-skilled occupations, our evidence suggests that temporary help agencies facilitated the use of more "risky" workers by lowering their wages and benefits and the costs associated with turnover. The use of agency temporaries in both high-and low-skilled occupations reduced the pressure on companies to raise wages for existing employees, and thereby may have contributed to the stagnant wage growth and low unemployment observed in the 1990s. Temporary agency employment expanded steadily during the 1990s. According to Bureau of Labor Statistics establishment data, employment in help supply services, which primarily comprises temporary help agencies, increased from 1.2 percent of paid employment in 1990 to 2.6 percent in 2000. The share in temporary agency employment grew throughout this period of strong economic expansion and very low unemployment despite the fact that the majority of temporary agency workers express a desire for regular, permanent jobs (Cohany 1998). The preference for regular employment among most agency temporaries has led many to conclude that the growth of the share in temporary employment in the 1990s was most likely driven by employer demand. In this paper, we provide insights into why employers heavily rely on temporary agency workers in tight labor markets based on evidence from two industries: hospitals and auto supply manufacturers. The fact that the share in temporary agency employment moves procyclically has long been observed. The most common explanation for this pattern is that companies use agency temporaries to handle demand variability and to buffer core workers during downturns (Mangum, Mayall, and Nelson 1985; Abraham 1988; Kandel and Pearson 2001). Because agency temporaries are the first to be laid off in a recession, we would expect the share in temporary employment to rise during expansions and fall during recessions. Nevertheless, it is hard to understand why, in the aggregate, the share in temporary employment would continue to grow strongly after almost a decade of expansion if firms were simply using temporaries to buffer core workers against an anticipated downturn. Indeed, evidence from employer surveys, (Abraham 1988, 1990; Houseman 2001b) suggests the importance of other factors, including difficulty in finding qualified workers on their own and the desire to screen workers for permanent positions. The hypothesis that, in tight labor markets, companies are filling vacancies with temporary
2001
This paper examines the reasons why employers used and even increased their use of temporary help agencies during the tight labor markets of the 1990s. Based on case study evidence from the hospital and auto supply industries, we evaluate various hypotheses for this phenomenon. In high-skilled occupations, our results are consistent with the view that employers paid substantially more to agency help to avoid raising wages for their regular workers and to fill vacancies while they recruited workers for permanent positions. In low-skilled occupations, our evidence suggests that temporary help agencies facilitated the use of more "risky" workers by lowering their wages and benefits and the costs associated with turnover. The use of agency temporaries in both high-and low-skilled occupations reduced the pressure on companies to raise wages for existing employees, and thereby may have contributed to the stagnant wage growth and low unemployment observed in the 1990s. Temporary agency employment expanded steadily during the 1990s. According to Bureau of Labor Statistics establishment data, employment in help supply services, which primarily comprises temporary help agencies, increased from 1.2 percent of paid employment in 1990 to 2.6 percent in 2000. The share in temporary agency employment grew throughout this period of strong economic expansion and very low unemployment despite the fact that the majority of temporary agency workers express a desire for regular, permanent jobs (Cohany 1998). The preference for regular employment among most agency temporaries has led many to conclude that the growth of the share in temporary employment in the 1990s was most likely driven by employer demand. In this paper, we provide insights into why employers heavily rely on temporary agency workers in tight labor markets based on evidence from two industries: hospitals and auto supply manufacturers. The fact that the share in temporary agency employment moves procyclically has long been observed. The most common explanation for this pattern is that companies use agency temporaries to handle demand variability and to buffer core workers during downturns (Mangum, Mayall, and Nelson 1985; Abraham 1988; Kandel and Pearson 2001). Because agency temporaries are the first to be laid off in a recession, we would expect the share in temporary employment to rise during expansions and fall during recessions. Nevertheless, it is hard to understand why, in the aggregate, the share in temporary employment would continue to grow strongly after almost a decade of expansion if firms were simply using temporaries to buffer core workers against an anticipated downturn. Indeed, evidence from employer surveys, (Abraham 1988, 1990; Houseman 2001b) suggests the importance of other factors, including difficulty in finding qualified workers on their own and the desire to screen workers for permanent positions. The hypothesis that, in tight labor markets, companies are filling vacancies with temporary
The Evolution of the Demand for Temporary Help Supply Employment in the United States
1999
The level of temporary help supply (THS) employment surged during the late 1980s and the 1990s. However, we know little about where these workers were placed and, thus, there is a gap in our understanding of cyclical and trend industry employment in the U.S.. To close this gap, we estimate the proportion of THS employees in each major U.S. industry during 1977-97 using information from input-output tables and from the Contingent Worker Supplements to the CPS surveys of February 1995 and February 1997. Our estimates indicate that almost all of the growth in THS employment is attributed to a change in the hiring behavior of firms, rather than to a disproportional increase in the size of more THS-intensive industries. In fact, the proportion of THS employees in each major American industry, except the public sector, increased during our sample period. These increases were particularly large in services and in manufacturing where by 1997 close to 4 percent of all employees were THS workers. The public sector, which had demanded almost 40 percent of all THS workers in 1982, hired a negligibly small number of THS workers in 1997.
The role of temporary agency employment in tight labor markets
2003
This paper examines the reasons why employers used and even increased their use of temporary help agencies during the tight labor markets of the 1990s. Based on case study evidence from the hospital and auto supply industries, we evaluate various hypotheses for this phenomenon. In high-skilled occupations, our results are consistent with the view that employers paid substantially more to agency help to avoid raising wages for their regular workers and to fill vacancies while they recruited workers for permanent positions. In low-skilled occupations, our evidence suggests that temporary help agencies facilitated the use of more "risky" workers by lowering their wages and benefits and the costs associated with turnover.
Role of Temporary Agency Employment in Tight Labor Markets, The
2003
The authors use case study evidence from hospitals and auto parts manufacturers to investigate why employers used—and even increased their use of—temporary help agencies during a period of tight labor markets in the 1990s. In high-skill occupations, the evidence suggests employers paid substantially more to agency help than to regular employees in large part to gain additional time to recruit employees for permanent positions and thereby avoid raising wages for new hires and existing employees.
Temporary Employment and Strategic Staffing in the Manufacturing Sector
Industrial Relations: A Journal of Economy and Society, 2009
In this paper, we analyze the determinants of use, intensity, and form of use of temporary workers by Wisconsin manufacturers. We differentiate three ways in which temporary employment can be used to achieve numerical flexibility: reactive use, where temps are used to deal with unexpected fluctuations in demand; planned use, to buffer regular employees, accommodate expected fluctuations, or screen for regular employment; and systematic use, to permanently staff positions with temporary workers. Our results provide evidence that temporary contracts are used to achieve planned and systematic numerical flexibility.