Low-Income and Low-Skilled Workers' Involvement in Nonstandard Employment:

Chapter 3:
New Evidence for At-Risk and Low-Income Workers in Alternative Work Arrangements

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Contents

• Characteristics of At-Risk Workers In Alternative Work Arrangements
• Where are the jobs?
• The Characteristics of Jobs for At-Risk Workers in Alternative Work Arrangements
  • Part-time Employment and Job Duration
  • Wages
  • Benefits
• Why Do At-Risk Workers Work In Alternative Work Arrangements And How Do They Like It?
• The Relationship Between Temporary Help and the Low-Wage Sector
• Summing Up

Endnotes

It is clear from Chapter 2 that both definitional issues and the key research questions are complex--so we should expect the examination of new evidence to be equally complex. This is indeed the case. We use two different sources of data to examine the research questions.⁽⁴⁹⁾ In this chapter we exploit the Current Population Survey to address the first component of the research question, namely: how do labor market outcomes for at-risk workers in alternative work arrangements compare with those of all workers and low-income workers in traditional employment. The reason for the use of the CPS is that it is an excellent source for describing a variety of different work arrangements as well as for using different measures of at risk. Consequently, the CPS provides quite rich detail to characterize the trends in and characteristics of alternative work arrangements.

One of the main issues faced with using the CPS was that very few individuals were both at risk and working in alternative work arrangements. Table 3.1 shows the sample sizes associated with the most feasible definitions of at-risk or low-income individuals--namely, individuals who had received public assistance in the previous period, who had a family income below 150 percent of the poverty line, or who had a family income below 200 percent of the poverty line. ⁽⁵⁰⁾

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Characteristics of At-Risk Workers In Alternative Work Arrangements

Our examination of the CPS data reveals that workers who are at risk of welfare recipiency by either of our two definitions are more than twice as likely to be in alternative work arrangements as are other workers (Table 3.2). Although there appears to be no observable trend in the proportions of either former public assistance recipients or workers from poor families who are agency temps, there is a slight increase in the proportion of the former who are on-call workers.⁽⁵¹⁾

It is worth noting that at-risk workers who get jobs in alternative work arrangements do not differ much from at-risk workers who get standard jobs--they have similar education levels and age distributions (Table 3.3). However, the education level of these workers is very low--over one-third are high school dropouts; three out of four have a high school education level or less. The only salient difference is the sex of the workers: in 1995, over half of at-risk temporary workers were male, but by 1999, this had fallen to less than one-third. In comparison, among at-risk workers in regular employment, roughly 44 percent were male, and this remained relatively unchanged between 1995 and 1999. There are some substantial differences in the industry in which at-risk workers work, however. In particular, at-risk workers in temporary help employment are almost twice as likely to be employed in the service sector than at-risk workers in regular employment, and one sixth as likely to be in trade.

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Where are the jobs?

If we list the major industries that hire temporary workers (not just at-risk temporary workers), it is clear that the business services and auto and repair services industries are overwhelmingly important demanders of temporary labor--accounting for roughly half of all temporary help employment (See Table 3.4). However, most of this is accounted for by personnel supply services (Table 3.5), which in turn lease out the workers to other industries. In addition, durable goods manufacturing accounts for just over one in ten jobs for temporary help workers, and employment in other professional services another one in twenty. In examining those industries (at a finer level of industrial detail) that employ temporary help workers (Table 3.6), other important users of temporary help worker services are health services, hospitals, telephone communications, electrical machinery, equipment and supplies and computer and data processing services. There are few discernable trends in these patterns over the five-year period for which we have data.

A detailed industry analysis reveals that the number of industries drawing on temporary help workers has increased, and that the median education level of temporary workers employed in these industries is quite high. In almost all of the industries in 1997 and 1999 (but not 1995), the median education level of workers is beyond high school, and in some (notably telephone communications and computer and data processing services), the median worker is a college graduate. It is also worth noting that there appears to be some increased demand for higher education qualifications among temporary help workers. All the "newly important" industries that emerge by 1999--namely, telephone communications and hospitals--have more temporary help workers with at least some college than not; the one "important" industry in 1995 that was no longer important by 1999 was construction, which had more high school graduates and dropouts than not. This trend stands in marked contrast to the average education level of the at-risk group in which we are interested (Table 3.3), where only about one in four workers has education beyond a high school diploma, as described previously. Finally, while the median temporary worker is usually less educated than the median regular worker in the firm that hires her, the level of skill required for the temporary job is usually below that of the median regular worker. This introduces the possibility that as skill levels in the economy as a whole increase, so will the demand for the skills of temporary help workers, with clear implications for at-risk temporary workers, who are generally less educated.

Although only a few industries account for the bulk of temporary worker hiring, the dominance of just a few sectors is less evident when the occupational distribution of temporary help workers is examined. As Table 3.7 shows, a large number of workers classify themselves as working in administrative support occupations (almost one in three), but we also see large numbers working as machine operators, assemblers, inspectors, handlers, equipment cleaners, helpers, and laborers.

Again, turning to examine the occupations of temporary help workers in more detail, as Table 3.8 shows, it is clear that in 1995, the median education level of most temporary help workers in these occupations was quite low, and the occupations were fairly unskilled: laborers, secretaries, data entry keyers, assemblers, typists, nursing aides, and the like. However, just as the "newly important" industries in Table 3.6 employed a more highly educated temporary worker, on average, in 1999 than did the industries in 1995, so too did the educational mix of temporary workers in "important" occupations change by 1999. For example, bookkeepers, accounting and auditing clerks--an occupation in which the median temporary help worker had some college--appeared as an important occupation by 1999.

In general, just as with the industry analysis, the type of temporary help worker that is needed appears to be changing. In 1995, the education level of temporary help workers matched the education level of the regular workers in their occupations. By 1999, the median temporary help worker's education exceeded that of regular workers in three of the eight most important occupations. Indeed, the median education level for temporary help workers in five of these eight occupations was "some college," which is well above the education level of at-risk temporary workers.

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The Characteristics of Jobs for At-Risk Workers in Alternative Work Arrangements

Although temporary help jobs have often been characterized as peripheral and marginal in nature, little is known about whether these jobs are substantially different for at-risk workers than for the workforce in general. This section examines several different aspects of jobs in the alternative work arrangements sector--the quantity of work (hours and job duration), the price of work (the wage rate), and other measures of the quality of work (such as benefit information). Although these measures are of interest in any analysis of the labor market, they are of particular interest to those at risk of welfare receipt. It is self-evident that low wages are an important contributing factor to poverty--and it is also well known that the difference between low-wage workers below poverty and low-wage workers above poverty is the number of weeks and hours worked per year. ⁽⁵²⁾ In addition, work by Farber (1997) shows that the availability of health and pension benefits for low-skill workers is steadily decreasing, lowering the quality of jobs available to this group.

Part-time Employment and Job Duration

A number of quite interesting facts emerge from an examination of the evidence on part-time employment and job duration presented in Table 3.9. The first set of rows, for all workers, reveal that the rate of part-time work is much higher for workers in alternative work arrangements than those in regular employment, and job tenure is shorter. Although fewer than one in six regular workers works part time, more than one in five agency temps, and roughly one in two on-call workers work under 30 hours a week. Similarly, although nine in ten regular workers have been in their jobs more than six months, only slightly more than half of agency temps have been, and three out of four on-call workers. This has already been well documented by Polivka (1996a), and is not surprising, given the inherently transient and part-time nature of both temporary and on-call employment. It is interesting to note, however, that there has been no discernable change in this pattern over the past five years.

When we turn to examine whether similar part-time patterns hold true for at-risk workers in alternative work arrangements versus at-risk workers in regular employment (the second and third sets of rows in Table 3.9), it is clear that at-risk workers are more likely to be part time than are all workers across the board, regardless of what kind of job they hold. However, this increased likelihood of part-time work is greater for at-risk workers in regular jobs than for at-risk workers in either temporary work or on-call work.

In keeping with this finding, it is also clear from Table 3.9 that job duration in general is also lower for at-risk workers in alternative work arrangements regardless of whether the comparison group is their cohort in regular work or all other agency temps. If we compare at-risk workers who are agency temps with at-risk workers who have regular employment, only about one in two at-risk workers who are agency temps have been in their job more than six months, while eight in ten at-risk workers who have regular employment have been in their job at least six months. If we compare at-risk agency temps to other agency temps, it is clear that the proportion of at-risk workers with job tenure greater than either six months or one year is generally less than other agency temps. All of these groups have much lower job duration than do regular workers in general, where nine in ten have a job that has lasted at least six months, and eight in ten have a job that has lasted at least one year.

Finally, there appears to have been little change in these patterns over time--there is little evidence of a trend in the data. Neither the rate of part-time work nor job duration has changed substantially--and this holds true both for all workers and for those at risk of welfare receipt.

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Wages

The second component of job quality in which we are interested is wages. It is clear from Table 3.10 that earnings of workers in alternative work arrangements are substantially below those in regular work, although average earnings in this sector have showed a slightly stronger upward trend than overall earnings.

Turning to look at at-risk workers, their earnings are about one-third less in alternative work arrangements than those workers in the same arrangements who are not at risk of welfare receipt, who in turn make about one-third less than regular workers. Thus, at-risk workers in alternative work arrangements make about 50 percent less than regular workers for two, roughly equal, reasons--their at risk status and their employment in alternative work arrangements. Indeed, the median at-risk worker who worked full-time year-round in this sector (which is unlikely, given the information on job duration and the incidence of part-time work) would just barely earn enough to be above poverty for a family of four. It is also worth noting that since the distribution of earnings for at-risk workers in temporary work is much less skewed than for any other of the groups being examined (the mean and the median are quite close), there are very few workers either making large amounts above or below the group average.

Benefits

The final piece of the puzzle in assessing job quality is assembled by examining the availability and coverage of employer-provided benefits--particularly health and pension benefits.

As one would expect, very few workers in alternative work arrangements are either covered by health insurance or have it available to them. As Table 3.11 shows, the proportion of temporary help workers who have health insurance available is roughly one in four; fewer than one in ten are actually covered, compared with almost two out of three regular workers. If we examine at-risk workers, the availability is not markedly different, but the coverage is roughly half an already low rate--about one in twenty at-risk workers in temporary work are actually covered by health insurance. There does appear to be some upward trend over the sample period, although the sample size is so small that these numbers should be treated with caution.

A very similar picture emerges for employer-provided pensions. As a comparison of the first set of rows of Table 3.12 to the second and third sets of rows shows, the availability of pensions to at-risk temporary help workers is under one in ten, compared with seven out of ten for all regular workers. Most of this discrepancy is, in fact, due to the fact that temporary work in general is rarely in an agency where pensions are available--if we examine the first set of rows in Table 3.12, it is clear that the availability of pension coverage goes from seven out of ten regular workers to just over one out of eight temporary help workers. When we turn to examining the second and third sets of rows--those for at-risk workers--it is evident that about one in ten at-risk temporary help workers has pension benefits available, and about one in twenty has pension coverage. Again, it is difficult to make a judgement about the trends over time, primarily because the small sample size leads to quite high volatility.

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Why Do At-Risk Workers Work In Alternative Work Arrangements And How Do They Like It?

In order to understand the circumstances associated with alternative work arrangements, particularly for those workers most at risk of welfare receipt, it is important to examine the reasons for their employment in the industry and the satisfaction associated with this employment. It is fairly clear that most workers work in temporary help services because they have no choice, not that they choose temporary work for personal reasons. In particular, worker responses to the CPS question that examined the reasons for the choice of temporary employment found overwhelmingly that workers work in the temporary help industry for economic reasons--that is, it was the only type of work that they could find; that they hoped it would lead to permanent employment; or that the nature of the work was seasonal. Workers in the temporary help industry are not there for personal reasons such as schedule flexibility, child care, school scheduling, or family and personal obligations (See Table 3.13). This holds just as much (but not more) for at-risk workers as for all workers--roughly three out of five workers in the temporary help industry work for economic reasons, regardless of economic status. The slight decrease between 1995 and 1999 in temporary workers who cite economic reasons (from 63 percent to 56 percent) could be a reflection of improved economic conditions and options, however, this does not trickle down to at-risk workers--where just as many workers cited economic conditions for their employment choice in 1999 as in 1995.

Not surprisingly, given this information about the reason for work in the alternative sector, most workers in temporary work are not particularly happy in that job. As Table 3.14 shows, almost one in four is looking for new work, and about two-thirds report that they would prefer a different job. This response is slightly higher for at-risk workers than for all workers, and there does appear to have been a sharp increase in both measures of dissatisfaction in 1999. This stands in marked contrast to regular workers, who are, by and large, quite satisfied with their jobs (95 percent of these workers are not looking for new jobs). It also stands in marked contrast to at-risk workers in regular jobs, who are only marginally more likely to be looking for new work than are all workers.

The Relationship Between Temporary Help and the Low-Wage Sector

Given the relatively poor employment and wage outcomes described above, it is natural to question the extent of the linkage between employment in the temporary help services sector and employment in the low-wage sector. In order to address this, we identify those industries that have the most low-wage workers in each of the three years for which we have data and report the results in Table 3.15 and in more detail in Table 3.16.

The overlap between industries with the majority of low-wage workers and the industries with the majority of temporary help workers is marked, but not overwhelmingly so.⁽⁵³⁾ As mentioned above, the biggest sector to employ temporary help workers was business, auto and repair services, accounting for half of all temporary help employment. These industries are clearly also an important employer of low-wage workers: roughly eight percent of all low-wage workers worked there in each year for which we have data, but it is not nearly the same order of magnitude as for temporary work. In a similar vein, employment in durable goods manufacturing accounted for the jobs of more than one in ten temporary help workers, but only one in twenty low-wage workers; the retail trade sector accounted for one in four low-wage jobs, but under two percent of temporary help service workers. Again, there is no evidence of any particular trends over time.

We then investigate the evidence with respect to occupational classifications, and find essentially the same picture (See Table 3.17). In particular, while temporary help occupations are primarily administrative support, machine operators, and handlers (in order of importance), low-wage occupations are primarily service occupations, sales occupations, and administrative support occupations. Even when we examine the detailed occupational categories of low-wage workers (Table 3.18), we find no overlap. In none of these is there any particular trend over time.

The same picture holds when we examine the industries of low-wage workers in more detail, and compare this to the industries associated with temporary help services, as seen in Table 3.19. There is no overlap in detailed industry employment: the dominant low-wage employers are firms in eating and drinking places, while the dominant temporary help employer is personnel supply services. Similarly, while educational establishments are very important low-wage employers, they do not figure at all in the temporary help market.

It is interesting to note that those industries that are the most important employers of low-wage workers are extraordinarily stable over the five years for which we have data: the same five industries show up in each year, albeit in slightly different ordering (See Table 3.19). This is in contrast to the dominant occupations of temporary help workers, where there appears to be a little more volatility, although this may be a function of sample size (See Table 3.20).

While this describes the current situation, the Bureau of Labor Statistics (BLS)⁽⁵⁴⁾ provides some insight into what growth to expect in these low-wage industries. While employment growth for the whole economy between 1998 and 2008 is projected to be about 14 percent, employment in eating and drinking establishments (17 percent growth), and the education sector (15 percent growth) is expected to exceed this rate, while employment in grocery stores and construction work is expected to fall far short (at between 5 and 7 percent growth). When we compare this to the growth in the industries that employ temporary help workers, there are some substantial differences. BLS expects employment growth in the temporary help industry to be 43 percent, in health services to be 65 percent, in telephone communications to be 24 percent, but in hospitals, an important temporary help employer, to be a scant 8 percent. In sum, the employment growth prospects for both low-wage and temporary workers depend very much on the industry in which they work. Since jobs in these industries are neither geographically concentrated (as were jobs in the steel and auto industries 20 years ago) nor difficult to switch into (again, unlike heavily unionized or high-skill jobs), an important policy direction might be to encourage job mobility in response to industry demand changes.

As Table 3.20 shows, the same picture is also evident in an examination of the occupations of low-wage workers, which are overwhelmingly very low-skill occupations--cashiers, cooks, janitors, waiters and waitresses. In general, employment growth in these low-wage occupations is projected to exceed employment growth in the economy at large--particularly in the only occupation which does overlap with temporary work--that of nursing aides, orderlies and attendants. Again, for policy purposes it is useful to note that these occupations are not geographically restrictive, nor are there high barriers to entry. As the demand for one occupation shrinks, workers should be able to move to a newly expanding occupation, if adequate information about job opportunities is made available.

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Summing Up

The descriptive statistics presented above provide some evidence that workers at risk of welfare receipt fare worse in alternative work arrangements than do other workers in such arrangements--although the degree to which they fare worse varies depending on what measure is used. However, in general, at-risk workers in temporary work have lower wages, a greater likelihood of part-time work and shorter job duration than do others in temporary work, and certainly than regular workers. In addition, at-risk workers in temporary work are less likely to have employer-provided benefits than are regular workers. Not surprisingly, at-risk workers are also less happy with their work, and more likely to be in the job for economic reasons than are other temporary help workers. There is little evidence of any trends for the better or worse in these levels over time, although much of this may be attributable to small sample sizes.

It is also worth noting that the level of education of at-risk workers is, by and large, very low, and that it is possible that the alternative to work in temporary help services is not regular employment, but, rather, nonemployment. Thus, the comparison of wages, employment duration, and benefits to those achieved by workers in regular employment may not be the appropriate comparison. We examine this in more detail in Appendix B, where we present the results of constructing the appropriate comparison groups based on the analysis of the SIPP.

The differences in educational attainment between temporary help and at-risk temporary help workers could prove to be quite important in another dimension. In particular, it appears that the dominant employers of temporary help workers are increasingly requiring more skill, as are the occupations in which temporary help workers are working. Since three out of four at-risk workers are high school graduates or less, this is a cause for concern. However, the literature review suggested that while there are many reasons for firms to use alternative work arrangements, the main source of demand comes from primarily short-term firm staffing needs. Thus, the increased demand for skilled temporary help workers may reflect skill shortages in the economy at large rather than a structural change in the nature of temporary help work.

Finally, although one might expect there to be some relationship between the industries and occupations that predominantly hire low-wage workers and those that predominantly hire temporary help workers, the descriptive statistics did not find this to be the case. This result is consistent with the literature review. The decision to hire low-wage workers is driven by long-term production decisions, which is evident from the stability of the types of industries that hire low-wage workers. In contrast, the need for temporary help workers is driven by short-term staffing needs and will reflect economic conditions as a whole.

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Endnotes

49.  A full discussion of these different data sources is provided in Appendix A.

50.  A full discussion of the details surrounding this decision is provided in Appendix A.

51.  Sample sizes shown in Table 3.1 should be considered when evaluating these trends.

52.  Lane, Julia. "The Role of Job Turnover in the Low-Wage Labor Market." In Low-Wage Labor Market: Challenges and Opportunities for Economic Self-Sufficiency, edited by Kelleen Kaye and Demetra Smith Nightingale, pp. 185-198. Urban Institute Press, 2000.

53. One major caveat to this discussion is that almost one in four temporary help workers show up as working for personnel supply services. They could, in turn, be leased to any industry, but the data do not permit this kind of tracking.

54. Industry projections are taken from the BLS website at http://www.bls.gov.

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