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

Chapter 4:
What Happens To At-Risk Workers After Work In Alternative Work Arrangements?

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Contents

• Setting Up the Analysis
• What Is The Effect Of Temporary Help Work on At-Risk Workers: Main Findings
• What Is The Effect Of Temporary Help Work on At-Risk Workers: A Detailed Analysis
• Job Outcomes
• Job Quality Outcomes
• Public Assistance Receipt and Poverty Status

Endnotes

The second component of the research question addresses how work in alternative work arrangements affects subsequent labor market outcomes for at-risk workers. This, of course, entails setting up a counterfactual--namely, how did an alternative work arrangement affect earnings and employment relative to what the at-risk worker would have been doing otherwise. There are two possible options for the counterfactual: the worker could have been in traditional employment, or could have not been employed at all. Fully analyzing this question requires the development of a model to construct appropriate comparison groups, controlling for demographic characteristics and employment histories. Subsequent earnings and employment outcomes can then be compared for those in alternative work arrangements and those in the comparison groups. A good source of data for such an analysis is the Survey of Income and Program Participation (SIPP). Although the Current Population Survey has excellent data on employment in alternative work arrangements and good outcome measures, it provides neither the sample size nor the data on work histories required for analyzing the impact of temporary work relative to a matched counterfactual. The SIPP has a weaker measure of alternative work arrangements--the only available measure is employment in the temporary help industry--but it provides relatively large sample sizes, good outcome measures, and considerable data on work history. The work history data is particularly important for trying to match temporary workers with appropriate comparison groups.⁽⁵⁵⁾

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Setting Up the Analysis

The research task is to describe the effect of temporary work on at-risk disadvantaged workers. Three key issues are of interest here. The first is to define the counterfactual; the second is, for each counterfactual, to develop a comparison group of workers possessing a set of characteristics as close as possible to the characteristics of those workers who have experienced temporary employment; and the third is to describe the differences in outcomes for the treatment and comparison groups.

Since defining the counterfactual and developing a comparison group are critical to the analysis, we briefly discuss the approach here, and provide detailed discussion in Appendix B. The effect of entering into temporary help employment is clearly conditioned on the state from which the worker entered: whether the worker was employed or not employed to start with. Thus, we define two separate groups of workers: those who enter temporary help employment from traditional employment, and those who enter temporary help employment from nonemployment. We then need to construct a comparison group--and it is also clear that there are two possible counterfactuals. One alternative to temporary work is traditional employment; the other is not having a job at all. Thus two sets of comparison groups need to be constructed--each of which, again, will be conditioned on the initial state. So the first "treatment" group--individuals who went into temporary work from traditional employment--will be compared to two possible counterfactuals--individuals who went from traditional employment to nonemployment and those who went from traditional employment to traditional employment. The second "treatment" group--individuals who went into temporary work from nonemployment--will be compared to two different possible counterfactuals--individuals who went from nonemployment to nonemployment and those who went from nonemployment to traditional employment.

Defining the comparison group is also an important component of answering the research question. Here we use not only baseline demographic characteristics, but we also exploit the richness of the SIPP data to construct employment histories. We use matched propensity score techniques to "match" individuals in each treatment and comparison group as closely as possible.

Clearly, the analysis of the results is quite complex. First, since for at-risk workers, often the alternative to temporary help work is no employment at all, we provide results for four sets of counterfactuals: those who have jobs, and those who are not employed--conditional on two sets of initial employment states. Second, since the validity of the results is critically dependent on the quality of the matching procedure, and one reason to use SIPP was the availability of a rich employment history, we provide a detailed discussion of the quality of the match for each of these four comparison groups. This discussion is reported in Appendix B for reasons of brevity. Third, since there are multiple ways to define the effect of temporary work, we use several outcome measures for a year later--ranging from public assistance receipt, to employment and earnings. Finally, since the focus of analysis is on disadvantaged workers, we provide results for both the full sample of workers, and workers within 200 percent of poverty in the initial period.⁽⁵⁶⁾

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What Is The Effect Of Temporary Help Work on At-Risk Workers: Main Findings

The results are striking. In sum, it matters whether the alternative to temporary work is employment or nonemployment. In the former case, it appears as though temporary workers are less likely to have a job, and less likely to have one with employer-provided health insurance. If they have a job, the job is one with lower earnings than if they had not had temporary work, and overall, they work fewer hours. However, if the counterfactual of having a temporary job is to be not employed, it is very clear that having a temporary job does provide some pathway out of poverty. Individuals who have experienced a spell of temporary work are more likely to have a job, and more likely to have a job with health insurance. If they have a job, the job is likely to have higher earnings than if they had not had a temporary help job. Overall, they are likely to have longer hours of work and less likely to be have incomes below 200 percent of the poverty line than individuals who remained out of employment.

Another important result is that work histories clearly matter in determining the comparison groups. Although we were unable to fully control for work histories, it is likely that our efforts improve the match by much more than would be possible using cross-sectional data--again suggesting that simple tabulations of outcomes for different groups of workers are likely to be misleading.

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What Is The Effect of Temporary Help Work on At-Risk Workers:
A Detailed Analysis

We look at the effects of temporary work a year later along three different dimensions: employment and earnings outcomes, job quality and welfare receipt. The first set--work-related outcomes--are the likelihood of employment, earnings levels if the individual gets a job, and the hours of work at that job. The second set--job quality--is measured by whether the worker has private health insurance or, more specific to job quality, employer-provided health insurance. Finally, we examine the effect on the worker's welfare receipt and poverty status a year later.

The clearest result⁽⁵⁷⁾ that comes out of an analysis of job outcomes is that workers who get temporary jobs fare much better in terms of job and job quality outcomes a year later than do workers who were not employed in the same time period; but they fare slightly worse than those who were employed in nontemporary employment. The effect of temporary work on reducing the likelihood of welfare receipt and poverty is unambiguously positive. Most importantly for this study, these results hold true for both the full sample and for at-risk workers, both in terms of the direction and the order of magnitude of the effects.

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Job Outcomes

Turning to the specifics, an examination of the first column in Table 4.1 shows that if we compare workers who were initially not employed and then took temporary help work with a comparison group that were not employed in both periods (i.e., was not employed in both months in the initial period), the latter had only a 35 percent chance of being employed a year later. By contrast, the group that moved from nonemployment to temporary employment had almost twice the likelihood of being employed, at 68 percent.⁽⁵⁸⁾

Temporary work appears to have positive effects even when we look at the set of workers who moved from nontemporary employment to temporary employment and compare them to a set of workers with similar characteristics who moved from nontemporary employment to nonemployment in the initial period. Again, while the latter group have a 57 percent chance of being employed a year later, the temporary workers most like this comparison group improved these odds by 27 percentage points, and had an 83 percent chance of having a job a year later. These probabilities were quite similar for the at-risk groups of initially not employed and initially employed temporary workers, sitting at 68 percent (34.6 percent + 32.9 percent) and 76 percent (55.6 percent + 20.0 percent), respectively.

This picture changes markedly when we examine the cohort of workers who moved from nonemployment to temporary work and compare them to a set of similar workers who went from nonemployment to nontemporary employment in the initial period. Nearly three-quarters (73 percent) of the latter group was employed a year later, compared with 68 percent of the temporary work group. The same is evident when we compare the group that moved from nontemporary employment to temporary work to those that stayed in nontemporary employment. The movement to temporary work dropped the probability of being in employment a year later from 88 percent to 83 percent. It is worth noting that the drop is about twice as large for the at-risk group of workers--their employment probabilities drop from 84 percent to 76 percent.

The story is very much the same for earnings outcomes. Temporary help employment generally improves earnings outcomes among those employed when the comparison group is those who were not employed (although this is not statistically significant); earnings are lower when compared to the experience of similar workers who got nontemporary jobs. The sole exception to this is the at-risk workers who moved from nontemporary employment to temporary employment rather than stay in nontemporary employment--their earnings gain was substantial (about 10 percent). We suspect, however, that this is a result of using earnings as a selection criterion for the at-risk group.

The third set of rows investigates the effect of temporary work on hours worked (including the effect of non-work). Again, the results are strikingly different depending on which comparison group is used. Workers who were not employed in both initial periods or transitioned from nontemporary employment to nonemployment had quite low hours a year later--ranging from 12 to 20 hours a week. Those who transitioned into temporary employment worked almost twice as many hours as those who were not employed in both of the initial periods, and half as many again as those who transitioned into nonemployment from nontemporary employment.⁽⁵⁹⁾ The effect is slightly lower for at-risk workers, however.

The negative effects of temporary work when compared to nontemporary employment are quite small--they are completely insignificant when the comparison group is workers who moved from nonemployment to nontemporary employment, and only just over an hour a week when compared to those who stayed in nontemporary employment.

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Job Quality Outcomes

Another important dimension that we would like to capture is the quality of the jobs that the workers get. We capture one component of this by finding out whether the worker has health insurance a year later, as well as whether the insurance comes from an employer. We find the same general results: the quality of jobs a year later, in general, differs in a systematic way across the comparison groups (worst for the group that were not employed in both months in the initial period; best for those who were employed in nontemporary work in both months, and the rest falling on a natural continuum in between)--and that while workers who took temporary help jobs had better outcomes than those who went to nonemployment, they fared worse relative to those who went into nontemporary help employment. While the at-risk group did worse than the full sample in terms of their job quality outcomes, their gains from temporary work, when they were to be had, were greater in percentage terms, and often even in relative terms than for the full sample.

The second group of rows in Table 4.1 provides more detail. While 57 percent of those workers who were not employed in both initial periods had health insurance a year later (41 percent of at-risk workers), about 14 percent had this provided by the employer. In both this case, and the case where workers had moved from nontemporary employment to nonemployment, however, similar workers who had moved into temporary work did better--almost doubling their chances of getting employer-provided health insurance. In both cases, the effects reflect large effects of temporary work on the probability of employment.

When we turn to comparing outcomes for temporary workers with those who had regular employment rather than temporary help employment in the second month of the initial period, temporary help workers do significantly worse in getting a job with employer-provided health insurance than those who were continuously employed in nontemporary positions (but not those who were not employed in the previous period).

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Public Assistance Receipt and Poverty Status

The key result in this section is that temporary help work appears to substantially reduce the likelihood of a worker receiving public assistance or having low income a year later--sometimes by more than a third. The gains are particularly marked for at-risk workers.

For example, individuals who were not employed for both of the months in the initial period have an 18 percent chance of getting public assistance (28 percent if they are at risk), a 15 percent chance of Medicaid receipt (23 percent if at risk) and a 50 percent chance of being below 200 percent of the poverty level (74 percent if at risk). These odds drop substantially if an individual with similar characteristics were to go from nonemployment to temporary work. Public assistance receipt would drop by 19 percent (22 percent if at risk); Medicaid by 25 percent (29 percent if at risk) and the incidence of income below 200 percent of the poverty level by 18 percent (17 percent if at risk). This effect is more pronounced for individuals who move from regular employment to nonemployment as opposed to temporary work. Workers with similar characteristics who choose temporary work (rather than nonemployment) have substantially better outcomes a year later.

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Endnotes

55. Again, full details on these issues are provided in Appendices A and B.

56. We define at risk as 200 percent of the federal poverty level rather than 150 percent (our definition of at risk for the CPS analysis). The higher cutoff is used here to ensure the sample size is adequate for analysis.

57. Although the results that are presented here reflect the simple quintile approach discussed in the previous section, the results are substantively unchanged when additional controls are added, or when a difference-in-difference approach is used.

58. The predicted probability for temporary workers can be calculated from Table 4.1 by taking the estimated probability of .345 for the comparison group plus the temporary worker differential of .336.

59. The differences in average hours worked between those who left employment and those who remained employed partially reflects the difference in employment rates a year later for the two groups.

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