Low-Income and Low-Skilled Workers Involvement in Nonstandard Employment. A First Look at Whether Alternative Work Arrangements Help Workers On The Path To Regular Employment

10/01/2001

Some TANF agencies have begun using temporary help agencies to help place welfare recipients in jobs.(44) This may well become an important trend--as more former welfare recipients go to work and the caseload becomes harder to serve, welfare agencies are likely to rely more heavily on intermediaries that either provide services to help clients with employment barriers (e.g., substance abuse treatment) or assist with job search activities including teaching clients "soft skills" necessary to succeed in interviews. While this may be helpful to some workers with few skills and little or no work history, opponents fear that the temporary agency jobs are low paying with only a small chance of the job becoming a permanent position.(45)

Survey-based evidence suggests that few temporary jobs lead to permanent employment--only 5 percent of companies report hiring agency temporaries to fill positions for more than one year. A recent study using CPS data confirms that there is a significant amount of job turnover for agency temporaries. In an analysis of labor market transitions for personnel supply services workers (SIC 736) between 1983 and 1993, Segal (1996) found that half of personnel supply services workers were employed in a different industry after one year. In each year between 1983 and 1993, on average, 20 percent of those who were personnel supply services workers in the preceding year were without a job in the subsequent year, either out of the labor force (13.8 percent) or unemployed (6.3 percent).(46)

UI wage record data also suggest that few temporary jobs become permanent. In Washington, fewer than half of temporary employment spells (42 percent) result in a transition to a permanent job (Segal and Sullivan 1997a). In Wisconsin, only 5 percent of the single parents who worked for temporary agencies at any point in the five quarters had nontemporary agency earnings over $2500 during the first quarter of 1997. Roughly 6 percent of persons with temporary agency jobs may have obtained full-time nontemporary employment through a temporary job. Most of these successful persons had the characteristics of the population most likely to leave AFDC with or without a temporary job placement, i.e., 69 percent had 12 or more years of schooling and 57 percent were already employed in first quarter 1996 at the start of the study period.(47) In addition, even after controlling for demographic characteristics as well as work and welfare histories, the Pawasarat (1997) study generally found significantly lower probabilities of working in all four quarters in the year after leaving welfare if a welfare recipient had worked in a temporary agency as compared to other industries.

Although most jobs do not convert to permanent jobs, some firms do provide the opportunity. The Upjohn Institute's survey found that about 43 percent of employers using agency temporaries and 36 percent of employers using on-call workers said they often, occasionally, or sometimes move employees into permanent positions. This is confirmed by a survey conducted by the National Association of Temporary Staffing Services, which found that more than one-third of temporary agency workers surveyed said they had been offered a permanent job by their employers.(48)

Endnotes

10.  Polivka, Anne E. "Contingent and Alternative Work Arrangements, Defined." Monthly Labor Review, October 1996b.

11.  Moore, Mack A. "The Temporary Help Service Industry: Historical Development, Operation, and Scope." Industrial Labor Relations Review, 1965.

12.  Manpower Inc. "Manpower Inc. Facts." Manpower Inc. <http://www.manpower.com/en/story.asp>. 2000.

13.  Lee, Dwight R. "Why Is Flexible Employment Increasing?" Journal of Labor Research XVII, no. 4, Fall 1996: 543-53.

14.  Autor 2000; Lee 1996.

15.  Autor 2000.

16.  Swoboda, Frank. "Temporary Workers Win Benefits Ruling." The Washington Post, August 31 2000, A1.

17.  It is worth making the point that there is a difference between contingent work and alternative work arrangements: the latter describe the relationship between employer and employee, the former is closely tied to the expected duration of employment

18.  Cohany, Sharon R. "Workers in Alternative Employment Arrangements." Monthly Labor Review October 1996.

19.  Cohany 1996.

20.  Houseman, Susan N. and Anne E. Polivka. "The Implications of Flexible Staffing Arrangements for Job Stability." Upjohn Institute Staff Working Paper No. 99-056, May 1999.

21.  U.S. Department of Labor. "SIC Description for 7363." Occupational Safety and Health Administration. <http://www.osha.gov/cgi-bin/sic/sicser2?7363>. 2000.

22.  Typically a company will contract with an employee leasing firm and then dismiss their employees only to have them hired by the leasing company and leased back to the original firm. The leasing company provides wages, payroll taxes, and benefits to the employees for a set fee. See KRA Corporation. Employee Leasing: Implications for State Unemployment Insurance Programs. Unemployment Insurance Service, Department of Labor, 1996.

23.  Polivka, Anne E. and Thomas Nardone. "On the Definition of 'Contingent Work'." Monthly Labor Review December 1989.

24.  Abraham, Katherine G. and Susan K. Taylor, "Firms' Use of Outside Contractors: Theory and Evidence" Journal of Labor Economics, July 1996: 394-424.

25.  Houseman, Susan N. "Temporary, Part-Time, and Contract Employment in the United States: A Report on the W.E. Upjohn Institute's Employer Survey on Flexible Staffing Policies." U.S. Department of Labor. June 1997.

26.  The Upjohn Survey defines short-term hires as individuals who are employed directly by the organization for a limited and specific period of time. Short-term hires include workers hired for the December holiday season or during the summer and they may work part-time hours.

27.  Houseman 1997.

28.  The Upjohn Institute survey reports establishment responses about alternative work arrangements. Thus, the perspectives of alternative workers are not reflected in these data. Also, the averages in the data represent the typical firm, rather than the firm whether the typical worker is located.

29.  It is worth discussing the discrepancy between these results and those reported based on establishment employment statistics in some detail. The Current Population Survey (CPS), which covers households, and the Current Employment Statistics survey (CES), which covers firms, do not agree on the level of employment in the United States for a number of reasons, but primarily because the former series covers workers and the latter covers jobs. However, in the 1990s the gap between the two series grew markedly: employment as measured by the CPS grew by only 8 million (from 110 million to 118 million) from 1994 to 1998 while the CES showed an employment growth of more than 12 million (from 113 million to over 125 million) (Nardone 1999). The reason for this discrepancy is not known--it could be due to changes in multiple job holding, undocumented illegal immigration, Census undercounts (and hence misweighting in the CPS), or changes in establishment reporting practices. Although understanding the causes for these differences has important implications for knowing how much true employment growth has actually occurred in the temporary help sector, and is an important area for future research, it is beyond the scope of the current study.

30.  The authors use Unemployment Insurance (UI) data from the State of Washington to examine wage differentials and employment duration, respectively, among workers in the temporary help supply services industry.

31.  Farber, Henry S. "Job Creation in the United States: Good Jobs or Bad?" Princeton University Industrial Relations Section Working Paper 385, July 1997.

32.  Cohany, Sharon R. "Workers in Alternative Employment Arrangements: A Second Look." Monthly Labor Review November 1998.

33.  Personal reasons, as defined in the CPS, include: flexibility of schedule; family or personal obligations; in school or training; and other.

34.  Economic reasons, as defined in the CPS, include: employer laid off and hired back as temporary employee, only type of work I could find, hope job leads to permanent employment, retired/social security earnings limit, nature of work/seasonal, and other.

35.  Cohany 1998.

36.  Center for Law and Social Policy and Center on Budget and Policy Priorities. "State Policy Demonstration Project." <www.spdp.org/medicaid/table_3.htm>. January 2000.

37.  For reasons of comparison, we selected gross income limits and the 1999 poverty threshold for a family of three.

38.  U.S. General Accounting Office. "Contingent Workers: Incomes and Benefits Lag Behind Those of Rest of Workforce." GAO/HEHS-00-76, June 2000; Houseman, Susan N. "Flexible Staffing Arrangements: A Report on Temporary Help, On-Call, Direct-Hire Temporary, Leased, Contract Company, and Independent Contractor Employment in the United States." DRAFT, June 1999; Houseman 1997.

39.  All of the studies with income information for alternative workers discussed here rely on data from the February Contingent Workers and Alternative Work Arrangements supplement to the CPS or March CPS.

40.  U.S. GAO 2000a.

41.  This paper provides descriptive statistics; the estimates do not control for other factors that may affect human capital.

42.  Houseman's definition of "regular employees" is not clear from the paper, however, it likely refers to workers in traditional arrangements and may or may not include part-time employees along with full-time employees.

43.  Houseman 1997.

44.  Pavetti, LaDonna, Michelle Derr, Jacquelyn Anderson, Carole Trippe, and Sidnee Paschal. The Role of Intermediaries in Linking TANF Recipients with Jobs. Mathematica Policy Research, Inc. U.S. DHHS/ASPE, February 2000; Houseman 1999.

45.  Houseman 1999.

46.  Segal, Lewis M. "Flexible Employment: Composition and Trends." Journal of Labor Research XVII, no. 4 Fall 1996: 523-42. See Table 6 on page 539.

47.  Pawasarat, John. "The Employment Perspective: Jobs Held by the Milwaukee County AFDC Single Parent Population (January 1996-March 1997). Milwaukee, WI: Employment and Training Institute, December 1997.

48.  Houseman 1997.