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The growth of temporary services work

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  • Lewis Segal
  • Daniel Sullivan

Abstract

Temporary services employment has expanded rapidly and now accounts for a sizable fraction of aggregate employment. The industry's workers are no longer overwhelmingly female or limited to clerical occupations. Temporary work is associated with variable weekly schedules and with part-year participation, but not with voluntarily part-time work. On average, temporary workers have less labor market security than permanent workers, being prone to both more unemployment and more underemployment. Relatively few of them, however, stay in temporary positions for as much as a year and the majority move on to permanent employment within that time period. Temporary workers' wages average over 20% less than permanent workers, but at least two-thirds of this gap is explained by worker and other job characteristics. We discuss explanations for temporary service employment growth that involve an increased client firm demand for flexibility, including the flexibility to screen workers before offering them permanent positions, an increased ability of temporary workers to perform valuable tasks, an increased supply of workers willing to accept temporary positions, and an increased use of temporaries to implement two-tier compensation structures. We emphasize that temporary workers are quite diverse and, in particular, that occupation is an important determinant of the relative quality of temporary versus permanent jobs and possibly the reasons for temporary services employment growth.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Chicago in its series Working Paper Series, Macroeconomic Issues with number WP-96-26.

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Date of creation: 1996
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Handle: RePEc:fip:fedhma:wp-96-26

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Keywords: Labor market ; Temporary employees;

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References

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  1. Donald S. Allen, 1995. "Changes in inventory management and the business cycle," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 17-26.
  2. Richard B. Freeman, 1983. "Longitudinal Analyses of the Effects of Trade Unions," NBER Working Papers 1207, National Bureau of Economic Research, Inc.
  3. Finis Welch, 1993. "Matching the Current Population Surveys," Stata Technical Bulletin, StataCorp LP, vol. 2(12).
  4. repec:fth:coluec:452 is not listed on IDEAS
  5. Lewis M. Segal & Daniel G. Sullivan, 1995. "The temporary labor force," Economic Perspectives, Federal Reserve Bank of Chicago, issue Mar, pages 2-19.
  6. Thomas Klier, 1996. "Assessing the Midwest economy--a longer view," Chicago Fed Letter, Federal Reserve Bank of Chicago, issue Jul.
  7. Garth L. Mangum & Donald Mayall & Kristin Nelson, 1985. "The temporary help industry: A response to the dual internal labor market," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 38(4), pages 599-611, July.
  8. Abraham, Katharine G & Taylor, Susan K, 1996. "Firms' Use of Outside Contractors: Theory and Evidence," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 394-424, July.
  9. Lawrence F. Katz, 1986. "Efficiency Wage Theories: A Partial Evaluation," NBER Working Papers 1906, National Bureau of Economic Research, Inc.
  10. Brian Motley, 1996. "Recent developments in labor force participation," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue may24.
  11. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
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