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Do Temporary Help Jobs Improve Labor Market Outcomes for Low-Skilled Workers? Evidence from 'Work First'

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David H. Autor
Susan Houseman

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Abstract

A disproportionate share of low-skilled U.S. workers is employed by temporary-help firms. These firms offer rapid entry into paid employment, but temporary-help jobs are typically brief, and it is unknown whether they foster longer-term employment. We exploit a unique aspect of the city of Detroit’s welfare-to-work program, in which one in five jobs taken is obtained with a temporary-help firm, to identify the effects of temporary-help jobs on the subsequent labor market advancement of low-skilled workers. Welfare participants are assigned on a rotating basis to one of numerous program providers that have substantially different placement rates into temporary-help and regular (‘direct-hire’) jobs but offer otherwise standardized services. This gives rise to variation in job-taking rates that is functionally equivalent to random assignment. Using provider assignments as instrumental variables, we find that temporary-help job placements yield significant short-term earnings gains, but these gains are offset by lower earnings and less frequent employment over the next one to two years. Job placements with direct-hire employers, by contrast, substantially raise earnings over one, two, and three years following placement. The primary observable difference between these types of job placements is their effect on subsequent employment stability. Direct-hire placements roughly double the probability of ongoing employment in each of the first eight quarters following program assignment, while temporary help placements only positively affect the probability of ongoing employment for two quarters and do not facilitate transitions to direct-hire jobs. These results qualify the interpretation of a large experimental literature documenting the benefits of job placement services for labor market outcomes of low-skilled workers. We find that the benefits of job placements derive entirely from direct-hire jobs; placing low-skilled workers in temporary-help jobs is no more effective than providing no job placements at all.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11743.

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Date of creation: Nov 2005
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Handle: RePEc:nbr:nberwo:11743

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Find related papers by JEL classification:
I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General

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  1. Alison L. Booth & Marco Francesconi & Jeff Frank, 2002. "Temporary Jobs: Stepping Stones Or Dead Ends?," Economic Journal, Royal Economic Society, vol. 112(480), pages F189-F213, June. [Downloadable!] (restricted)
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  2. Jeffrey R Kling & Jeffrey B Liebman & Lawrence F Katz, 2007. "Experimental Analysis of Neighborhood Effects," Econometrica, Econometric Society, vol. 75(1), pages 83-119, 01. [Downloadable!] (restricted)
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  3. Michael Kvasnicka, 2005. "Does Temporary Agency Work Provide a Stepping Stone to Regular Employment?," Labor and Demography 0510005, EconWPA. [Downloadable!]
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  4. Andersson, Pernilla & Wadensjö, Eskil, 2004. "Temporary Employment Agencies: A Route for Immigrants to Enter the Labour Market?," IZA Discussion Papers 1090, Institute for the Study of Labor (IZA). [Downloadable!]
  5. Kling, Jeffrey & Liebman, Jeffrey, 2004. "Experimental Analysis of Neighborhood Effects on Youth," Working Paper Series rwp04-034, Harvard University, John F. Kennedy School of Government. [Downloadable!]
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  6. Andrea Ichino & Fabrizia Mealli & Tommaso Nannicini, 2005. "Temporary Work Agencies in Italy: A Springboard Toward Permanent Employment?," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 64(1), pages 1-27, September. [Downloadable!]
  7. Katharine G. Abraham, 1988. "Flexible Staffing Arrangements and Employers' Short-Term Adjustment Strategies," NBER Working Papers 2617, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Neugart, Michael & Storrie, Donald, 2002. "Temporary work agencies and equilibrium unemployment," Working Papers in Economics 83, Göteborg University, Department of Economics. [Downloadable!]
  11. Zijl, Marloes & van den Berg, Gerard J. & Heyma, Arjan, 2004. "Stepping Stones for the Unemployed: The Effect of Temporary Jobs on the Duration until Regular Work," IZA Discussion Papers 1241, Institute for the Study of Labor (IZA). [Downloadable!]
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  12. O Blanchard & A Landier, 2002. "The Perverse Effects of Partial Labour Market Reform: fixed--Term Contracts in France," Economic Journal, Royal Economic Society, vol. 112(480), pages F214-F244, June. [Downloadable!] (restricted)
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  14. Abadie, Alberto, 2003. "Semiparametric instrumental variable estimation of treatment response models," Journal of Econometrics, Elsevier, vol. 113(2), pages 231-263, April. [Downloadable!] (restricted)
  15. Segal, Lewis M & Sullivan, Daniel G, 1997. "The Growth of Temporary Services Work," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 117-36, Spring. [Downloadable!] (restricted)
  16. Michael Gerfin & Michael Lechner & Heidi Steiger, 2002. "Does subsidised temporary employment get the unemployed back to work? An econometric analysis of two different schemes," University of St. Gallen Department of Economics working paper series 2002 2002-22, Department of Economics, University of St. Gallen. [Downloadable!]
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  17. Susan N. Houseman, 2001. "Why employers use flexible staffing arrangements: Evidence from an establishment survey," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 55(1), pages 149-170, October.
  18. David H. Autor, 2001. "Why Do Temporary Help Firms Provide Free General Skills Training?," The Quarterly Journal of Economics, MIT Press, vol. 116(4), pages 1409-1448, November. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. René Böheim & Andrea Weber, 2006. "The Effects of Marginal Employment on Subsequent Labour Market Outcomes," IZA Discussion Papers 2221, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Michael C. Burda & Michael Kvasnicka, 2005. "Zeitarbeit in Deutschland: Trends und Perspektiven," Labor and Demography 0510004, EconWPA. [Downloadable!]
    Other versions:
  3. Peter R. Mueser & Kyung-Seong Jeon & Andrew Dyke & Carolyn J. Heinrich & Kenneth R. Troske, 2006. "The Effects of Welfare-to-Work Program Activities on Labor Market Outcomes," Working Papers 0602, Department of Economics, University of Missouri. [Downloadable!]
    Other versions:
  4. Andrea Ichino & Fabrizia Mealli & Tommaso Nannicini, 2006. "From Temporary Help Jobs to Permanent Employment: What Can We Learn from Matching Estimators and their Sensitivity?," IZA Discussion Papers 2149, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  5. Antoni, Manfred & Jahn, Elke J., 2006. "Do changes in regulation affect employment duration in temporary work agencies?," IAB Discussion Paper 200618, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]. [Downloadable!]
    Other versions:
  6. Bart, COCKX & StŽphane, ROBIN & Christian, GOEBEL, 2006. "Income support policies for part-time workers : a stepping-stone to regular jobs ? An application to young long-terme unemployed women in Belgium," Discussion Papers (ECON - Département des Sciences Economiques) 2006050, Université catholique de Louvain, Département des Sciences Economiques. [Downloadable!]
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  7. Catalina Amuedo-Dorantes & Miguel A. Malo & Fernando Muñoz-Bullón, 2006. "The Role of Temporary Help Agencies in Facilitating Temp-to-Perm Transitions," IZA Discussion Papers 2177, Institute for the Study of Labor (IZA). [Downloadable!]
  8. Peter R. Mueser & Kenneth R. Troske & Carolyn J. Heinrich, 2007. "The Role of Temporary Help Employment in Low-wage Worker Advancement," Working Papers 0719, Department of Economics, University of Missouri. [Downloadable!]
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  9. Renato Faccini, 2007. "Unemployment and Within-Group Wage Inequality: Can Information Explain the Trade-Off?," Economics Working Papers ECO2007/14, European University Institute. [Downloadable!]
  10. Fredrik Andersson & Harry J. Holzer & Julia Lane, 2007. "Temporary Help Agencies and the Advancement Prospects of Low Earners," NBER Working Papers 13434, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. David Autor & Susan Houseman, 2005. "Temporary Agency Employment as a Way out of Poverty?," NBER Working Papers 11742, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  12. John T. Addison & Christopher J. Surfield, 2006. "Does Atypical Work Help the Jobless? Evidence from a CAEAS/CPS Cohort Analysis," IZA Discussion Papers 2325, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
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