Advanced Search
MyIDEAS: Login to save this paper or follow this series

Why Do Temporary Help Firms Provide Free General Skills Training?

Contents:

Author Info

  • David H. Autor

Abstract

Nominally free, unrestricted training in portable computer skills is offered by the majority of U.S. temporary help supply (THS) establishments, a practice that is inconsistent with the competitive model of training. This paper asks why temporary help firms provide free general skills training. The answer proposed is that in addition to skills formation, training plays an informational role at THS firms by eliciting private information about worker ability. The model is built on the premise that training is more productive and therefore valuable to high ability workers. Firms offer a package of training and initially lower wages that induces self-selection. Workers of high perceived ability choose training in anticipation of a steeper wage profile while low ability workers are deterred by limited expected gains. Firms profit from their sunk training investment via their short-run informational advantage about ability and thereby limited monopsony power. Market competition among THS firms reduces employer rents, yielding higher wages and more training. Detailed tests of the model using representative establishment data on wages and training find strong support. The analysis demonstrates that beyond providing spot market labor, THS firms gather and sell information about worker quality to clients. The rapid growth of THS as a labor market information broker implies that the demand for worker screening is rising.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w7637.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7637.

as in new window
Length:
Date of creation: Apr 2000
Date of revision:
Publication status: published as Autor, David H. "Why Do Temporary Help Firms Provide Free General Skills Training?," Quarterly Journal of Economics, 2001, v116(4,Nov), 1409-1448.
Handle: RePEc:nbr:nberwo:7637

Note: LS
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Katharine G. Abraham & Susan K. Taylor, 1993. "Firms' Use of Outside Contractors: Theory and Evidence," NBER Working Papers 4468, National Bureau of Economic Research, Inc.
  2. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
  3. Daron Acemoglu & Jorn-Steffen Pischke, 1999. "The Structure of Wages and Investment in General Training," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 107(3), pages 539-572, June.
  4. John M. Barron & Mark C. Berger & Dan A. Black, 1997. "On-the-Job Training," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, W.E. Upjohn Institute for Employment Research, number ojt.
  5. Daron Acemoglu & Jörn-Steffen Pischke, 1998. "Why Do Firms Train? Theory And Evidence," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 113(1), pages 78-118, February.
  6. 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.
  7. Lewis M. Segal & Daniel G. Sullivan, 1998. "Wage differentials for temporary services work: evidence from administrative data," Working Paper Series, Federal Reserve Bank of Chicago WP-98-23, Federal Reserve Bank of Chicago.
  8. Daron Acemoglu, 1999. "Changes in Unemployment and Wage Inequality: An Alternative Theory and Some Evidence," American Economic Review, American Economic Association, American Economic Association, vol. 89(5), pages 1259-1278, December.
  9. Alan B. Krueger, 1991. "How Computers Have Changed the Wage Structure: Evidence From Microdata, 1984-1989," NBER Working Papers 3858, National Bureau of Economic Research, Inc.
  10. Gibbons, R. & Katz, L.F., 1989. "Layoffs And Lemons," Working papers 531, Massachusetts Institute of Technology (MIT), Department of Economics.
  11. Heckman, James J & Sedlacek, Guilherme, 1985. "Heterogeneity, Aggregation, and Market Wage Functions: An Empirical Model of Self-selection in the Labor Market," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 93(6), pages 1077-1125, December.
  12. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  13. David H. Autor, 2000. "Outsourcing at Will: Unjust Dismissal Doctrine and the Growth of Temporary Help Employment," JCPR Working Papers, Northwestern University/University of Chicago Joint Center for Poverty Research 153, Northwestern University/University of Chicago Joint Center for Poverty Research.
  14. Lewis M. Segal & Daniel G. Sullivan, 1997. "The Growth of Temporary Services Work," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 11(2), pages 117-136, Spring.
  15. Heckman, James J & Sedlacek, Guilherme L, 1990. "Self-selection and the Distribution of Hourly Wages," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 8(1), pages S329-63, January.
  16. Ann P. Bartel & Nachum Sicherman, 1995. "Technological Change and the Skill Acquisition of Young Workers," NBER Working Papers 5107, National Bureau of Economic Research, Inc.
  17. Loewenstein, Mark A & Spletzer, James R, 1998. "Dividing the Costs and Returns to General Training," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 16(1), pages 142-71, January.
  18. Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 90(4), pages 630-49, November.
  19. Chang, Chun & Wang, Yijiang, 1996. "Human Capital Investment under Asymmetric Information: The Pigovian Conjecture Revisited," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 14(3), pages 505-19, July.
  20. Salop, Joanne & Salop, Steven, 1976. "Self-Selection and Turnover in the Labor Market," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 90(4), pages 619-27, November.
  21. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 84(3), pages 488-500, August.
  22. Katz, Eliakim & Ziderman, Adrian, 1990. "Investment in General Training: The Role of Information and Labour Mobility," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 100(403), pages 1147-58, December.
  23. Joseph G. Altonji & James R. Spletzer, 1991. "Worker characteristics, job characteristics, and the receipt of on-the-job training," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 45(1), pages 58-79, October.
  24. Joanne Salop & Steve Salop, 1976. "Self-selection and turnover in the labor market," Special Studies Papers, Board of Governors of the Federal Reserve System (U.S.) 80, Board of Governors of the Federal Reserve System (U.S.).
  25. Lewis M. Segal & Daniel G. Sullivan, 1997. "Temporary services employment durations: evidence from state UI data," Working Paper Series, Macroeconomic Issues, Federal Reserve Bank of Chicago WP-97-23, Federal Reserve Bank of Chicago.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:7637. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.