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

  • David H. Autor
  • Susan Houseman

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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Publication status: published as David Autor & Susan N. Houseman, 2007. "Do temporary jobs help low-skilled workers? : surprising data from Detroit," Communities and Banking, Federal Reserve Bank of Boston, issue Fall, pages 6-8.
Handle: RePEc:nbr:nberwo:11743
Note: LS PE
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  4. Gerfin, Michael & Lechner, Michael & Steiger, Heidi, 2002. "Does subsidised temporary employment get the unemployed back to work? An econometric analysis of two different schemes," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 A2-2, International Conferences on Panel Data.
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  8. Neugart, Michael & Storrie, Donald, 2002. "Temporary work agencies and equilibrium unemployment," Working Papers in Economics 83, University of Gothenburg, Department of Economics.
  9. Lawrence Katz & Jeffrey R. Kling & B. Jeffrey Liebman & Lisa Sanbonmatsu, 2004. "Moving to Opportunity and Tranquility: Neighborhood Effects on Adult Economic Self-Sufficiency and Health From a Randomized Housing Voucher Experiment," Working Papers 860, Princeton University, Department of Economics, Industrial Relations Section..
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  13. Abadie, Alberto, 2003. "Semiparametric instrumental variable estimation of treatment response models," Journal of Econometrics, Elsevier, vol. 113(2), pages 231-263, April.
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  15. Booth, Alison L. & Francesconi, Marco & Frank, Jeff, 2000. "Temporary Jobs: Stepping Stones or Dead Ends?," IZA Discussion Papers 205, Institute for the Study of Labor (IZA).
  16. 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.
  17. 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," Working Paper Series 2004:19, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  18. Susan N. Houseman, 2001. "Why employers use flexible staffing arrangements: Evidence from an establishment survey," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 55(1), pages 149-170, October.
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  21. 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.
  22. David H. Autor, 2000. "Why Do Temporary Help Firms Provide Free General Skills Training?," NBER Working Papers 7637, National Bureau of Economic Research, Inc.
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