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The Role of Temporary Agency Employment in Tight Labor Markets

The authors use case study evidence from hospitals and auto parts manufacturers to investigate why employers used—and even increased their use of—temporary help agencies during a period of tight labor markets in the 1990s. In high-skill occupations, the evidence suggests employers paid substantially more to agency help than to regular employees in large part to gain additional time to recruit employees for permanent positions and thereby avoid raising wages for new hires and existing employees. In low-skill occupations, temporary help agencies appear to have facilitated the use of more “risky†workers by lowering their wages and benefits and the costs associated with turnover. As in high-skill occupations, the use of agency temporaries in low-skill occupations relieved pressure on companies facing tight labor markets to raise employees' wages, and may have contributed to the stagnant wage growth and low unemployment observed in the 1990s.

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Paper provided by W.E. Upjohn Institute for Employment Research in its series Upjohn Working Papers and Journal Articles with number snhakge2003.

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Handle: RePEc:upj:weupjo:snhakge2003
Note: Appears in Industrial and Labor Relations Review 57(1): 105-127
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  1. Edward J. Schumacher, 2001. "The Earnings and employment of nurses in an era of cost containment," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 55(1), pages 116-132, October.
  2. 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.
  3. Edward J. Schumacher, 2001. "The Earnings and Employment of Nurses in an Era of Cost Containment," ILR Review, Cornell University, ILR School, vol. 55(1), pages 116-132, October.
  4. Fred A. Bellemore, 1998. "Temporary Employment Decisions of Registered Nurses," Eastern Economic Journal, Eastern Economic Association, vol. 24(3), pages 265-279, Summer.
  5. Kandel, Eugene & Pearson, Neil D., 2001. "Flexibility versus Commitment in Personnel Management," Journal of the Japanese and International Economies, Elsevier, vol. 15(4), pages 515-556, December.
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