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The Role of Temporary Agency Employment in Tight Labor Markets

The authors use case study evidence from the hospital and auto parts manufacturing industries 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, one apparent reason employers were willing to pay substantially more to agency help than to regular workers was to fill vacancies while they recruited workers for permanent positions. 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. The use of agency temporaries in both high- and low-skill occupations generated less pressure to raise regular workers' wages than companies probably would have felt had they screened and hired temporary workers themselves. The practice therefore may have contributed to both the stagnant wage growth and the low unemployment observed in the 1990s. (Author's abstract.) (Free full-text download available at http://digitalcommons.ilr.cornell.edu/ilrreview/.)

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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," 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," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 55(1), pages 116-132, October.
  4. 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.
  5. Fred A. Bellemore, 1998. "Temporary Employment Decisions of Registered Nurses," Eastern Economic Journal, Eastern Economic Association, vol. 24(3), pages 265-279, Summer.
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