Working Paper

The growth of temporary services work

Abstract: Temporary services employment has expanded rapidly and now accounts for a sizable fraction of aggregate employment. The industry's workers are no longer overwhelmingly female or limited to clerical occupations. Temporary work is associated with variable weekly schedules and with part-year participation, but not with voluntarily part-time work. On average, temporary workers have less labor market security than permanent workers, being prone to both more unemployment and more underemployment. Relatively few of them, however, stay in temporary positions for as much as a year and the majority move on to permanent employment within that time period. Temporary workers' wages average over 20% less than permanent workers, but at least two-thirds of this gap is explained by worker and other job characteristics. We discuss explanations for temporary service employment growth that involve an increased client firm demand for flexibility, including the flexibility to screen workers before offering them permanent positions, an increased ability of temporary workers to perform valuable tasks, an increased supply of workers willing to accept temporary positions, and an increased use of temporaries to implement two-tier compensation structures. We emphasize that temporary workers are quite diverse and, in particular, that occupation is an important determinant of the relative quality of temporary versus permanent jobs and possibly the reasons for temporary services employment growth.

Keywords: Labor market; Temporary employees;

Bibliographic Information

Provider: Federal Reserve Bank of Chicago

Part of Series: Working Paper Series, Macroeconomic Issues

Publication Date: 1996

Number: WP-96-26