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Friday, January 22, 2010

Does Temp Work Lead to Permanent Employment?

Some analysts have been hailing recent increases in part-time workers as good news since many of them will end up being hired permanently once firms realize the recovery is on solid footing. For example, Calculated Risk says:

The thinking is that before companies hire permanent employees following a recession, employers will first increase the hours worked of current employees and also hire temporary employees. Since the number of temporary workers increased sharply, some people think this might be signaling the beginning of an employment recovery.
But, CR says, be careful:
However, there has been some evidence of a shift by employers to more temporary workers, and the saying may become "We are all temporary now!", so use this increase with caution.

In recent work, David Autor and Susan Houseman throw "cold water on the notion" that temporary workers turn into full-time workers, and they support the cautious interpretation CR talks about:

Temporary gains, by Peter Dizikes, MIT News Office: While the U.S. economy struggles, one form of employment is on the rise: Temporary jobs. In December, the country lost 85,000 jobs overall, but added 47,000 temp positions, according to the Bureau of Labor Statistics. Increasingly America relies on these contingent employees — or “disposable workers,” as BusinessWeek put it in a recent cover story.
For many workers, these jobs are stop-gap measures, but social scientists have long floated another idea: That temp positions help low-skill workers to acquire experience and eventually join the permanent workforce in better long-term jobs. Now, a new working paper co-authored by MIT economist David Autor throws cold water on that notion. Not only do many temp employees struggle to find long-term or “direct-hire” work, the study says, but holding a temp job generally lowers a worker’s employment and income prospects over time.
“Temp jobs have some initial positive impact,” says Autor. “But not only do they end quickly, they tend to displace what a person would have done instead, either taking a direct-hire job or engaging in the kind of search that could lead to a direct-hire job.” ...
This made think I should reconsider some of the job creation strategies I've been promoting, but perhaps these results don't apply more generally?:
To be sure, a valid question is how broadly these findings apply, given Michigan’s acute economic struggles. However, as Autor notes, the study’s data starts when the state economy was growing in the late 1990s, then continues through the slump of the early 2000s and the subsequent rebound; it ends before the current recession began.
Moreover, Autor and Houseman believe there is no regional bias in the study because the overall figures for people finding both temporary and long-term jobs through Work First in Detroit closely match the equivalent data for other regions, including North Carolina and Missouri. The researchers also say temp workers fared no differently in the production-line jobs associated with Michigan than in the kinds of clerical jobs found everywhere.

But Autor gives an important qualification that may give some hope that these kinds of programs will be more effective when used to combat unemployment in a recession -- where many of the laid-off workers are skilled -- as compared to trying to find employment for low-skilled workers who experience extended unemployment spells:

“I don’t think it’s anything specific about Detroit, or the type of work in which temps are placed,” says Autor. “In terms of the external validity of the conclusions, my main concern is how this relates to a more skilled population. There we don’t have a clear answer yet.” It is possible that temp jobs for people with college degrees do lead to greater opportunities and earnings — something the researchers would study if the right data set presents itself, Autor says. Given the way America’s temporary workforce keeps growing, there may be plenty of those numbers for Autor to scrutinize in the future.

    Posted by on Friday, January 22, 2010 at 12:35 PM in Economics, Unemployment | Permalink  Comments (31)


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