Do temporary help agencies help? Employment transitions for low-skilled workers

Abstract

[eng] This paper examines the impact of working for a temporary help agency (THA) versus being directly employed on transitions from temporary employment to permanent jobs, other temporary positions, or unemployment. The focus of our analysis is on low-skilled male workers aged between 20 and 45. Temporary help agencies also referred to as temporary work or employment agencies, hire workers and rent out their services to client firms. The THA sector has experienced substantial growth since the 1990s, particularly in developed countries with previously highly regulated labor markets.1 This growth can be attributed to deregulation, aimed at enhancing labor market dynamism (Autor, 2009; Fudge and Strauss, 2013; Voss et al., 2013).2 THAs play an important role in shaping the labor market by helping firms adjust to demand fluctuations and facilitating employee screening. Their specialization in recruiting allows them to spread employment termination risks across firms, achieving economies of scale and cost advantages (Houseman et al., 2003; Neugart and Storrie, 2002). On the supply side, it is commonly argued that THAs shift the workforce composition towards individuals desiring greater workplace flexibility (Katz and Krueger, 2019), but this comes with the transfer of risk from the firm to the worker (Harrington and Velluzzi, 2008).