NCPA - National Center for Policy Analysis

Strong Economy Challenges Temporary Help Firms

August 24, 2000

Companies that supply temporary workers are now competing with their business clients for recruits. That is one consequence of the tightest U.S. labor market in 30 years -- with unemployment at 4 percent.

The situation is altering the labor-market landscape and changing firms' personnel policies.

  • In order to attract recruits, temporary-help suppliers are offering more free job-training -- which is expensive, with training costs more than doubling between 1995 and 1997.
  • But, paradoxically, the more training outsourcing companies provide to recruits, the faster they lose them to clients, according to a recent study.
  • Although the free training may inspire loyalty and convince recruits to stay with the temporary-staffing firms, a Massachusetts Institute of Technology study by economist David Autor discovered that two-thirds of all temporary workers would prefer permanent jobs.
  • The trainees are increasingly coming from the ranks of retirees and former welfare recipients.

About 13 million workers -- or 10 percent of overall U.S. employment -- are outsourced. An American Staffing Association survey found that pay of workers at temporary-help firms rose by nearly 10 percent in 1998 -- compared with about 3.5 percent for most of the labor force.

More than 70 percent of temporary workers go on to permanent jobs.

Source: Robert Johnson, "Tight Job Market Pinches Temporary-Help Firms," Wall Street Journal, August 24, 2000.


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