Temps Have a Permanent Place in the Workforce; Temporary Employment Arrangements Can Benefit Both Employers and Workers. Businesses Can Cut Costs and Maintain Staffing Flexibility; Employees Can Gain Experience and Training. While Still Not a Large Share of Total Payroll Employment, the Temp Industry Is Growing Both Regionally and Nationally and Appears to Have Important Implications for Businesses and Policymakers. (Regional Focus)

EconSouth, Fall 2002 | Go to article overview
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Temps Have a Permanent Place in the Workforce; Temporary Employment Arrangements Can Benefit Both Employers and Workers. Businesses Can Cut Costs and Maintain Staffing Flexibility; Employees Can Gain Experience and Training. While Still Not a Large Share of Total Payroll Employment, the Temp Industry Is Growing Both Regionally and Nationally and Appears to Have Important Implications for Businesses and Policymakers. (Regional Focus)


Our parents may have retired from their jobs after 30 or 40 years, receiving the obligatory gold watch and flamed certificate. Today many of us have changed careers, much less jobs, several times, and we see a growing number of people in our workplaces who won't be there thirty days, much less thirty years.

Over recent decades, job permanence has given way to job flexibility, and temporary workers have become an increasing and more important part of the workforce. The impact of temporary workers on overall employment and on the economy as a whole may have important implications for businesses and for the policymakers who seek to understand the temporary help industry's cyclical nature and its role as an economic indicator.

Between 1979 and 1995 the number of workers employed by temporary-help supply services grew at an annual rate of 11 percent--five times the rate of growth for total employment. As a result, temporary services' share of total employment also grew. Still, in 2001 estimates of temporary workers made up only a small percentage of total employment, estimated between 1.7 and 4 percent of the total labor force (see chart 1). In the Sixth Federal Reserve District states, temp services as a proportion of total state employment rates range from a high of 2.7 percent in Georgia to a low of 0.9 percent in Mississippi.

A temp or not a temp? That is the question ...

Temporary employment varies from contract and seasonal employment to employment-agency placements in jobs that may last only a few hours. Temporary employment provided through staffing firms can be divided into two broad categories: temporary help and employee leasing.

Temporary help represents employees hired to meet employers' short-term or project-specific needs. Employee leasing is typically a longer-term contractual relationship between a leasing agency and an employer; the agency assumes responsibilities such as payroll, taxes and possibly even management of the leased employees.

Why use temps?

A recent survey by the Upjohn Institute for Employment Research found employers demand temporary workers for a broad range of reasons. Using temps allows firms to adjust more easily to workload fluctuations and employee absences. Companies that hire temporary workers also enjoy lower employee-screening and hiring and firing costs because temporary help agencies bear some of those expenses. And using temps saves firms health insurance and pensions-related costs. For example, the Upjohn survey notes that in 2001 only 10 percent of temporary workers had employer-provided health insurance and only about 7 percent were included in employer pension plans. In comparison, roughly 55 percent of permanent workers received health insurance and 47 percent had a pension plan through their employer, according to a study by David Autor of the Massachusetts Institute of Technology.

In addition, firms may save on salaries because temporary workers are paid roughly 20 percent less, on average, than permanent workers are. A temp worker earned $396 weekly in early 2001, significantly below the roughly $500 per week paycheck of a permanent employee. Even taking into account the fees paid to the staffing agency, roughly three-quarters of firms surveyed found temporary employees' total compensation costs less than those of permanent employees.

Steve Berchem, vice president of the American Staffing Association, says that many businesses use temps to help out during unexpected increases in demand or to fill in for absent regular employees. This labor flexibility will continue to be an important market factor in the use of temporary help. In fact, workforce flexibility was a critical driver behind the record-breaking expansion of the U.S. economy during the last decade, and Berchem predicts that more businesses will turn to staffing companies to help meet their labor needs as they understand the importance of such flexibility.

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Temps Have a Permanent Place in the Workforce; Temporary Employment Arrangements Can Benefit Both Employers and Workers. Businesses Can Cut Costs and Maintain Staffing Flexibility; Employees Can Gain Experience and Training. While Still Not a Large Share of Total Payroll Employment, the Temp Industry Is Growing Both Regionally and Nationally and Appears to Have Important Implications for Businesses and Policymakers. (Regional Focus)
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