Temporary employees typically work for firms for brief and often fixed periods, in contrast with permanent full- and part-time workers. Temporary employees are part of the category contingent workers, which also includes part-time employees and contract workers, and temporary employees are either hired directly or are provided to client firms by temporary employment agencies, as is most often the case. In the 1990s, roughly 90 percent of U.S. businesses and 95 percent of Fortune 500 firms used some form of temporary employment, according to temporary employment agencies. Among the areas of most rapid growth are the use of temporaries in professional, technological, and service occupations. Companies typically use temporary help for employee absences, special assignments, seasonal work increases, and temporary worker shortages.
Temporary employment firms typically undertake hiring and firing decisions, issue paychecks, and also withhold payroll taxes and make contributions for unemployment insurance, workers' compensation, and Social Security. In the late 1990s, there were approximately, 15,000 temporary employment agencies in the United States. The industry is served by the National Association of Temporary Services (NATSS), which has 1,500 members. According to NATSS, 72 percent of assigned workers eventually move to permanent positions. Furthermore, a study by the Upjohn Institute for Employment Research indicated that over 50 percent of the companies that expanded their use of temporary workers in the 1990s did so in an effort to find permanent workers.
Temporary workers generally receive hourly wages that range from $5.50 an hour for unskilled jobs to $15 an hour for skilled jobs. Moreover, some highly skilled workers receive over $75 an hour for technology- and knowledge-based. The mean hourly rate was $10.11 in the late 1990s, according to NATSS. Temporary job assignments generally last anywhere from 1 day to several months. However, some managerial and executive assignments may last as long as a few years.
The first temporary employment firms began operations in the 1940s. It was not until the 1980s and 1990s, however, that temporary employment grew rapidly. Annual average temporary employment grew from 340,000 in 1978 to 695,000 by 1985, increasing three times faster than total service sector employment and eight times faster than total nonagricultural employment. The temporary employment industry experienced its most explosive growth in the early 1990s, expanding by an average of 17 percent a year. Annual average temporary employment rose to 2.2 million workers by 1996 and to nearly 2.8 million by 1998 with an annual growth rate of about 9 percent. Between 1992 and 1998,18.4 million non-agricultural jobs were added to the U.S. economy. Temporary employment accounted for 1.4 million of these jobs, according to the U.S. Bureau of Labor Statistics (BLS). The BLS predicts that the temporary employment will increase by 53 percent by 2006, making it one of the most rapidly expanding industries. Overall, temporary employment accounts for about 2 percent of the country's employment.
In the late 1990s, temporary employment agencies began investing greater more in training employees for their assignments. A NATSS survey from 1998 reported that temporary employment agencies spent $720 million on training 1997, in contrast to only $260 million in 1995. The survey also indicated that 4.8 million workers participated in the training programs and that about 90 percent of all temporary employment agencies provide training for free.
Temporary workers exhibit a variety of demographic characteristics. About 40 percent have completed at least a two-year college program and roughly 20 percent attend school while working. In addition, 21 percent use temporary employment as a path to permanent employment, going directly from being a student to being a temporary employee. Furthermore, the segment of temporary workers between 18 and 24 years old has continued to grow.
The administrative and clerical category has been the leading temporary employment category for decades. However, the BLS predicts that this category will decline through 2006, while skilled and professional occupations increase. The professional occupations—including accountants, managers, engineers, and computer programmers and technicians, lawyers, and marketing professionals—already constitute a significant and growing sector of the industry. These temporary positions accounted for about 11 percent of the industry's total placements in the late 1990s, according to the BLS.
The manufacturing sector also made up a growing proportion of the demand for temporary workers in recent years. A large number of manufacturers made increasing use of the just-in-time system, which minimized inventories. Temporary employment provided flexibility, which suited it to the conditions of the just-in-time production. The U.S. Department of Labor estimated that about 33 percent of all temporary employees worked for manufacturers and temporary agencies provided about 400,000 temporary workers per day to the manufacturing sector in mid-1990s. An example was Nike's repackaging facility in Memphis. Nike employed 120 permanent employees, who received at least $13 per hour plus benefits. This core labor force worked alongside 60 to 225 temporaries provided by Norrell Services. Norrell received $8.50 per hour for each temporary, who in turn received $6.50 per hour. These temporaries did not receive health insurance, though Norrell did cover workers' compensation and Social Security.
A confluence of factors fueled the growth of temporary employment including corporate downsizing or restructuring, low unemployment rates, outsourcing, and increased employment regulation. Downsizing refers to the corporation practice of reducing the size of their core workforce. In the 1980s, for example, Fortune 500 firms cut three million jobs. What's more, companies averaged about 600,000 layoffs annually in the mid- to late 1990s. Companies substitute temporary for permanent employees because temporaries receive hourly wages that average 75 percent of the wages of permanent employees, and generally receive fewer benefits. Temporary workers contracting directly with firms are generally not eligible for unemployment insurance or workers' compensation. In addition, temporary employees provided firms with a great deal of flexibility in the face of changing business conditions. The trend of substitution of temporary for permanent workers is reflected in the fact that the decline in temporary employment was substantially less in the recession of the early 1980s than in the recessions of the 1970s.
Unemployment rates in the mid- to late 1990s remained some of the lowest in three decades. For example, the unemployment rate staid below five percent in 1998—a 28-year low. Since some economists generally argue that a natural unemployment rate for the United States is about 5 or 6 percent, they suggest that companies face greater difficulty finding and retaining employees when the unemployment rate drops below the natural rate. Consequently, temporary employment agencies were poised to help companies overcome their staffing shortages. Simultaneously, temporary employment agencies assist unemployed workers providing them with temporary positions until they locate permanent ones and thereby helping reduce the unemployment rate.
Related trend to corporate downsizing has been outsourcing where companies contract with outside workers or agencies to perform non-core tasks. As a result, temporary employment agencies received some of the outsourcing business from these companies. Finally, increased regulation requiring employers to pay taxes on and provide various benefits to permanent employees also contributed to the demand for temporary employment so that companies could bypass the additional measures or effort needed to comply with these regulations.
In his 1988 volume, Alternative Staffing Strategies, David Nye argued that the expanded use of temporary employment was likely to persist. He wrote that factors that caused the growth of temporary employment are expected to continue exerting an influence on the labor market. According to Nye, these factors include the decline of manufacturing jobs and the growth information, technology, and service jobs, employer reliance on temporary employment to help cope with possible business slowdowns, the growth of technology that requires specialization, and the presence workers with adequate skills who by choice or of necessity seek temporary employment.
One area of concern for temporary workers is the extent to which they are protected by labor legislation. Temporary employment firms are required to abide by the Fair Labor Standards Act of 1938, the Equal Employment Opportunity Act of 1972, and the Occupational Safety and Health Act of 1970. Temporary workers are often ineligible for unemployment insurance. This results in part from their inability to meet the minimum earnings requirements specified in state laws. In addition, temporary employment firms may offer unemployed temporaries a one-day assignment just prior to their eligibility for unemployment benefits, thus minimizing firms' contribution to unemployment insurance.
The Employee Retirement Income Security Act of 1974 (ERISA) requires firms with pension plans to offer them to all employees working 1,000 or more hours per year. Firms can consequently minimize these costs by working temporaries a lesser number of hours. Labor legislation makes it difficult for short-term workers to engage in collective bargaining, and the National Labor Relations Board (NLRB) determines on a case-by-case basis whether temporaries can be included in bargaining units.
The largest temporary employment firm in the United States in 1998 was Manpower Inc., with $8.8 billion in revenues—a $6 billion increase over 1992. Manpower employed over 2 million workers worldwide in 1998. Manpower was founded in Milwaukee in 1948 and originally provided unskilled temporary workers for industrial employment. Soon the company diversified into providing temporary office workers. Because of the volume of temporary workers it places, Manpower is considered the largest employer in the United States—with more employees than IBM and AT&T combined. About one-third of Manpower's workers receive permanent positions each year as a result of their temporary employment. The firm not only provides secretarial and factory workers, but also accountants and doctors. This is part of an overall trend in temporary employment in which professional occupations, including executives, lawyers, engineers and scientists, are among the fastest growing. Furthermore, with demand for technical workers, Manpower established Manpower Technical, which specializes in helping high-tech companies solve their staffing problem for everything from computer programming to engineering to biotechnology. Manpower Technical reports providing temporary help to about 94 percent of the 500 companies.
In terms of revenue, Manpower Inc. was followed by the Olsten Corporation, with $4.6 billion and 701,000. Olsten provides a wide array of temporary staffing services, including office, professional, and health care help. Olsten has separate subsidiaries that handle some its specialty fields such as Co-Counsel and Olsten Health Care Services. Kelly Services Inc. was the third leading company with $4 billion in revenues and 750,000 workers, out of an industry total of about $58.6 billion in 1998. In contrast, total industry revenues were $20 billion in 1990.
SEE ALSO : Outsourcing
[ David Kucera ]
Brogan, Timothy W. "Staffing Services Annual Update." May 1999. Available from www.natss.org/staffingservicesupdate.html .
Melchiomo, Rich. "The Changing Temporary Work Force: Managerial, Professional, and Technical Workers in the Personnel Supply Services Industry." Occupational Outlook Quarterly, spring 1999, 24.
Stone, Martha L. "Companies Turn to Marketing Temps." Business Marketing, October 1998, 10.