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In late August, the National Labor Relations Board (NLRB) ruled that companies who use temporary agencies to hire workers should be considered joint employers. That means the client companies have to take more responsibility for the way temps are treated. The board said the decision will help address “changing economic circumstances, particularly the recent dramatic growth in contingent employment relationships.”

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In a 2007 paper for the Cambridge Journal of Economics, Jamie Peck and Nik Theodore looked at how dramatically the growth of temporary employment helped change the nature of U.S employer-employee relationships since the 1990s.

Peck and Theodore note that temp jobs have grown dramatically—from less than a quarter million in the early 1970s to one million in 1992 and almost 2.7 million in 2000. That still represents less than 3 percent of all U.S. jobs, but the authors write that the significance of the temporary labor industry isn’t simply about the number of workers it employs. Rather, the importance lies in how temp workers are used.

Some companies use temp agencies to bring on seasonal workers, or to screen potential permanent employees, or simply to fill unpleasant, high-turnover positions like assembly and packing. The common denominator in all these uses is that the employment relationship is mediated. The indirect employer is shielded from the costs of unemployment insurance and workers’ compensation claims and generally doesn’t pay for benefits like health insurance.

Since the early 1990s, the temporary industry has also provided a buffer against economic volatility. Temp jobs grew fast during the boom years of the 1990s and dropped sharply when the economy tanked in 2001. During the recession, temp workers, who had made up 2.5 percent of the workforce, represented 26 percent of net job losses. (Several years after Peck and Theodore wrote, a similar pattern played out on a larger scale during the Great Recession and subsequent recovery.)

Peck and Theodore write that, in addition to providing an economic shock absorber, the temp industry helps companies avoid upward pressure on wages. Generally, temp workers are paid less than their permanent counterparts for the same work.

More broadly, the rise of temp work and the way it has spread across all kinds of companies has had an impact beyond its actual size on the way human resources decisions are made. It has helped promote workplace cultures in which it’s increasingly common to outsource whole departments and make outside agencies responsible for payroll and other HR functions.

Ultimately, Peck and Theodore write, the “shock absorber” function of temp agencies might better be understood as “shock displacement,” since the agencies pass the costs and risks traditionally associated with employment down to their workers. The agencies typically find ways to avoid paying unemployment insurance costs or health benefits to workers.

It remains to be seen whether the recent NLRB ruling will change any of that.


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Cambridge Journal of Economics , Vol. 31, No. 2 (March 2007), pp. 171-192
Oxford University Press