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Temporary Agency Employment as a Way out of Poverty?

August 2005

David Autor, MIT Department of Economics and NBER; Susan Houseman, W.E. Upjohn Institute for Employment Research.

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One in eight Americans and one in five children under the age of six lived in poverty in 2003 (U.S. Census Bureau, 2003). Poverty is strongly associated with lack of fulltime, year-round employment. Government programs such as welfare-to-work and the Workforce Investment Act (WIA) try to help the poor find stable employment and thereby escape poverty. As one strategy to facilitate such transitions, several researchers have recently proposed the use temporary agencies as labor market intermediaries for the poor (Holzer (2004); Andersson et al. (2005), and Lane et al. (2003). Drawing on a unique policy quasi-experiment from a large welfare-to-work program, we provide new, direct evidence on whether temporary agency jobs help low-skilled workers escape poverty. A large minority of participants in government employment programs already work in the temporary help sector. In our data on participants in a welfare-to-work program, 21 percent who found jobs worked for temporary agencies. Similarly high levels of temporary help employment—ranging from 15 to 40 percent—have been found in other studies of government employment programs (Autor and Houseman 2002). These figures are especially striking in light of the fact that temporary agency employment accounts for only 2 to 3 percent of daily employment in the United States...

Employment, Unemployment, and the Labor Market, Welfare Reform and the Administration of Welfare Programs