Do temporary help jobs improve labor market outcomes for low-skilled workers? : Evidence from Random assignments

A disproportionate share of low-skilled U.S. workers is employed by temporary help firms. These firms offer rapid entry into paid employment, but temporary help jobs are typically brief and it is unknown whether they foster longer-term employment. We draw upon an unusual, large-scale policy experiment in the state of Michigan to evaluate whether holding temporary help jobs facilitates labor market advancement for low-skilled workers. To identify these effects, we exploit the random assignment of welfare-to-work clients across numerous welfare service providers in a major metropolitan area. These providers feature substantially different placement rates at temporary help jobs but offer otherwise similar services. We find that moving welfare participants into temporary help jobs boosts their short-term earnings. But these gains are offset by lower earnings, less frequent employment, and potentially higher welfare recidivism over the next one to two years. In contrast, placements in direct-hire jobs raise participants’ earnings substantially and reduce recidivism both one and two years following placement. We conclude that encouraging low-skilled workers to take temporary help agency jobs is no more effective - and possibly less effective - than providing no job placements at all.