What Was Driving the 1982–88 Boom In Temporary Employment? Preference of Workers or Decisions and Power of Employers

Abstract. The level of temporary help employment rose two‐and‐a‐half fold between 1982 and 1988, was quite variable and had a disproportionately larger effect on employment flows. One conventional explanation suggests that changing demographic composition of the labor force in favor of groups preferring nontraditional employment arrangements fueled the temporary help boom. Demand‐side views emphasize the volatility in labor demand, intensified price competition and the absence of employee benefit contributions. Empirical estimation confirms that demand‐side forces predominate. Yet no labor supply variable is found to be positively associated with the extent of temporary employment. Cyclical fluctuation in output, intensified foreign competition and the magnitude of nonwage labor costs are all positively associated with temporary employment levels. The diminishing bargaining power of labor unions allows employers to exploit the labor cost savings of temporary hires, and the extent of paid time‐off and the lack of flexibility in weekly hours of work play a weak role. The findings suggest why temporary job growth accelerated in the 1980s, as more firms employed a “core‐periphery” human resource strategy. Public policy should adopt measures that attempt to limit the creation of temporary jobs to a level that accommodates the worker need for flexible annual work schedules.