Signaling, selection and transition: empirical evidence on stepping-stones and vicious cycles in temporary agency work

Abstract

Despite the growing importance of temporary work agencies, the benefits they bring to temporary agency employees (TAEs) are still disputed, and empirical findings are, by and large, mixed. Using a unique dataset comprising almost 12,000 TAEs on their first and second temporary work assignments, this work aims at disentangling the consequences of temporary agency work on the level of the individual TAE in Germany. We find that temporary agency work assignments act as learning devices for employers about the underlying ability of TAEs. High ability employees can show their qualities and fit with the organization with the time spent on temporary work assignments, albeit at decreasing rates. In addition, we find that if a TAE is assigned to a subsequent project after the first one, it is less likely that the employee transitions into permanent employment. Hence, we conclude that a division exists among TAEs: where the high ability employee may find it a stepping-stone to a desired permanent position, and others get trapped in it and have a hard time transitioning into permanent employment.

Keywords:

• employer signaling
• selection effects
• stigmatization
• temporary agency work

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

^1. With respect to comparing statistically significant and nonsignificant coefficients, we follow the extant literature on comparing coefficients within logit and probit models. Hoetker (2007, p. 338), for example, notes that ‘If the model is estimated separately for each group, the researcher can – at a minimum – compare the statistical significance of the coefficients across groups. This is possible because the coefficients and standard errors are consistent within each group. One could report, for example, that x has a significant and positive impact for Group 1, but is not significant for Group 2’.

^2. We thank an anonymous reviewer for bringing this point to our attention.