Discussion of: The Impact of a Temporary Help Job on Participants in Three Federal Programs by Carolyn J. Heinrich, Peter H. Muser and Kenneth R. Troske Bernhard Boockmann Centre for European Economic Research (ZEW)

2 Research questions Earnings and employment effects of a spell in THS work of formerly unemployed individuals  relative to spells in other industries  for participants in different active labour market programmes  accounting for observable characteristics  accounting for sector changes within the observation period  accounting for selectivity into industries  comparing across different points of time in the business cycle

3 Main results  THS as a “transitional industry”, in particular for nonwhites and workers in metropolitan areas  Employment probability 8 quarters after entry into THS is much higher as compared to individuals remaining unemployed (controlling for characteristics) and only slighty smaller as compared to individuals hired in other sectors  Similar conclusion for earnings as an outcome variable  Earnings while in a THS job are substantially lower than in other industries  income losses due to THS spell are higher in the bust (2001) than in the boom (1997)  Most of the effects on employment (though not on earnings) disappear if accounting for selection on unobservables

4 European studies on THS work Temporary agency work often seen as a way to end unemployment  Deregulation of THS work in Germany and publicly subsidised programmes (“Personnel Service Agencies“)  Application of propensity score matching shows little evidence for stepping-stone effect (Kvasnicka 2005)  Some public programmes seem to improve participants’ employment prospects (Lechner et al., 2000)  In the short run, lock-in effects dominate (Infas/WZB 2005)

5 Background information on THS work Readers unfamiliar with U.S. institutions could need more institutional background  Sectoral composition of user enterprises, structure of the industry, typical job and placement durations, cyclical behaviour of THS employment, quality of work,...  Workers in THS industry are identified by sector – how many belong to THS firms’ permanent workforce (i.e., THS office staff, etc.)?  By whom is selection into THS employment made? By placement officers? By individuals? By THS firms? Do the public programmes considered (TANF, Job Training etc.) differ in this respect? (Need to know this to gauge the importance of selections on unobservables)

6 Selectivity issues  Ex ante, the presumption that there is selectivity on unobservables is strong  Individual characteristics both determine exit from unemployment into different sectors and subsequent labour market success  Many individuals stay in their jobs – role of job-specific unobserved heterogeneity  Unobserved heterogeneity probably most similar between THS sector and retail; but estimated impact of ε differs in almost all of the estimations

7 Selectivity issues  Apart from selectivity into THS employment, there is also selectivity into the different labour market programmes (TANF, job training, etc.). This makes it difficult to compare between the programmes and over time.

8 Miscellaneous points  Many individuals either remain unemployed or return to unemployment – how is this accounted for in the earnings regressions?  Age bands are chosen relatively wide (starting at 18)  Sensitivity should be checked  With respect to the periods between entry into TWA and outcome measurement (now: 8 quarters)  With respect to initial period in TWAs (how do extended spells in TWAs affect subsequent earnings and employment?)