Out of work? A temp job might not be your best bet

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While I was out of town I missed this new paper (PDF) from MIT economist David Autor, which shows that people who are out of work and take a temporary gig until a full-time position comes along might be doing damage to their long-term earnings power.

Autor and Susan Houseman of the W.E. Upjohn Institute for Employment Research studied a welfare-to-work program in Detroit that randomly assigned job seekers to either temporary or long-term positions. The researchers looked at 37,000 cases between 1999 and 2003, and calculated that people who got full-time jobs increased their earnings by about $2,000 a year (compared to their previous income), but that those who started out with temporary positions saw their earnings drop by about $1,000 per year.

Autor offers up the following explanation:

“Holding the temp job has two consequences: First of all, it’s very difficult to search for a job while you’re working. Second, when you’re connected to a temp agency, you may have the illusion a job is about to show up. They say, ‘We’ll call you when we have something.’ I wouldn’t call it ‘complacency,’ but it may create the sense that you’re doing something when you’re not.”

Now, these findings come from a fairly low-skill labor pool, and whether or not the same patterns would be observed among, say, college-educated professional workers, is far from clear. In fact, there may be reason to think the process would work in the opposite direction since networking seems to play a larger role in landing higher-skill jobs.

Still, I think there’s an important lesson here: a temporary position may provide a much-needed paycheck, but it also represents an opportunity cost. As Autor says:

“What I’d like [job seekers] to take from this is that although temporary work sometimes leads to a direct-hire position, that’s probably not the most fruitful way to get them, relative to the sort of painful work of a direct-hire search. Don’t view temp work as the on-ramp into the labor market.”

Of course, whether or not you’ll have much say in the matter is an entirely different problem.