published in: Review of Economics and Statistics, 2005, 87 (1), 154-173
Recent welfare reforms are prompting some state and local welfare agencies to use
temporary help service firms to help place welfare recipients into jobs. Concerns have arisen
that these jobs are more likely to pay low wages, provide fewer benefits, and offer less
stability. We explore the effects of temporary help firms on the labor market outcomes of
welfare recipients by looking at the characteristics of welfare recipients who go to work for
temporary service firms and by examining their subsequent employment and welfare
dynamics. We find that although welfare recipients who go to work for temporary help service
firms have lower initial wages they experience faster subsequent wage growth. Two years
later, their wages are only slightly below workers who initially had jobs in other sectors, and
they are no more likely to be unemployed and are only slightly more likely to remain on
welfare.
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