Kalleberg (2000) explains that nonstandard employment relations such as part-time work, temporary help agency and contract company employment, short-term and contingent work, and independent contracting–have become increasingly prominent ways of organizing work in recent years. The public’s understanding of these nonstandard work arrangements has been hampered by inconsistent definitions, often-inadequate measures, and the paucity of comparative research. Replacement hiring or hiring temporary workers is one of the most difficult jobs that a hiring team would face. It is difficult in a sense that hiring temporary workers may affect the mobility of permanent workers, as is cited by Kalleberg (2000) from Barnett & Miner’s (1992) analysis of career interdependence between care and temporary workers in a large US utility company. Another factor is that temporary workers earn, on average, lower wages than regular workers. In addition, temporaries usually receive fewer fringe benefits than do regular workers (Gannon 1974, Segal & Sullivan 1997a, Kalleberg et al 2000). Temporary workers’ fringe benefits are very limited, even in occupations where they may earn more than regular workers such as engineers and technicians (Carey & Hazelbaker 1986). The problem is how can replacement hires become successful with limited compensations and benefits? That is the question that this paper helps to find out.
In Hofler and Murphy’s (1992) study “Underpaid and Overworked: Measuring the Effect of Imperfect Information on Wages,” they concluded that underpayment varies across demographic groups in the predicted direction; education and underpayment are inversely related; underpayment falls as search costs fall; greater wealth leads to less underpayment; and underpayment shrinks as tenure on the job lengthens. Unemployment benefits are shown not to alter underpayment to any great degree. The paper’s result basically has two-folds: First, Hofler and Murphy (1992) apply a relatively new econometric technique to an area of labor theory that has lacked empirical testing. The results generally confirm the predictions search theory makes regarding the shortfall between observed wages and potential wages. Second, the paper gives us, at 10 percent of GNP, a believable estimate of the cost of imperfect information in the labor market. As what the reality depicts, Kalleberg (2000) states that employers have been motivated by cost-containment to use part-timers, since typically they cost less in wages and particularly in fringe benefits. This contradicts to what Hofler and Murphy (1992) explains. They state that “the search theory of unemployment predicts that workers, upon finding employment, are paid a wage below the maximum wage that could be earned in the labor market by a worker with a comparable set of skills. This “underpayment” occurs because information about jobs is costly to come by, because searchers possess positive discount rates, and because searchers have time horizons of finite length. As a result, workers terminate the search process prior to discovering the highest paying job available.”
The contradiction between the demand and supply for temporary workers has been greatly stressed. The best possible solution would be acquiring the help of temporary help agencies. Kalleberg (2000) states that temporary help agencies employ workers and send them out to customers to work on an hourly basis at the client’s premises and direction. This would provide convenience for the company when it comes to hiring or searching for the temporary workers because these agencies recruit and screen employees, sometimes provide training, and are responsible for hiring and firing, issuing paychecks, withholding payroll taxes, and making required employer contributions to unemployment insurance and Social Security (Carey & Hazelbaker 1986). In addition, Kalleberg (2000) cited that organizations use temporary help agencies to lower recruitment and screening costs, by hiring employees who perform well: Houseman (1997) found that 21% of the establishments in her sample said this was a reason for their use of temporary help agencies. Organizations may also be able to reduce training costs through the use of temporary help agency workers, as is suggested by Krueger (1993). On the other hand, Hofler and Murphy(1992) suggests that perfect information on the wages that the temporary workers would receive should be announced to avoid hassle in the recruitment process. Applicants who change their minds in the middle of the employment process would result in useless efforts.
References
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