NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Why Do Temporary Help Firms Provide Free General Skills Training?

David H. Autor

NBER Working Paper No. 7637
Issued in April 2000
NBER Program(s):   LS

Nominally free, unrestricted training in portable computer skills is offered by the majority of U.S. temporary help supply (THS) establishments, a practice that is inconsistent with the competitive model of training. This paper asks why temporary help firms provide free general skills training. The answer proposed is that in addition to skills formation, training plays an informational role at THS firms by eliciting private information about worker ability. The model is built on the premise that training is more productive and therefore valuable to high ability workers. Firms offer a package of training and initially lower wages that induces self-selection. Workers of high perceived ability choose training in anticipation of a steeper wage profile while low ability workers are deterred by limited expected gains. Firms profit from their sunk training investment via their short-run informational advantage about ability and thereby limited monopsony power. Market competition among THS firms reduces employer rents, yielding higher wages and more training. Detailed tests of the model using representative establishment data on wages and training find strong support. The analysis demonstrates that beyond providing spot market labor, THS firms gather and sell information about worker quality to clients. The rapid growth of THS as a labor market information broker implies that the demand for worker screening is rising.

download in pdf format
   (1075 K)

email paper

This paper is available as PDF (1075 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w7637

Published: Autor, David H. "Why Do Temporary Help Firms Provide Free General Skills Training?," Quarterly Journal of Economics, 2001, v116(4,Nov), 1409-1448.

Users who downloaded this paper also downloaded these:
Autor w7557 Outsourcing at Will: Unjust Dismissal Doctrine and the Growth of Temporary Help Employment
Acemoglu and Pischke w6357 The Structure of Wages and Investment in General Training
Lazear w9679 Firm-Specific Human Capital: A Skill-Weights Approach
Lazear and Shaw w13653 Personnel Economics: The Economist's View of Human Resources
Lazear w5334 Hiring Risky Workers
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us