August 01, 2013

What’s Driving the Temporary Workforce?

What factors are driving the rapid growth of the temporary workforce? This is the question that labor experts, economists and executives at companies are asking!

There are many factors, besides the increasing availability of temp positions, driving the adoption of temporary work:

  1. Uncertainties in economist growth continues to drive expansion plans for competitive businesses, by keeping permanent hiring plans on hold.
  2. Millennial and younger workers are choosing to embrace more flexible lifestyles with a higher work-life balance. This generation of workers is seeking work that does not tie them to a specific location or organization.
  3. Talent shortages are inspiring skilled workers to transition into independent contractors, commanding a higher income and broader experience by working for multiple employers. 
  4. Foreign students are staying longer especially based on proposed legislation to issue green cards to students with advanced degrees. These students often have skill sets that are important to employer for specific projects, thus leading to temp employment.
  5. Obama’s health care reform is forcing employers to consider all aspects of cost efficiency.
  6. Shift of the American market from manufacturing to services.
  7. Illegal immigration from neighboring countries increasing the labor population.

By delving into some of these factors in more detail, we can discover forces that are driving the growth of the temporary workforce.

Uncertainties in Economic Growth

Federal budget cuts attributed to sequestration along with uncertain growth projections by economists are causing employers to be concerned. Not wanting to incur a fixed expense at such a time, companies are increasingly looking for flexible and scalable solutions in order to meet their business requirements. Increasing their use of temporary workers in their talent mix allows employers to keep permanent hiring plans on hold, while still having the labor assets they require for the operation of their business. 

The temporary help services sector has 765,000 more jobs in 2013 than it did in 2009, according to estimates by Economic Modeling Specialists (EMSI). This surge accounts for 15% of the national job growth in the last four years, while the industry makes up only 2% of the American workforce.

Temp Help Sector: Share of U.S. Job Growth (2009 to 2013)

Temp Help Sector

Work-Life Balance Desire Becoming a Factor

A comprehensive global study conducted by PricewaterhouseCoopers, The University of Southern California and the London Business School found that the millennial generation is actively seeking more workplace flexibility and a better balance between their work and home life. 

This generation of workers, consisting of 80 million young adults born between 1976 and 2001, will comprise 36% of our workforce by 2014, and 46% of our workforce by 2020. This group of workers places a high emphasis on their ability to shift work hours and work locations. Given the opportunity, 65% of millennials would like to occasionally work from home, and 66% would like the opportunity to shift their work hours. These workers, who are rapidly becoming the largest majority of the workforce, places a premium on work-life balance, and for them, temporary work assignments provides the perfect blend of mixing their lifestyle desires with their career aspirations.

Talent Shortages

Talent shortages in various industries, such as utilities, healthcare, and engineering, are also driving the growth of temporary workers.  In a recent survey, 52% of employers reported that they have difficulty finding suitable applicants for their open positions. Highly skilled workers realize that due to the lack of supply of talented workers, they can command higher wages by working as independent contractors or consultants to multiple companies. 

In fact, companies are increasingly relying upon contingent workforce programs to meet their demand for skilled talent. A study by McKinsey & Company in 2012 found that 45% of companies are already increasing their use of temporary or contingent workers to address their talent needs.

Actions to Address Talent Shortages

Actions to Address Talent Shortages

The Influx of Foreign Students

Central and Eastern United States have the largest concentration of foreign students, relative to their total undergraduate and graduate student population. We might see a massive increase in temporary workers in those regions, depending on immigration policy changes to make it easier for foreign students to stay and work in the country after graduation.

Generally, foreign students tend to pursue degrees in STEM college majors, thus increasing their options and potential for finding a position after graduation.

Unemployment Rate by Educational Level

Educational Level Achieved

Unemployment Rate (June 2013)

Less than High School


High School Grad (No College)


Some College or Associates Degree


Bachelor’s Degree or Higher


Source: Bureau of Labor Statistics

Large Population of Illegal Immigrants

Besides the value-add of cheaper wages, with a large percentage of native-born Americans shying away from jobs requiring intensive physical labor, such as positions in manufacturing, companies are turning to a temporary workforce to address their talent needs.

Percentage of Illegal Immigrants as Compared to Total U.S. Population

Percentage of Illegal Immigrants as Compared to Total U.S. Population

There are around 11 million illegal immigrants in the United States, of whom, 64 percent of the adults have been in the country for over ten years.  These workers are in continuous need of employment, as they do not receive any aid or benefits from the federal government. These workers are often engaged by middlemen who offer them temporary work for minimal pay in questionable work conditions.

While legitimate staffing companies are committed to complying with employment legislation and engaging only workers authorized to work in the United States, there are disreputable companies who use such middlemen and claim innocence when workers are found to be without any papers or social security number.

Ratio of Temporary Workers to Permanent Immigrants in OECD Countries, 2010

Ratio of Temporary Workers to Permanent Immigrants in OECD Countries, 2010