Staircases or Treadmills?: Labor Market Intermediaries and Economic Opportunity in a Changing Economy

Chapter Four

Chapter Four The Incidence and Use of Labor Market Intermediaries To date, there has been little comprehensive work quantifying the incidence and nature of intermediary use in the U.S. economy. There have been case studies of certain sorts of LMIs, although most of them simply highlight “best practices ” and few try to profile the average experience, as we did in the previous chapter. There have also been empirical studies following certain kinds of workers using certain kinds of LMIs (see, for example, Autor and Houseman 2005b) The broadest study looking at LMI use in a full labor market context was conducted by Fredrik Andersson, Harry Holzer, and Julia Lane (2005). Their work is both pioneering and elegantly done, and we compare our results with theirs at the end of chapter 5. Nonetheless, their study is limited in certain ways. It relies on state data from unemployment insurance records, focuses only on temps (because this is the only type of LMI that can be examined in their data), has no information about individual worker characteristics (and so imputes these data), and is not able to distinguish between hours and wages. To fill the gap in comprehensive knowledge of intermediary activity, we fielded an original survey in our two regional labor markets to assess the difference in the market experiences of those who did and did not use LMIs to find work. To our knowledge, this is the first such effort to collect a broad and representative base of quantitative information on LMI use and incidence across the whole range of types of intermediaries. The data collected allow us to comprehensively document the role and impact of LMIs and to place them in the broader context of the labor markets in which they operate. We also explore whether or not intermediaries serve as substitutes for or complements to the use of social networks for low-income workers. An analysis of these data is presented here and in the following two chapters. In this chapter, we provide an overview of the incidence and type of intermediary use, the reasons why intermediaries are being used, and the services and satisfaction that workers get from intermediaries. We then look closely at the intermediary experiences of disadvantaged workers in the two regions, showing how their experiences differ from those of their more advantaged counterparts. We follow up in chapter 5 with an analysis of the outcomes that intermediaries appear to secure for workers, and in chapter 6 with a look at the relationship between social networks and intermediary use. The Survey of Labor Market Intermediary Use was fielded between August 2001 and June 2002 as a random-digit-dialing phone survey in the Silicon Valley region of northern California and the Milwaukee, Wisconsin, metropolitan area. We collected responses from 1,348 individuals between the ages of twenty-five and sixty-five who had worked sometime in the past three years.1 Survey respondents were roughly split between the two regions and between those who had and had not used an LMI to obtain a job; we used an oversampling strategy to obtain more responses from LMI users to permit detailed analysis, then used proper weights to transform all responses back to population characteristics. We also oversampled on those living in low-income areas, using phone prefixes as a proxy, because we wished to see whether there were geographic issues with regard to social networks and LMI use, a topic taken up in chapter 6. Again, we use weights to adjust these respondent answers to their likely share in the general population (for a more detailed documentation of the survey methodology, see the appendix). In the survey, we identified and categorized the intermediaries used by workers into five groupings—private agencies, unions, nonprofit or governmental agencies, community and technical colleges or vocational schools, and professional associations.2 Within the first category, we make some further distinctions between temporary agencies and those that function as permanent placement agencies, also known as recruiters or “headhunters.” Although intermediaries are becoming more common in our economic landscape, the concept of intermediary activity and the distinctions between THE INCIDENCE AND USE OF LABOR MARKET INTERMEDIARIES 99 organizational types are not well defined in the popular consciousness. Through repeated drafting and testing, in both focus groups and trial questionnaires , we found that individuals are most able to accurately recount their experiences with LMIs if those experiences...