Association for Public Policy Analysis & Management

Whether public policies have an effect on the quality of jobs in the labor market merits study given the association of low quality jobs with the problems of the working poor and rising income inequality. I investigate the effect of one specific policy area – unemployment insurance – on one type of low quality job – temporary help services employment – in the United States from 1990 to 2011. I construct a state and year fixed effects model to estimate the effects of the state unemployment insurance mean tax rate and tax gradient on temporary help services employment prevalence. Controls for state industrial structure, economic growth and employment patterns, wages, unionization, and demographic factors are included. The implications of the Great Recession on the relationships between unemployment insurance tax factors and temporary help services employment are also evaluated. The analysis is the first to use state-level data from the Bureau of Labor Statistics’ Quarterly Census of Employment and Wages for the study of temporary help services employment. Additional data are drawn from published and unpublished Department of Labor Employment and Training Administration, Bureau of Labor Statistics, and Bureau of Economic Analysis sources. State unemployment insurance tax factors are found to have significant effects on temporary help services employment prevalence. The magnitude of the effect of changes in the state unemployment insurance mean tax rate on temporary help services employment substantially exceeds that of changes in the tax gradient. To mitigate against job quality degradation associated with an increase in temporary help employment prevalence, state policy-makers might consider expanding the tax gradient rather than increasing unemployment insurance tax rates across the board to raise revenues when state unemployment insurance trust funds become depleted.