workplace safety in atlanta's construction industry: institutional failure in temporary...

Workplace Safety in Atlanta’sConstruction Industry: Institutional Failure in TemporaryStaffing Arrangements

Chirag Mehta and Nik Theodore

This article examines workplace safety conditions in Atlanta’s construction industry in light of the growingpresence of temporary staffing agencies in the industry. Using data collected from surveys of building con-tractors, temporary staffing agencies, and temp workers, the article explores the ways in which the use ofagency-supplied temps by construction contractors subverts workplace health and safety regulations, therebyexposing construction workers to heightened risk of injury.

Statistics on workplace injuries in the U.S. are unequivocal—constructionis a hazardous industry for its workers. Over the past several decades, unions,government agencies, the insurance industry, and employer associations havelaunched initiatives to protect the safety of construction workers. These effortshave evolved into a regulatory framework—a workplace safety regime—thatcreates incentives for employers to take steps to reduce workplace injuries.Despite these efforts, however, injury rates in the construction industry remaindisturbingly high, in part because employers have not fully responded to thissystem of incentives. More troubling, the changing landscape of U.S. employ-ment arrangements is challenging this already inadequate system of incentives.This system, which is comprised of labor market forces, workers’ compensationpolicies, and occupational safety and health regulations, has evolved in relationto standard employment arrangements (full-time work, under a contract ofunlimited duration with a single employer) that have been the norm for decades.With the growth in nonstandard employment arrangements, and employmentthrough temporary staffing agencies in particular, the adequacy of the existingsystem of incentives is further called into question.

This article examines workplace safety conditions in Atlanta’s constructionindustry in light of the growing presence of temporary staffing agencies in theindustry. Using data collected from standardized surveys of building contrac-tors, temporary staffing agencies, and temp workers, the article explores theways in which the use of agency-supplied temps by construction contractors

WorkingUSA: The Journal of Labor and Society · 1089-7011 · Volume 9 · March 2006 · pp. 59–77© 2006 The Author(s)

Journal compilation © 2006 Immanuel Ness and Blackwell Publishing, Inc.

60 WorkingUSA: The Journal of Labor and Society

subverts workplace health and safety regulations, thereby exposing constructionworkers to heightened risk of injury. The first section examines the size andscope of the market for agency-supplied temps in the Atlanta metropolitan areaconstruction industry. The second section describes safety conditions for tem-porary workers in the construction industry and reviews factors that typicallyinfluence safety conditions. The third section explores the extent to which the nonstandard employment arrangements are implicated in the erosion ofsafety conditions for agency-supplied temps. A methodological appendix followsthis.

Prevalence of Agency-Supplied Temps in the Atlanta Construction Industry

Employers turn to temporary workers to meet unexpected staffing needs, to cut labor costs, and to staff short-term, specialized positions. Constructioncontractors in the Atlanta metropolitan area access temporary workers fromthree sources:

• Temporary staffing agencies are for-profit labor market intermediaries thatsupply workers to other companies on a daily basis. Under most U.S. laborlaws, temp agencies are the legal employers of the temp workers suppliedto business clients. They are the employer of record for unemploymentinsurance, workers’ compensation, and employment discrimination laws.The Atlanta metropolitan area is one of the largest and most competitivetemp markets in the U.S. (Theodore and Peck 2002), with approximately 200agencies operating locally. The segment of the temp industry supplying theconstruction sector, however, is a small portion of the total industry.

• Day labor corners are informal public gathering places such as street corners,parks, and parking lots where workers congregate to wait for employers todrive by and offer them work for the day (see Valenzuela 2003; Valenzuelaand Melendez 2003). Some day laborers congregate at worker centers oper-ated by community organizations. These centers provide day laborers witha safer place to wait for work, workers’ rights education, information onalternative employment opportunities, and other services. There are twosuch centers operating in the Atlanta metro area. Anecdotal evidence sug-gests that labor corners and worker centers in Atlanta are a small butgrowing source of temporary construction workers who are hired by home-owners and building contractors. Workers congregating at Atlanta’s laborcorners and worker centers mainly are immigrants from Mexico and CentralAmerica.

• Informal subcontractors are individuals or companies hired by contractors tosupply labor on a temporary basis. Workers who are hired as informal sub-contractors can be distinguished from agency-supplied temps in that theyare hired directly by contractors and not directly employed by a labor marketintermediary.

mehta and theodore: SAFETY IN THE CONSTRUCTION AGENCY 61

Temporary staffing agencies, labor corners, and informal subcontractors are the means through which the supply of temporary workers is organized and made available to the Atlanta construction industry. In the broadest terms, these sources of labor supply form the institutional underpinnings of thelabor market for temporary construction workers. As labor market intermedi-aries/institutions, each is governed by its own set of rules regarding workerrecruitment, terms of employment, and contractor relations. On the demandside, these intermediaries offer contractors various benefits. For example, tem-porary staffing agencies are formalized intermediaries that assume someemployer responsibilities, such as recruitment, payroll, unemployment insur-ance, and workers’ compensation. Although these agencies charge a mark-upon the hourly rate for temp workers, their flexibility, reliability, and role as theprimary employer presents contractors with an attractive alternative to standardemployment arrangements.

Labor corners are informal intermediaries yet are relatively stable entitiesthat allow contractors to readily access an available pool of temporary workerswith minimal restrictions. Finally, informal subcontracting is the least formal-ized arrangement. Informal subcontractors are typically workers employed bycontractors to recruit other workers from labor corners and elsewhere for tem-porary employment.

On the supply side of the construction labor market, segments of the localworkforce rely to markedly differing degrees on these intermediaries. Whileworkers employed through each of these intermediaries share certain labormarket experiences arising from their position as underemployed constructionworkers—primarily heightened employment uncertainty and status as margin-alized laborers within the construction industry—there exist important differ-ences in the operation of these institutional sites of labor supply. Temporarylabor markets in the Atlanta construction industry are deeply race-structured.African–Americans primarily seek employment through local temporary staffingagencies, whereas immigrants from Latin America primarily seek employmentthrough labor corners and consider temp agencies a secondary source ofemployment. Hence, as a means for organizing temporary labor markets, thevery workings of these intermediaries reinforce extant patterns of segregationin Atlanta’s construction labor markets.

The remainder of this section returns to our principal topic of investiga-tion—agency-supplied, temporary workers, the largest and most formalizedsource of short-term construction labor in Atlanta. The analysis that follows isinformed by three surveys: one of a stratified random sample of 301 buildingcontractors operating in the Atlanta metro area, another of twenty-four tem-porary staffing agencies supplying the building and construction industry, anda third of 100 temporary construction laborers.

Demand for Agency-Supplied Temps in the Atlanta Construction Industry

Workers supplied by temporary staffing agencies comprise a small butimportant share of the construction workforce in the Atlanta area, especially


during peak construction periods. Estimates derived from official statistics anddata generated from a survey of construction contractors in the Atlanta metroarea reveal that approximately 3 percent of the local construction workforce issupplied through temp agencies, a figure that is comparable to national esti-mates (authors’ calculations based on U.S. Bureau of Labor Statistics 2001a,2001b). However, for a significant segment of the industry, workers supplied bytemporary staffing agencies form a large buffer workforce that is mobilizedduring peak periods.

Results from the survey of building contractors indicate that approximatelyone-quarter of the contractors in the industry use temporary staffing agenciesto fill positions at job sites. Based on contractors’ reports of total employmentof agency-supplied temps during peak and slack periods, it is estimated that thedaily number of agency-supplied construction temps in the Atlanta metro areavaries between 300 during slack periods and more than 3,000 during peakperiods. For building contractors reporting the use of agency-supplied temps in the previous year, these workers comprised 20 percent of contractors’ peak-period workforce.

Demand for agency-supplied temps varies greatly by type of contractor.When asked whether workers had been employed through temp agencies atconstruction sites in the past year, 41 percent of general contractors and 20percent of heavy construction and special trades contractors reported havingdone so. Among special trades contractors that contracted with a temp agencyin the previous year, most were involved in plastering, drywall, electrical, orplumbing trades. General contractors mainly turn to temporary staffing agen-cies to supply workers for general laborer assignments. Almost 70 percent ofthe positions filled by agency-supplied temps were occupations such as clean-up, demolition, material handling, and ditch digging. Conversely, heavy con-struction and special trades contractors mainly employed agency-supplied tempsto fill more skilled positions.

Characteristics of Temp Agencies Supplying the Construction Industry

A small number of temporary staffing agencies are responsible for organiz-ing the supply of temp construction workers in the Atlanta metro area. Only 10percent of temp agencies in the Atlanta metro area reported supplying workersto the construction industry. Beyond supplying contractors with temporaryworkers, temp agencies play an important role in defining contractor–workeremployment arrangements. Temp agencies typically are the primary employerof the temps that they supply to client employers. As such, temp agencies areresponsible for carrying temp workers on their payroll and for purchasingworkers’ compensation insurance to cover these workers. In addition, someagencies also take responsibility for providing temp workers with safety equip-ment and safety training.

A number of temp agency managers surveyed indicated that the high costof workers’ compensation insurance combined with the hazards of construction


work meant that it was too risky and potentially unprofitable for their agencyto supply workers to the construction industry. The following statement isindicative of the views expressed by dozens of respondents:

We do strictly clean-up [on job sites]. No construction trades at all. It’s aworkers’ comp issue. There are strict rules for what the temps can actually doon-site. They can’t pick up a hammer or go up a ladder taller than 6 feet . . .because of the workers’ comp guidelines. (Interview with temp agency manager,September 2002)

Workers’ compensation insurance can indeed be a significant cost of doing busi-ness. The average workers’ compensation rate for general labor and clean-uppositions is $0.14 for every dollar of payroll, while for most skilled constructionoccupations, it is $0.24 for every dollar of payroll (authors’ estimates based onNCCI 2002). The high workers’ compensation costs that are required to offsetthe high risk of worker injury in blue-collar occupations such as constructionlaborer channels most temp agencies into occupations where workers’ com-pensation costs are lower and less volatile. For example, workers’ compensationrates for temporary office and clerical workers are less than $0.01 for everydollar of payroll. Not surprisingly, most commercial staffing agencies supply amix of clerical and blue-collar workers as a way both to increase the volume ofplacements and to control workers’ compensation costs.

Temp Workers and Workplace Safety

Temporary construction workers in Atlanta endure high rates of on-the-jobinjury. According to temp agency representatives, contractors routinely placeagency-supplied temps in hazardous working conditions. This observation wassummed up by one agency manager, “My workers always get the worst safetyequipment, and they get assigned to the most hazardous jobs” (Interview,October 2002). Twenty-three percent of respondents of the worker surveyreported experiencing a serious injury in the last year (an injury that requiredmedical attention or resulted in lost time on the job). Respondents reported arange of serious injuries sustained in the previous year, including deep cuts andpuncture wounds on the feet, hands, and arms; head wounds; skin rashes; backpain; wrist pain; and strained muscles.

Most injured workers (60 percent) did not receive treatment for their injury.Many of these workers did not seek treatment because they could not afford it,were uninsured, or feared that employers would deny them future employmentopportunities. One worker explained:

People need to keep their jobs. They say everything is safe . . . because theyneed the job and they don’t care whether it is safe or not. Most go [to the work-site] whether it is dangerous or not. (Interview, October 2002)

Several workers who sustained injuries on the job reported that their employ-ers convinced them that the injuries did not require medical attention. Oneagency-supplied temp described his experience this way:


After I was injured the contractor called the labor pool [temp agency] and toldthem to come get me. The labor pool told me to walk to the VA Hospital. AndI was in pain! But a friend gave me tokens to take the bus. It was two or threemiles away. I asked the [contractor] to help out with my medication but theydidn’t even do that, they didn’t pay anything (Interview, October 2002).

Work-related injuries sustained at construction sites should be coveredunder workers’ compensation insurance. However, none of the injured workersin our survey who obtained medical treatment or lost time from their jobreceived workers’ compensation benefits. Rather, those employed through tem-porary staffing agencies reported that agencies discouraged them from claim-ing benefits, often by asserting that they are ineligible. Workers suggest that thetriangular employment arrangement between building contractors, temp agen-cies, and temp workers obscures lines of accountability and responsibility forcompensating temp workers for their injuries. Workers explain that temp agen-cies frequently contend that building contractors are responsible for payingworkers’ compensation to injured temp workers, while contractors place respon-sibility back on temp agencies. Too often, workers are unable to discern whichemployer is in fact responsible.

Many temporary workers, whether they have been injured on the job or not,report that they encounter hazards on construction job sites that threaten theirsafety. Approximately half of temporary construction workers surveyed workedin an unsafe construction job (a job where they were or could have been injured)in the prior year. High levels of dust and working at unsafe heights withoutproper equipment were the most common hazards reported. More than one-quarter of respondents reported that at least one piece of machinery at their lastunsafe job was not working properly and 23 percent reported that there werehazardous chemicals present at the worksite. Other reported hazards includedimproper scaffold construction, exposure to harmful substances, electricalhazards, lack of information and training, unsafe behavior of other workers,using hand and power tools without proper instruction, and falling objects.

Again, many workers do not raise safety concerns with their employersbecause they fear that doing so would jeopardize their opportunity to work. Onetemporary laborer explained, “I didn’t say anything [about unsafe conditions]because I was afraid they wouldn’t ask me to work the next day” (Interview,October 2002). In other cases, workers reported having raised safety concerns,but employers have refused to act on these complaints. A worker described thesituation in this way:

No safety glasses, they didn’t give us anything, only tools. No hard hat, nonothing. I voiced concerns about this, but no action was taken. Then thewoman from the temp agency wouldn’t pay me [for the hours worked] (Inter-view, October 2002).

Limited access to safety equipment may explain, in part, the widespread per-ception that construction sites are hazardous. Forty-two percent of respondentsreported that they did not receive the necessary safety equipment at their last


unsafe temporary construction job. Furthermore, 35 percent reported that thesafety equipment they were provided was not in good working order at theirlast unsafe job, and 26 percent reported their employer did not provide anysafety equipment whatsoever. A worker described one incident:

I had to mix chemicals for cleaning without gloves. I got a rash on my armsand skin was peeling off. It could have been prevented. [The contractor] didn’ttell us what would happen—they could have at least have told us to wear longsleeves. The temp agency didn’t tell us what we would be doing and no onetold us the possible reaction of the chemicals. This happened to all the otherworkers too. [The contractor] gave us one cleaner but it didn’t work, so thenthey said to mix two different cleaners. I noticed a rash a couple hours later.There was a [woman] there who had been with them awhile who said that ourskin would probably peel off, she had seen this happen before. No gloves oranything (Interview, October 2002).

Agency-supplied temps frequently have inadequate access to safety equipment.One worker stated, “We ask [contractors] if they have [safety equipment wecould use] and they say, ‘No, we’re all out. You have to bring your own, go outand buy your own’” (Interview, October 2002).

To assess whether workers in unsafe jobs were given the safety equipmentnecessary for their job assignment, respondents’ reports of safety equipmentreceived were compared to Occupational Health and Safety Administration(OSHA) safety equipment guidelines for construction occupations. For all typesof protection with the exception of hand protection, less than half of all workerssurveyed received the equipment they needed (Table 1). Provisions for ear andbreathing protection in particular appear inadequate.

Many workers also reported a lack of proper job training by contractors.Almost 40 percent of those who reported an unsafe job in the last year indicatedthat they had not received adequate training to safely complete assigned tasks.

The Workplace Safety Regime

Prior research on factors influencing workplace safety in standard employ-ment arrangements provides insights into why workers employed through tempagencies might be more likely to be exposed to substandard safety conditions.

Table 1. Adequacy of Temp Workers’ Safety Equipment

Type of protection Number of Share of workersworkers in that received

need of adequate protection protection (%)

Eye (e.g., goggles, glasses) 34 46Ear (e.g., ear plugs, ear muffs) 9 33Head (e.g., hardhats) 34 47Hand (e.g., gloves) 18 72Breathing (e.g., respirators) 24 17


The literature on workplace safety identifies a workplace safety regime withthree components that combine to encourage employers to improve safety standards: labor market forces, workers’ compensation costs, and OSHA re-gulations. Together, these components intervene in standard employmentarrangements inducing employers to improve safety conditions by internalizingthe costs of work-related injuries.

Labor Market Forces

Workers’ demands and expectations for a safe working environment arecommonly understood to exert pressures on employers to adopt higher work-place safety standards. The reasoning is as follows. Workers respond to unsafeconditions either by quitting unsafe jobs or by demanding higher wages as com-pensation for working in unsafe conditions. Through these actions, workers bidup wages for unsafe jobs. Rather than paying wage premiums to recruit andretain employees to work at unsafe worksites, employers take steps to improvesafety conditions when the marginal cost of doing so is less than that of com-pensating employees for working in unsafe conditions.

This explanation is based on a rational actor model of decision-making thatis founded on three important assumptions regarding worker behavior: (1)workers have perfect (or at least fairly accurate) information about the hazardspresent at various workplaces; (2) workers are able to quit jobs and find less haz-ardous employment; and (3) workers have equal bargaining power vis-à-visemployers in the market. This conventional wisdom is supported by a numberof sectoral studies that lend credence to the contention that employees are ableto exert wage pressures on employers in response to unsafe conditions (seeRobinson 1991).

However, labor market forces do not, under all circumstances, positivelyinfluence job site safety conditions. Several factors weaken or even reverse theexpected positive relationship between wages and risk. Empirical evidence sug-gests that certain groups of workers are considerably less able to bid up wagesfor unsafe jobs (Chelius 1991; Shapiro 1999). For example, workers in low-wage occupations often have little choice but to stay in unsafe jobs because theylack information about and the skills to secure alternative employment. Undoc-umented immigrants, in particular, might be reluctant to seek alternativeemployment for fear of being deported. In addition, workers’ access to accurateand timely information regarding safety conditions is often inadequate. Robinson (1991) cites survey data suggesting that between 33 and 50 percentof workers in hazardous occupations believe that they face no significant safetyor health hazards.

Workers’ Compensation Insurance

Workers’ compensation insurance is a state-regulated program that collectspremiums from employers to cover medical and lost work-time expenses


incurred by workers who have been injured on the job. Premiums are based onthe claims history of the industry in which the employer does business, as wellas the claims experience of the individual employer. In the event of a work-related injury, workers’ compensation insurance is the “exclusive remedy” forinjured workers. One of the objectives of workers’ compensation insurance isto reduce the rate of injury on the job by penalizing employers that are unwill-ing or unable to maintain adequate safety standards.

Workers’ compensation insurance influences workplace safety by assessingpremiums based in part on the claims history of employers. Employers’ premi-ums rise as their claim-cost history surpasses the industry average. By “experi-ence-rating” premiums in this way, workers’ compensation insurance acts as aninducement for employers to reduce job-related injuries.

Research on the effect of experience-rating workers’ compensation insur-ance premiums has found that this policy mechanism encourages employers totake actions to reduce claims (Hyatt and Krajl 1995). Thomason and Pozzebon(2002) found that as experience-rating of workers’ compensation insurance pre-miums increases—in other words, as the sensitivity of employers’ premiums totheir individual claim-cost history intensifies—injury rates decline. Krajl (1994)also found that firms increasingly implement health and safety measures andclaims-management practices as experience-rating intensify. A similar relation-ship has been found between workplace fatality rates and benefit payments(Moore and Viscusi 1989). As the value of benefits paid to claimants rises(thereby increasing the experience-rating for employers of claimants), fatalityrates decline.

Occupational Health and Safety Administration

Most studies of the impact of enforcement of OSHA regulations find thatregulations influence employers’ decisions to improve workplace safety condi-tions, albeit under limited circumstances. OSHA has designed special adminis-trative procedures to enforce standards for construction contractors, bothbecause the industry has significantly higher injury rates and because job sitesoften involve multiple employers. The research literature characterizes OSHAenforcement as modestly successful in encouraging employers to improve safetyconditions (Gray and Scholz 1993; Kniesner and Leeth 1995).

The Workplace Safety Regime and the Temporary Construction Labor Market

The evidence suggests that the workplace safety regime positively affectssafety for workers in standard employment arrangements (Figure 1). It is impor-tant to consider, however, whether the introduction of temporary staffing agen-cies in employment arrangements compromises the safety-inducing effects ofthe regime. The temporary staffing industry fundamentally alters employment


arrangements and, subsequently, might undermine the cause–effect relation-ships upon which the regime depends:

1. Labor market forces compel building contractors to respond to workerturnover or to their employees’ demand for higher wages by improvingsafety conditions. However, when building contractors recruit workersthrough temporary staffing agencies, it is the temp agencies that bearresponsibility for absorbing the costs associated with labor turnover anddemands for higher wages. Building contractors do not directly experiencethis wage pressure.

2. The influence of workers’ compensation insurance on workplace safety may bemuted in the context of temp agency–client employer arrangements. Tempagencies are usually responsible for carrying workers’ compensation insur-ance for employees supplied to client’s job sites. Therefore, when agency-supplied temps are injured on the job and receive benefits, temp agenciesare charged for workers’ claims. Therefore, the client employer does notdirectly absorb the marginal cost of increased workers’ compensation pre-miums resulting from the injury.

3. With regard to the influence of OSHA regulations, temp agencies and theirclient employers both play a role in ensuring the safety of agency-supplied

Worker response to unsafe conditions

1. Worker quits unsafe job.

2. Worker demands higher wage to compensate for the relatively higher risk.

3. Worker files workers’ comp claim as a result of an injury on the job.

4. Worker complains to OSHA about unsafe workplace conditions.

Workplace safety regime

Employer response to the regime

1 and 2. Employer pays worker higher wage or improves safety conditions to reduce costs associated with labor turnover and wages.

3. Employer improves safety conditions to reduce costs associated with workers’ comp insurance premiums.

4. Employer improves conditions to avoid OSHA penalties.

Labor market forces

Workers’ compensation

OSHA

Figure 1. The Workplace Safety Regime and Standard Employment.


temps. OSHA regulations, however, may not appropriately identify andpenalize building contractors and temp agencies when they fail to meetOSHA standards.

This section considers whether the introduction of temporary staffing agen-cies into the Atlanta construction labor market compromises the efficacy of eachcomponent of the workplace safety regime, thus explaining, at least in part, thesubstandard safety conditions reported by agency-supplied temps.

Temp Agencies Insulate Building Contractors from Labor Market Forces

In the context of temp agency–client employer arrangements, the influenceof labor market forces is substantially weakened because temp agencies shelterclient employers from the variable costs associated with increases in wages andlabor turnover (Figure 2). If temp workers demand higher wages as compensa-tion for working in unsafe conditions, workers negotiate directly with agencies,not with client employers. If temp workers choose to quit because of theirworking conditions, temp agencies are responsible for finding replacementworkers. Client employers may never realize that agency-supplied temps quitor declined job assignments in response to unsafe working conditions. In otherwords, temp agencies insulate client employers from these market forces.

It may appear that building contractors maintaining unsafe job sites pay forthe variable costs stemming from temp workers’ dissatisfaction with safety con-ditions because temp agencies pass these costs onto client employers throughincreases in the billing rate. However, evidence collected from the employersurveys suggests that the bargaining power exercised by client employers vis-à-vis temp agencies and their workforces prevents agencies from increasing billing

Temp worker’s response to unsafe

conditions

1. Worker quits unsafe job.

2. Worker demands higher wage to compensate for the unsafe conditions.

Temp agency responseemployers

1 and 2. Employer is assigned a new temp worker and continues to pay the same billing rate.

1. Temp agency sends out new temp worker to fill job assignment.

2. Temp agency fires worker and sends out new temp worker to fill job assignment, or temp agency pays higher wages.

Effect on client

Figure 2. Temp Agencies Shelter Client Employers from Labor Market Forces.


rates to recover these costs. For example, when temp workers quit job assign-ments, building contractors may demand replacement workers from the sup-plying temp agency or switch to another temp agency to staff the jobassignment.

Contractor interviews indicate that most use several staffing agencies tosupply workers. In fact, the majority of contractors (66 percent) reported thesimultaneous use of several temp agencies, fueling price competition amongagencies. Contractors also have the option of recruiting temp workers frominformal labor corners that provide viable and sometimes less costly alternativesto temp agencies. The competitive dynamics that ensues restricts the ability oftemp agencies to increase billing rates in proportion to rising wages, therebysheltering client employers from the higher labor costs associated with haz-ardous work. When asked about their business strategies, temp agenciesreported that competitive dynamics in the industry typically force them to lowerbilling rates to compete for client employers.

Further investigation of temp agency profit margins indicates that, indeed,the industry is highly price competitive which offers little scope for temp agen-cies to recover increased variable costs from their clients (see Mehta andTheodore 2002–3; Theodore and Peck 2002). Temp agency gross margins (thebilling rate less total wages) for construction positions are in the 50 to 60 percentrange (Table 2). However, after taking into account workers’ compensation pre-miums and payroll taxes, agencies earn net margins between 16 percent and 20percent (Figure 3).

A comparison of billing rates and wage rates in the temporary staffing indus-try provides additional evidence that price competition constrains opportunitiesto recover rising variable costs by increasing client billing rates. Billing rates forworkers filling assignments for general laborers are comparable to what clientemployers would pay these workers if they hired them directly. The averagewage paid to a general construction laborer in Atlanta in 2001 was $11.11 perhour (U.S. Bureau of Labor Statistics 2001a), while billing rates charged to con-struction contractors ranged between $10.00 and $12.75.

Furthermore, temp workers are able to exert only limited wage pressure ontemp agencies. Workers interviewed for this study frequently shared stories of

Table 2. Temp Agency Gross Margins by Occupation, Atlanta 2002

Position Wage ($) Billing Gross margin ($) Margin as % rate ($) of billing rate

Carpenter 9.25 17.50 8.25 47Clean-up 7.00 12.25 5.25 43Demolition 5.88 7.50 1.62 22Ditch digger 6.63 12.50 5.87 47Finisher 12.00 17.00 5.00 29General labor 8.00 12.00 4.00 33Misc. skilled labor 13.00 22.00 9.00 41


job instability and uncertainty that reveal their weak position in the labormarket. One worker explained, “You have to go back every morning. If you’rerunning late, you will lose your job. [Temp agencies] just need a body” (Inter-view October, 2002; see also Peck and Theodore 1998, 2001). In this context,it is understandable why workers have little recourse to demand higher wagesas compensation for working in unsafe conditions.

The characteristics of Latino and African–American temporary workersfurther explain their weak bargaining position. For example, several of theundocumented immigrants surveyed explained that their lack of legal immigra-tion status makes it more difficult for them to find and retain jobs, it createsproblems with local police, and it makes it more risky to protest unsafe condi-tions or seek compensation for on-the-job injuries (see Simmonds-Diaz 1993).As for African–American temp workers, homelessness appears to be common-place (see Theodore 2003), placing these workers in a vulnerable position.Anecdotal evidence suggests that some programs serving the homeless collab-orate directly with temp agencies and channel workers into potentially unsafejobs.1

The substandard wages earned by agency-supplied temps are an indicatorof their weak bargaining position in the labor market. A self-sufficiency wage(the wage needed to support the basic needs of workers and families) for workersin Fulton County, Georgia is $9.12 for one adult and between $9.81 and $19.06per adult for families, depending on the size of the family (Pearce 2002). In thisstudy, the median hourly wage for all agency-supplied temps at their last tem-porary construction job was only $5.50.

Another indicator of agency-supplied temps’ poor bargaining position is thefrequency with which they allege wage and hour violations. Almost 20 percent

Wage67%

Net margin17%

FICA5%

UI2%

WC9%

Unemployment insurance (UI)

Workers compensation (WC)

Wage

Federal InsuranceContributions Act (FICA)

Net margin

Figure 3. Composition of Gross Margins of Temp Agencies Supplying General Laborers.Note: OSHA, Occupational Health and Safety Administration.


of respondents indicated that they were not paid the amount they were prom-ised at their last temp job. One worker described his experience in this way:

In the morning the temp agency said I’d be making $6.00 but when I got backafter the job they told me [I would be paid] $5.50. If you argue they won’t sendyou back out anymore so there’s not much to do about it (Interview, October2002).

Workers also reported not being paid for all hours worked, as well as not beingallowed to work overtime. Several workers reported not being paid for workperformed prior to suffering an on-the-job injury.

Effect of Workers’ Compensation Insurance Undermined by Temp Agencies

Temporary staffing agencies shelter client employers from rising workers’compensation costs, thereby muting cost pressures that might induce employ-ers to improve workplace safety. In this way, the introduction of temp agenciesinto employment arrangements de-couples the cause–effect relationshipbetween increased workers’ compensation costs and employers’ investments inworkplace safety.

In standard employment arrangements, employers pay higher workers’compensation premiums when their direct-hire employees suffer work-relatedinjuries and receive workers’ compensation benefits. However, in the context oftemp agency–client employer arrangements, workers’ compensation insuranceprograms identify temporary staffing agencies as the employer of record. Thus,the costs associated with injuries are borne by agencies even though their clientemployers are chiefly responsible for providing for the safety of agency-suppliedtemps. Crucially, client employers’ workers’ compensation premiums are not inany way affected by injuries to temp workers employed through staffing agen-cies (Figure 4). In addition, exclusive-remedy provisions in Georgia shelter con-tractors from tort liability in the event that an agency-supplied temp becomes

Temp worker’s response to unsafe

conditions

Temp worker files workers’ comp claim as a result of work-related injury.

Temp agency’s response

Effect on client employers

Client employers’ claim-cost history is unaffected. No effect on workers’ comp premiums.

Temp agency disputes claim or

pays increased workers’ comp

premiums resulting from worsened claim-

cost history.

Figure 4. Temp Agencies Shelter Client Employers from Workers’ Compensation Costs.


injured on the job, even though contractors control the job site yet do not insuretheir agency-supplied temps.

Of course, client employers may ultimately pay for temp agencies’ increas-ing workers’ compensation costs if agencies are able to pass on these costs byraising billing rates. However, as discussed previously, the ability to raise billingrates to recover higher costs is greatly constrained by price competition amongtemp agencies.

In targeting temp agencies, workers’ compensation insurance fails toencourage contractors to improve safety conditions for agency-supplied tempsbecause it targets the wrong employer in the temp agency–client employerarrangement. Temp agencies, while responsible for workers’ compensationcosts, do not supervise workers and only rarely provide workers with skills orsafety training specific to the job. Nearly all contractors surveyed (96 percent)reported that they were responsible for supervising temp agency workers ontheir job sites. Furthermore, most contractors (54 percent) reported that theyare primarily responsible for providing agency-supplied temps with safetyequipment and an additional 23 percent reported that it depends on the situation.

Temp Staffing Arrangements Confound Proper Enforcement of OSHA Regulations

Unlike their role in sheltering client employers from labor market forcesand workers’ compensation inducements, temporary staffing agencies do notrelieve client employers from their responsibilities under OSHA regulations.However, temp agencies complicate the enforcement process, weakening theeffect of OSHA regulations on safety conditions for agency-supplied temps.OSHA regulations appropriately hold building contractors primarily responsi-ble for violations of health and safety standards that put agency-supplied tempsat risk. OSHA, on the other hand, does not sufficiently hold temp agenciesaccountable to their responsibilities.

In the context of temp agency–client employer staffing arrangements,OSHA places primary responsibility for compliance with OSHA standards onthe employers in direct control of the worksite. For example, in cases where atemp agency supplies workers to a contractor that supervises the temps, if atemp worker becomes injured because of a hazard at the jobsite, OSHA wouldlikely find the contractor liable for violations of regulations that led to the injury.Temp agencies may be cited if a citation is necessary to correct the violation orif the temp agency was aware or should have been aware of the unsafe condi-tion (Lenz 1997; U.S. Department of Labor 1999). Despite these regulations,however, OSHA rarely investigates temporary staffing agencies. The OSHAcompliance database that includes records of every inspection reveals thatOSHA did not investigate a single temp agency in the Atlanta metropolitan areain 2002, despite the fact that OSHA carried out 849 inspections of building con-tractors that year.


A General Accounting Office study (GAO 2002) on regulatory protectionsfor day laborers found that OSHA’s policy defining responsibilities for tempagencies is underdeveloped, thus undermining enforcement efforts. Accordingto the GAO (2002, 14):

Determining whether the temporary staffing agency or client employer isresponsible for providing training and can be cited for failing to ensure thesafety of their workers is a complex area that may be confusing, which mayleave day laborers without sufficient safety and health protections at the work-site. For example, a local OSHA office cited both the temporary staffing agencyand client employer after temporary workers suffered injuries at the clientemployer’s worksite for failing to provide sufficient training and concluded thateach employer believed the other employer was responsible for training theworkers. On the other hand, some OSHA officials said that they would be lesslikely to cite temporary staffing agencies.

Conclusion

This article finds that the demand for agency-supplied temps by buildingcontractors in the Atlanta metro area is substantial and that these workers oftenendure substandard safety conditions. We posit that there is a breakdown in theworkplace safety regime which partly explains why agency-supplied temps expe-rience high rates of exposure to unsafe working conditions. This regime ofincentives positively influences workplace safety conditions in standard employ-ment arrangements. However, in temporary employment arrangements, itsimpact is greatly diminished: (1) supply-side labor market forces do not exertsafety-inducing pressures on client employers in temporary labor markets; (2)experience-rating workers’ compensation premiums paid by temp agencies doesnot markedly influence safety conditions at client employers’ job sites; and (3)enforcement of OSHA regulations has been slow to adapt to the increasing pres-ence of temporary staffing agencies in the construction industry. As a result ofthese institutional failures, agency-supplied temps have less access to appropri-ate safety equipment, more often work without proper training and supervisioncompared to their counterparts in standard employment arrangements, and areexposed to heightened risks of on-the-job injury.

Methodological Appendix

Contractor Survey

A short telephone survey was conducted in September and October 2002with a stratified random sample of construction contractors in the Atlanta met-ropolitan area. A total of 3,900 building and construction contractors (generalcontractors, heavy construction, and special trade contractors) were identifiedusing the AFL–CIO’s 2001 Unicore list.


In order to construct a representative sample, the universe of 3,900 con-tractors was stratified by SIC code, employment size, and union status. Fifteenpercent of the contractors from each group were sampled and 10 percent werecontacted in each group. The remaining 5 percent were contacted only ifrespondents in the 10 percent sample needed to be replaced.

Response rates surpassed 75 percent in each group with the exception oflarge, non-union heavy construction contractors, where the response rate was68 percent. In total, 301 contractors were surveyed.

Ineligible or duplicate respondents and respondents with incorrect ormissing phone numbers were replaced by randomly selecting respondents fromthe replacement subset. Respondents were contacted at least five times beforebeing replaced. The respondent at each company was the person most knowl-edgeable about the use of temporary workers. There was no significant differ-ence in the characteristics of respondents and potential respondents that refusedor that were replaced.

Temporary Agency Survey

In September and October 2002, researchers conducted a telephone screen-ing of the universe of temporary staffing agencies in the Atlanta metropolitanarea. In all, 234 agencies (SIC code 7363—Help Supply Services) were identi-fied using the AFL–CIO’s 2001 Unicore list. The list was augmented with namesof temp agencies generated from Internet searches of businesses. Through thetelephone screening, 24 agencies that supplied temporary workers to the con-struction industry were identified and a survey was administered to 20 (83percent) of these agencies.

Worker Survey

Worker surveys and in-depth interviews were used to collect informationon the conditions encountered by workers who are dispatched frequently toconstruction worksites by temp agencies. A convenience sample was drawn fromworkers at several sites: two homeless services programs, one worker center, onetemporary agency, and a public park that is a gathering place for day laborers.These locations were selected in an effort to survey equivalent numbers ofAfrican–Americans and Latinos, two groups that make up the majority of low-wage temp workers in the Atlanta construction industry. In all, 100 surveys andeleven in-depth interviews were completed in August and October 2002.

Workers were screened to include respondents who had been employed astemporary construction laborers. Participants answered a short, verbally admin-istered questionnaire. All workers surveyed in October 2002 who had workedin Atlanta’s construction industry as a temp worker were asked to participate inan in-depth interview. Eleven respondents participated in a more detailed inter-view. Half of the surveys were conducted in English and half in Spanish.


Chirag Mehta is a Research Associate at the University of Illinois at ChicagoCenter for Urban Economic Development. His areas of research include low-wage labor markets, labor market policy interventions, and immigration policy.Address correspondence to Chirag Mehta, Research Associate, Center forUrban Economic Development, 322 South Green Street #108 (MC345), Uni-versity of Illinois, Chicago, Illinois 60607. Telephone: (312) 966-6336.

Nik Theodore is the Director of the Center for Urban Economic Develop-ment and an Assistant Professor in the Urban Planning and Policy Program atthe University of Illinois at Chicago. Address correspondence to Dr NikTheodore, Director, Center for Urban Economic Development, Assistant Pro-fessor, Urban Planning and Policy Program, 322 South Green Street #108(MC345), University of Illinois, Chicago, Illinois 60607. Telephone: (312) 966-8378. E-mail: [email protected].

Note

Funding for this study was provided by the Center to Protect Workers’ Rights, the Ford Foundation, and theRockefeller Foundation. Thanks to Sara Baum, Lori Bush and Kelsa Rieger for providing assistance with thisresearch. Thanks also to Jim Chamberlin, Henry Gallimore, Tim Love, and José Bernal.

1. Several workers discussed problems encountered with a non-profit organization operating an addictionrecovery program located in Atlanta that required participants to work through temp agencies on a dailybasis. Participants started the program owing $150 and were then charged exorbitant prices for food andlodging, making it difficult to pay off their debt.

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