What Drives the Demand for Temporary Agency Workers?

Abstract As part of the general trend towards increased employment flexibility temporary agency employment has grown steadily in most European countries. The paper examines, first, whether the deregulation of temporary agency employment is responsible for the growth of the flexible staffing industry. Second, we investigate the cyclical behavior of temporary agency employment. Using monthly data for Germany, we show that the liberalization of the law regulating the sector is not the main reason for the surge of this employment form. Our analysis reveals, moreover, that temporary agency employment exhibits strong cyclical behavior and correlates with main economic indicators in real time.