Practice to Policy: The Impact and Promise of Alternative Staffing Organizations

Every day social innovators and social innovation organizations across the country are measurably impacting communities and individuals. This Practice to Policy blog series lifts up the voices of the more than 70 organizations that make up the America Forward Coalition and our broader social innovation network by highlighting their outcomes-based solutions to our country’s most pressing social problems and why these solutions must be reflected in our federal policies. Today we will hear from the Alternative Staffing Alliance about an employment social enterprise approach that helps thousands of disadvantaged job seekers gain a foothold in the labor market while delivering talent solutions to employers.

Staffing is a key gateway to employment, and alternative staffing combines a staffing business model with supportive services to help overlooked and marginalized job seekers use this portal to the labor market. Annually nearly 70 alternative staffing organizations (ASOs) across the US match over 43,000 individuals with competitive temporary and temp-to-hire job placements in diverse industries.

The alternative staffing model benefits both job seekers and employer clients. Candidates with limited education or experience, criminal records, disabilities, insecure housing and other barriers to employment earn immediate income, demonstrate their motivation and reliability, and gain experience while building their resume. Employer clients gain access to job-ready talent, reduce their hiring risk (because ASOs are the employer of record), and save money through lower turnover and increased productivity, while also diversifying their workforce.

Using an annual performance survey and other sector-wide outreach, we track a variety of metrics – hourly wages, temp-to-hire conversions, and returns on public and philanthropic investments in these entities – that show alternative staffing to be a high-performing enterprise strategy for workforce development. Clearly understanding workers’ long-term employment stability, though, beyond the positive results documented by a few ASOs, is a gap in our evidence base. Below we share a few key metrics and describe our sector’s efforts and progress toward capturing long-term employment impacts more broadly.

Wage Rates

ASOs strive to improve the quality and dignity of temporary work, and hourly wages are a key measure of job quality. In our most recent performance survey (for fiscal year results ending September 2015 through June 2016), alternative staffing operators reported a median “average wage” rate of $10.75 per hour. Within our sample of 18 ASOs supplying wage data, the average and median wage rates paid to workers was 98.5% of the living wage for a single adult in their respective metropolitan area. Individual wage rates ranged from 85% to 123% of their local living wage rates.

Temp-to-Hire Conversions

ASOs aim to connect job seekers with transitional jobs that lead to stable employment. While a median of 25% of ASO workers are hired by employer clients, this metric varies widely by operator, with industry focus one determinant. In our most recent sample of 25 ASOs, a fourth that focus on making manufacturing placements reported conversion rates ranging from 50% to 75%. Where opportunities for temp-to-hire conversion are lower, ASOs help individuals complete a series of temporary assignments to establish a work history and acquire references that position them to secure external jobs on their own.

Leveraging Government and Philanthropic Support

In 2016, ASOs generated $250 million in annual fee revenues, and most of this revenue flows back to workers and the public in the form of wages and payroll taxes. ASOs typically cover their operating costs with fee revenues and use grant monies to cover the cost of supportive services such as workforce training, coaching, and transportation. ASOs’ earned revenues generate $7 to $9 for every federal or philanthropic dollar used to fund other program costs, making this a highly sustainable and effective workforce development approach.

Employment Retention

The median length of workers’ ASO employment is 20 weeks. While operators have solid data about this transitional job experience, they generally lack the capacity to measure workers’ post-exit employment stability. Tracking long-term retention data is challenging and expensive, and it’s here that we look to the public sector for support.

Anecdotally, the results are positive. Three ASOs that track post-exit retention of their workers document six-month retention rates of 50% to 79%, and average hourly wages at 94% to 99% of the living wage for a single adult in their respective counties. The ability for all ASOs to track workers’ long-term job retention and wage outcomes – to inform their practices and attract new investors – is a long-held goal and we continue to pursue a systems approach.

We have long viewed access to Unemployment Insurance (UI) wage records as a promising way to measure workers’ employment trajectory and earnings over time, although researchers note some drawbacks to using this data source. Reports about three states’ use of UI wage records to analyze long-term labor market outcomes (Georgia, Texas and Wisconsin) note that (1) data-sharing by states with third-party evaluators involves lengthy negotiations, (2) the data extraction process is complicated, and must be scheduled around states’ regular reporting cycles, (3) slow reporting by employers contributes to significant time lags in obtaining UI data, and (4) hourly wage rates cannot be determined, as earnings data is limited to quarterly totals.

Meanwhile, some of our members have begun testing new approaches, including text surveys and social media, to collect retention data from former workers in a more timely and cost-effective way. To help build the evidence base for alternative staffing (and other employment social enterprises), state and federal governments could support efforts to test and refine these methods, possibly through sponsoring pilot studies, toward the goal of applying these practices more widely in our sector and beyond.

About the Alliance: The Alternative Staffing Alliance is a project of The ICA Group, a nonprofit consultancy with a mission to expand economic opportunity and self-determination by supporting initiatives that empower workers, build community assets, and root capital locally through employee ownership. ICA launched the Alliance in 2007 with funding from the Charles Stewart Mott Foundation. Today, this network numbers some 40 organizations operating in 24 states who actively engage to share best practices, benchmark performance, advance the field and collaborate with partners in the employment social enterprise space to advance mutual goals.

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