How Do Alternative Work Arrangements Affect Income Risk after Workplace Injury?

Alternative work arrangements, including temporary and contract work, have become more widespread. There is interest in understanding the effects of these types of arrangements on employment and earnings risk for workers and the potential for existing social insurance programs to address this risk. We study employment and earnings risk in the context of workplace injuries among temporary and contract workers. We link administrative workers' compensation claims to earnings records to measure the employment and earnings risk posed by workplace injuries, comparing labor market outcomes after injury between temporary and contract workers and direct-hire workers injured doing the same job. We use a triple-difference identification strategy to isolate the effect of alternative work arrangements. We find that temporary workers have significantly lower probabilities of employment post-injury relative to similar direct-hire workers; temporary workers also have more severe earnings losses, which persist for at least three years after injury. This difference in income risk cannot be explained by differences in employment dynamics between temporary and direct-hire workers. We find evidence that the additional earnings losses suffered by temporary workers are offset by workers' compensation benefits, suggesting that the program provides insurance for the incremental risk faced by temporary workers.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at "http://www.nber.org/papers/w25989"