Each quarter, IQNavigator analyzes the data from IQNdex and compares the findings on temporary worker bill rates to current market conditions and economic indicators. More detailed analysis often yields a deeper story, as is the case with this report’s first IQNtrospective on how bill rates of temporary jobs respond to market demand more than direct hire employee salaries. The second IQNtrospective explores the impact of the trend of workers moving less frequently for employment.
IQNtrospective 1Q12.1 – Temp Worker Bill Rates Respond to Market Conditions
Comparison of direct hire employee salary trends to temporary worker bill rates reveals that while employee salaries appear to inexorably rise, temp worker bill rates fall and rise with market supply and demand. In the chart below, the Employee Cost line shows an indexed view of employee salary trends (exclusive of benefits) versus the Master IQNdex of temporary labor bill rates. Employee salaries continued to rise throughout the recession and subsequent period of high unemployment. The conclusion is that while companies may release workers, they seldom reduce employee salaries. In fact, institutional momentum drives employee salaries upwards even during a weak business climate.
In contrast, temporary worker bill rates clearly respond to decreased buyer demand and surplus labor supply. The Master IQNdex value fell as the recession deepened, showing that the bottom line rate to firms using temp labor services actually declined during this period. The Master IQNdex stayed roughly level until the job market began to slowly improve in 2011. While the gap between em- ployee salary trends and bill rate trends has narrowed, a difference has persisted over several years. Companies that skillfully manage their contingent labor programs can derive savings by leveraging these market changes. The median contingent worker assignment is four months, providing the buying firm ample opportunities to renegotiate rates.
Employee Cost per Hour (Wages & Salaries) vs. Master IQNdex