A study examined why employers use temporary agency and contract company workers and implications of these practices for wages, benefits, and working conditions of workers in low-skilled labor markets. Case studies in manufacturing (automotive supply), services (hospitals), and public sector (primary and secondary schools) industries defined the circumstances under which these workers were likely to be adversely affected, minimally affected, or even benefited by such outsourcing. Adverse effects on compensation were clearest when companies substituted agency temporaries or contract company workers for regular employees on a long-term basis because low-skilled workers in the organization received relatively high compensation and employment and labor law or workers and their unions did not block companies from such substitution. Often, organizations only contracted out management functions or used agency temporaries for brief periods, with little direct effect on in-house, low-skilled workers. Employers often used temporary agencies to screen workers for permanent positions. Because temporary agencies lowered the cost to employers of using workers with poor work histories or other risky characteristics, agencies might benefit these workers by giving them opportunities to try out for positions they might not have had. (Contains 18 references) (YLB)