That's how it's "supposed to work". However, it is being used as a means to manage uncertainty - resolving the "immovable object meeting an irresistible force" situation.
In addition, more temporary labor exists in non-temp lines of work, the less prosperous the economy is at a given time and place. By extension, one could plausibly argue that it also indicates government intervention as well.
Given the above, it's part of why I dislike Obamacare. It completely disincentivizes the search for or providing of work, much less in good faith.
During these crazy days of repressive laws/regulation and the constant threat of being litigated into oblivion, many employers gain a layer of protection via ‘temp’ job agencies or hiring on contractors.
The protection might be there, but it does not come without cost. The good people end up leaving, knowing that they have options elsewhere. Anyone without an alternative gets to know what churn is in the job market.
By the sound of it, such a setup resembles a bad labor union. The dues system exists (wrap/conversion rates, fees to agency), the lack of support by the agency towards the participants, and that it disincentivises productivity towards the minimum required(versus the highest quality).
What happened to the time where employers could generally get along with and inspire their workforce, instead of having to handle them? Those kind of employers (for those that choose that path) could give a sense of pride in their employee's work, even if it paid less.
Much of it has to do with technology, especially anything that is transmittable. Now the potential labor pool is global, which increases labor supply, and thus, exerts downward pressure on wages,
I believe at MBA school now, they may Lobotomize the area of the student's brain that could initiate leadership qualities. (along with realism, mathematics, common sense, and human emotions)