Manufacturers’ Outsourcing to Temporary Help Services: A Research Update

U.S. manufacturers make extensive use of temporary help services (THS). Although temporary help workers typically work at the client’s worksite, side-by-side direct-hire employees, they are legally the employees of the temporary help agencies and are counted in the temporary help industry in official employment statistics. Information on the number of temporary help workers, along with other types of contract workers, assigned to manufacturing and other industries is not systematically collected. In earlier work, we used data from several BLS household and establishment surveys to estimate the number of temporary help workers assigned to manufacturing from 1989 to 2009. We also estimated the effects of manufacturers’ outsourcing to temporary help services on measured labor productivity in that sector. This research brief updates selected estimates in that paper through 2015. The updated estimates indicate that temporary help workers assigned to manufacturing, expressed as a percent of manufacturing direct-hire employees, increased over the period, although it contracted during the last recession and expanded during the ensuing expansion. Reflecting these changes, the estimates also demonstrate that by not accounting for temporary help workers assigned to manufacturing, the official BLS measures of manufacturing labor productivity understate labor productivity growth during the recession and overstate labor productivity growth during the recovery. Our estimates suggest that, on net, the growth in manufacturing labor productivity was inflated over the 2007 to 2015 period.