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Manufacturers' Outsourcing to Employment Services

Author

Listed:
  • Matthew Dey

    (Bureau of Labor Statistics)

  • Susan Houseman

    () (W.E. Upjohn Institute for Employment Research)

  • Anne Polivka

    (Bureau of Labor Statistics)

Abstract

We estimate the effects of manufacturers' use of employment services—comprised primarily of temporary help and professional employer organizations—on measured employment and labor productivity in manufacturing between 1989 and 2004. A major contribution of the paper is the construction of panel data on employment by occupation and industry from the Occupational Employment Statistics program. We use these data to document the dramatic rise of production and other manual occupations within the employment services sector and, in conjunction with information from the Contingent Worker Supplements, to estimate the number of employment services workers assigned to manufacturing over the period. Although measured employment in manufacturing declined by 4.1 percent from 1989 to 2000, counting employment services workers assigned to manufacturing, employment in that sector actually rose by an estimated 1.4 percent. Factoring in manufacturers' use of employment services workers does not erase the large declines in manufacturing employment since 2000, but a growing share of manufacturing work in the United States is being performed by employees of staffing agencies. In 2004, employment services workers added an estimated 8.7 percent to direct-hire manufacturing employment, compared to just 2.3 percent in 1989. In addition, we estimate that manufacturers' outsourcing to employment services significantly inflated manufacturing labor productivity measures, accounting for 0.5 percentage points of the annual growth rate from 1989 to 2000 and from 2001 to 2004. Although multifactor productivity measures should adjust for such outsourcing, available evidence suggests that KLEMS, the multifactor productivity measure for manufacturing, does not fully capture the relatively large effects that outsourcing to staffing services has on manufacturing productivity.

Suggested Citation

  • Matthew Dey & Susan Houseman & Anne Polivka, 2006. "Manufacturers' Outsourcing to Employment Services," Upjohn Working Papers and Journal Articles 07-132, W.E. Upjohn Institute for Employment Research.
  • Handle: RePEc:upj:weupjo:07-132
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    References listed on IDEAS

    as
    1. Susan N. Houseman, 2001. "Why Employers Use Flexible Staffing Arrangements: Evidence from an Establishment Survey," ILR Review, Cornell University, ILR School, vol. 55(1), pages 149-170, October.
    2. David H. Autor, 2001. "Why Do Temporary Help Firms Provide Free General Skills Training?," The Quarterly Journal of Economics, Oxford University Press, vol. 116(4), pages 1409-1448.
    3. Abraham, Katharine G & Taylor, Susan K, 1996. "Firms' Use of Outside Contractors: Theory and Evidence," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 394-424, July.
    4. Marcello Estevao & Saul Lach, 1999. "Measuring temporary labor outsourcing in U.S. manufacturing," Finance and Economics Discussion Series 1999-57, Board of Governors of the Federal Reserve System (U.S.).
    5. Lewis M. Segal & Daniel G. Sullivan, 1997. "The Growth of Temporary Services Work," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 117-136, Spring.
    6. Susan N. Houseman & Arne L. Kalleberg & George A. Erickcek, 2001. "The Role of Temporary Help Employment in Tight Labor Markets," Upjohn Working Papers and Journal Articles 01-73, W.E. Upjohn Institute for Employment Research.
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    Cited by:

    1. Faberman, R. Jason, 2017. "Job flows, jobless recoveries, and the Great Moderation," Journal of Economic Dynamics and Control, Elsevier, vol. 76(C), pages 152-170.
    2. Matthew Dey & Susan Houseman & Anne Polivka, 2010. "What Do We Know About Contracting Out in the United States? Evidence from Household and Establishment Surveys," NBER Chapters,in: Labor in the New Economy, pages 267-304 National Bureau of Economic Research, Inc.
    3. Britton Lombardi & Yukako Ono, 2008. "Professional employer organizations: What are they, who uses them, and why should we care?," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 2-14.
    4. Jahn Elke J., 2010. "Reassessing the Pay Gap for Temps in Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 230(2), pages 208-233, April.
    5. Jahn, Elke J., 2008. "Reassessing the Wage Penalty for Temps in Germany," IZA Discussion Papers 3663, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    productivity; manufacturing; outsourcing; measurement; houseman;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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