Abstract: Several analysts claim that firms have been using more
flexible work arrangements in order to contain the costly adjustment
of labor to changes in economic conditions. In particular, temporary
help supply (THS) employment has increased dramatically in the last
ten years. However, there is only scant evidence on the industries
that are hiring this type of worker. In particular, some anecdotal
evidence points to the fact that manufacturing industries have
substantially stepped up their demand for THS workers since the
mid-1980s. If this is true, not accounting for this flow of workers
from the service sector to manufacturing may lead to misleading
conclusions about the cyclical and long-term path of manufacturing
employment and hours of work.
We close this gap by providing several estimates of the number
of individuals employed by temporary help supply (THS) firms who
worked in the manufacturing sector from 1972 to 1997. One estimate,
in particular, is based on a new methodology that uses minimal
assumptions to put bounds on the probability that a manufacturing
worker is employed by a THS firm. The bounds rely on readily available
data on workers' individual characteristics observable in the CPS. We
show that manufacturers have been using THS workers more intensively
in the 1990s. In addition, the apparent flatness of manufacturing
employment in the 1990s can be explained in part by this type of
outsourcing from the service sector. Finally, not accounting for THS
hours overstated the increase in average annual manufacturing labor
productivity by 1/2 percentage point during the 1991-1997 period.
Keywords: Outsourcing, contingent workers, adjustment margin, productivity, new economy, structural changes
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