The Rise of the Contract Workforce in US Manufacturing

Research and policy analysis on labor market issues often relies on employment measures that only capture employees of firms. Although prior studies have pointed to high and growing levels of contract labor in some segments of the economy, lack of data has hampered research into the size of this workforce and its broader implications for workers and labor market analyses. We help fill this data gap with a study US manufacturers’ use of contract workers. Using micro data from the Occupational Employment and Wage Statistics program and the Quarterly Census of Employment and Wages, we develop a new method for imputing staffing services workers in core manufacturing occupations to manufacturing industries and other sectors by detailed industry, occupation, and area from 1990 to 2018. We estimate that the share of contract workers in the manufacturing sector’s core occupations rose from 1.7 percent in 1990 to 5.8 percent in 1997. The contract share continued to grow in the 2000s, even as direct-hire employment in manufacturing declined sharply, peaking at 10.0 percent in 2015 before declining slightly. We estimate that the shift to contract workers can explain over 22 percent of the employment decline in core manufacturing jobs from 1990 to 2018 and 10 percent of the employment decline from 1997 to 2018. We find that the share of contract use varies considerably across industries and areas. The time series data we have created on contract use by occupation, industry, and area may help shed light on why firms outsource labor, the implications for workers, and potential biases in some analyses whose labor measures omit contract workers.