Academic journal article Administrative Science Quarterly

Determinants of Employment Externalization: A Study of Temporary Workers and Independent Contractors

Academic journal article Administrative Science Quarterly

Determinants of Employment Externalization: A Study of Temporary Workers and Independent Contractors

Article excerpt


Abraham, Katharine G.

1988 "Flexible staffing arrangements and employers' short-term adjustment strategies." In Robert A. Hart (ed.), Employment, Unemployment, and Labour Utilization: 288-311. London: Unwin Hyman.

Abraham, Katharine G., and Susan K. Taylor

1990 "Firms' use of outside contractors: Theory and evidence." During the past decade, organizations' use of external workers, such as temporary workers, leased workers, and independent contractors has increased tremendously. Belous (1989) reported that one quarter of all U.S. workers in 1988 were nonpermanent or part-time employees. The kind of work performed by external workers has also changed. Applebaum (1987) noted that the majority of externalized workers no longer perform unskilled clerical tasks; many are professionals, such as nurses or accountants. As the externalized workforce becomes more numerous and diverse, it is important to explore why firms employ these types of workers.

Studying the externalization of the workforce is also important because an organization's employment practices affect both individual attainment and the distribution of rewards in organizations. Temporary jobs typically lack the job security, fringe benefits, and possibilities for advancement that are available to incumbents of permanent jobs (Mangum, Mayall, and Nelson, 1985; Applebaum, 1987). Extensive reliance on temporary workers may create two classes of employees: permanent workers with relatively secure, high-paying employment and temporary workers who have only sporadic, low-paying work. Barnett and Miner's (1992) analysis of promotion patterns at a utility company demonstrated that hiring temporary workers increased mobility rates for the firm's core, permanent workers. Thus, externalization may actually increase inequality in the distribution of rewards, which can have many important consequences, including lowered productivity and increased conflict inside organizations (Dickens, Wholey, and Robinson, 1987; Harrison and Bluestone, 1990; Pfeffer and Davis-Blake, 1992) and increased conflict in society (Blau and Schwartz, 1984; Osterman, 1988). Because incumbents of temporary jobs are often members of groups that have little power in organizations (i.e., women, nonwhites, the very young), firms may experience little pressure to change the inequalities generated by externalization.

To date, empirical research on the use of external workers has been primarily descriptive (see Pfeffer and Baron, 1988, for a review), reporting statistics on the demographic characteristics of external workers (Howe, 1986; Cohen and Haberfeld, 1993), the kinds of jobs staffed by external workers (Sugarman, 1978; Mangum, Mayall, and Nelson, 1985; Howe, 1986), or the industries and regions in which they are employed (Gordon and Thal-Larsen, 1969; Mayall and Nelson, 1982; Mangum, Mayall, and Nelson, 1985). Other studies have gone beyond descriptive statistics in explaining the use of external workers, but several of these studies have significant limitations.

A few studies have attempted to predict the use of temporary workers. Using a survey of 882 firms, Mangum, Mayall, and Nelson (1985) found that use of three types of temporary workers (workers from temporary-help service agencies, limited duration hires, and call-ins) was affected by firm size, growth or decline in firm employment levels, firm benefit levels, industry, and the occupations in which the workers were employed. Their analyses focused on bivariate relationships between particular independent variables and the use of temporary workers, however, and it is not clear whether these relationships would hold in a more complex multivariate model. Using a survey of over 400 employers, Abraham (1988) found that use of temporary workers was affected by the level of unionization among the firm's nonexempt workforce and by the amount of variation in demand for the firm's products. Barry and Crant (1990), using a survey of 153 growing firms, found that use of temporary workers was affected by the proportion of female workers in the firm, the difficulty of recruiting employees, and a variety of human resource practices, such as flexible hours and promotion practices for supervisory personnel. …

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