Monthly Labor Review August 1997 3

Flexible Labor

Flexible Flexible Flexible Flexible labor: restructuring restructuring restructuring restructuring

the American work force the American work force

Trends in employment, occupations,

output, and input provide evidence

that firms have increased their purchases

of services relative to directly hiring labor

Angela Clinton Many businesses are redefining the

structure of their firms by moving toward flexible staffing. In these firms,

persons who formerly were hired directly are being replaced with purchases of services. Such

market-mediated arrangements could include

outsourcing or contracting out of various functions, utilizing temporary workers, or even leasing an entire work force to meet all labor needs.

To the extent that this is happening, some employment that, in the past, was counted in the industry of the business site is now being counted

in the services industry. The result distorts time

series and can lead to faulty analysis about job

trends in an industry. This has been of particular

concern in the manufacturing industries.

Much research has been done to explain the

shift from direct hires of permanent workers to

contingent workers. Flexible work arrangements

have been used as a means to meet fluctuations in

demand for the firm’s product, to supplement staff

due to absences from work, and to reduce labor

costs.1 Some studies indicate that firms purchase

services to avoid unionism.2 Other studies cite

increased competition and profit maximization as

factors that lead to increased use of flexible staffing arrangements.3 Still others show that more

companies are taking advantage of greater economies of scale achieved by service firms or the

specialized skills they offer.4

This article focuses on business services and

engineering and management services, two

industry groups that provide flexible labor

services and have been adding employees more

rapidly than the overall U.S. nonfarm economy.5

(See table 1.) Occupational employment and

output of these service industries, as well as inputs

of business services and engineering and management services to the production process of

other industries, will be analyzed to see whether

their trends provide information that might be of

value in future research regarding the causal

factors in the shift toward market-mediated work

arrangements.

Employment trends

Employment in business services has grown by

an astounding 6.9 percent annually since 1972

and by 5.8 percent per year since 1988.6 Although jobs in engineering and management services expanded at about half that pace, 3.1 percent, this was still twice as fast as in all industries

combined. In fact, of the nearly 14.3 million jobs

added to the economy from 1988 to 1996, more

than 22 percent were in the business services and

engineering and management industry groups.

Table 2 shows employment levels and growth

rates for the total nonfarm economy, these major

industry groups, and their component industries.

Nearly all of the industries in business and engineering and management services have experienced employment gains that were stronger than

that of the total U.S. economy.

Employment in business services. Business services is composed of eight industries; four of

these account for more than 85 percent of total

Angela Clinton is an

economist in the

Division of Monthly

Industry Employment

Statistics, Bureau of

Labor Statistics.
4 Monthly Labor Review August 1997

employment in this major group. (See chart 1.) Employment

in each of the business services industries grew more rapidly

than that of the total nonfarm economy, with the exception of

advertising. Expanding at more than 5 times the pace of the

total economy since 1972, personnel supply services (11.4

percent) and computer services (10.7 percent) achieved the

strongest average annual growth rates in business services.

(See chart 2 and table 2.)

Personnel supply services employed 2.6 million workers at

the close of 1996 and is the largest employer in business services. Help supply services, which includes temporary help

and the staff of employee leasing establishments, accounts

for nearly 90 percent of the employment in personnel supply

services, as well as for virtually all of the employment

growth.7 This was the most rapidly expanding industry in both

business services and engineering and management services

between 1972 and 1996.

Growth in computer services was spurred on by new and

changing technology.8 Although it grew more rapidly prior to

1988, employment in this business services industry increased

at a rate second only to personnel supply services between

1972 and 1996.

Three computer services industriescomputer programming, prepackaged software, and miscellaneous computer

services, which includes computer services that are not classified elsewhere by the Standard Industrial Classification system, such as computer consulting––account for about threefourths of this growth over the 1988–96 period and expanded

their share of employment from 42 percent to 56 percent of

all industries in computer services. In fact, employment in

each of these three computer services industries grew by more

than 10 percent annually over the 1988–96 period, while employment in computer integrated systems design and in information retrieval services grew about half this pace. The latter

industry, which includes services to access the internet, expanded in 1995 with an astounding 18.5-percent employment

increase over the prior year, followed by a 20.2-percent increase the next year.9 By the close of 1996, there were more

than 1.2 million employees working in the computer services

industries.

Miscellaneous business services establishments, which provide services such as guards, security systems, news syndicating, and photofinishing, contributed almost 60,000 jobs per

year to nonfarm payrolls since 1988. Since 1972, two other

business services industriesservices to buildings and mailing, reproduction, and stenographic servicesadded to

worker totals at more than twice the rate of the nonfarm

economy. However, since 1988, the average number of jobs

added per year was 15,000 in services to buildings and 11,000

in mailing, reproduction, and stenographic services.

Employment in engineering and management. Engineering and

management services employed about 2.9 million people, in four

industries, at the close of 1996. (See chart 3.) Employment in

this major industry group has grown at a pace about 2 times that

for all nonfarm establishments since 1988. And, like business

services, employment trends vary by industry.

Management and public relations services stands out in

terms of its rate of employment growth and the number of

jobs added per year. This industry accounted for nearly 60

percent of all the jobs added by engineering and management

services since 1988, and expanded at over 4 times the rate of

the nonfarm economy. (See chart 4.) Three component

industriesmanagement services (SIC 8741), management

consulting services (SIC 8742), and business consulting, not

elsewhere classified (SIC 8748)accounted for 90 percent of

employment growth in management and public relations.

Engineering and architectural services, as well as accounting, auditing, and bookkeeping services added jobs at about

twice the pace of the economy between 1972 and 1996. However, the rapid growth occurred during the early years of this

period and, since 1988, employment growth in these industries has slowed to about the same rate as that for all nonfarm

establishments.

Employment in business services and engineering and management services grew more rapidly than that of the total nonfarm economy. Logically, one might expect that industries

which purchase services rather than hire employees would be

losing workers in those occupations that are employed intensively by the service industries. And, conversely, the proportion of all workers in occupations employed intensively in the

service industries would be rising in those industries. The next

section closely examines these industries by analyzing occupational trends.

Occupational employment trends

Occupational shifts became apparent in business services and

engineering and management services as employment growth

Employment growth in business services and

engineering and management services as a

percent of the total nonfarm economy,

1972–96

Industry group Percent of employment Percent of job growth

1972 1988 1996 1972– 88 1988– 96

Business services ..... 2.0 4.4 6.1 10.0 18.3

 Personnel supply .... .3 1.3 2.2 3.6 9.1

Engineering and

management ............ (1

) 2.1 2.4 (1) 4.3

1 Series not available.

Table 1.
Monthly Labor Review August 1997 5

Chart 1. Employment distribution in business services, 1996 annual averages

1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996

0

500

1,000

1,500

2,000

0

500

1,000

1,500

2,000

Total nonfarm Personnel supply services Computer services

1972 = 100 1972 = 100

Chart 2. Employment index of total nonfarm, personnel supply, and computer services, 1972 to 1996

NOTE: "Other" includes advertising services, consumer credit and collection, mailing and related services, and miscellaneous equipment

rental.

Miscellaneous

Other

Computer 

 services

Building 

 services

Personnel supply
6 Monthly Labor Review August 1997

Employment levels and growth in the total nonfarm economy, business services, and engineering and

management services, 1972–96

Number Percent Number Percent

 Total nonfarm .................................. 73,675 105,209 119,523 1,910 2.1 1,789 1.6

Business services .................................... 1,491 4,638 7,254 240 6.9 327 5.8

Advertising ............................................ 122 229 242 5 3.0 2 .7

Credit and collection ............................. 76 93 127 2 2.2 4 4.0

Mailing and related services ................. 82 208 297 9 5.6 11 4.6

Services to buildings ............................. 336 780 897 23 4.2 15 1.8

Miscellaneous equipment rental ............ (1

) 180 238 (1) (1) 7 3.6

Personnel supply .................................. 214 1,350 2,646 101 11.4 162 9.0

Help supply ....................................... (1) 1,126 2,341 (1) (1) 152 9.8

Computer services ................................ 107 673 1,208 46 10.7 67 7.6

Miscellaneous business services .......... (1

) 1,125 1,600 (1) (1) 59 4.5

Engineering and management .................. (1) 2,230 2,846 (1) (1) 77 3.1

Engineering and architectural .............. 339 730 839 21 3.9 14 1.8

Accounting ............................................ 204 500 566 15 4.4 8 1.6

Research, development, and testing ..... (1

) 492 569 (1) (1) 10 1.8

Table 2.

in the two industry groups outpaced that of the total nonfarm

economy.10

Occupational trends in business services. Approximately onefifth of all wage and salary workers in the economy were employed in administrative support occupations, including clerical,

in 1995. While employment in this occupational group increased

at a rate slightly below that of all wage and salary workers, business services hired about 1 in every 4 new administrative support workers and increased its share of these employees from 5

percent in 1983 to about 9 percent or 2.1 million in 1995. (See

table 3.) Personnel supply establishments employed nearly

half of the workers in administrative support occupations

within this industry group.

Similar trends are evident in the helpers, laborers, and material movers, hand (helpers) occupational group, which accounted for about 4 percent of all wage and salary workers in

1995. Business services hired about 44 percent of all new helpers since 1983 and more than doubled its share of these workers to nearly 11 percent. More than three-fourths of these helpers in business services were employed by personnel supply

establishments toward the end of the period.

Employment of cleaning and building services occupations,

except private household workers (cleaners), increased at

about the same rate as that for all wage and salary workers

from 1983 to 1995. However, half of the net employment gains

were in business services, which increased its portion of cleaners by 7 percentage points over this time. More than 90 percent of the cleaners in business services were employed

through establishments which provide services to dwellings

and other buildings.

The dependence of business on personnel supply firms for

lower skilled workers such as administrative support workers

and helpers is demonstrated by Katharine G. Abraham who

found that firms rely more heavily on temporary help supply

workers in occupations such as office and clerical workers,

for which firm-specific skills are generally not required.11

Two highly skilled occupational groups, computer engineers, scientists, and systems analysts (systems analysts) and

computer programmers, had strong gains in wage and salary

employment growth from 1983 to 1995. Employment of systems analysts increased by 34 percent and that of programmers increased by almost 300 percent over the same period.

Business services accounted for more than 1 in 3 systems analysts and more than 8 in 10 programmers added since 1983. In

1995, about 80 percent of the systems analysts and proIndustry

Average annual growth

1972 1988 1996

Employment

(thousands)

1972–96 1988–96

Management and public relations ......... (1) 508 873 (1) (1) 46 7.1

1 Not available.

NOTE: Employment levels and average annual numbers for growth are in

thousands.

Average annual number growth is the difference between the beginning and

the end of the period divided by the number of years.

 Average annual percent growth = ( ) x

x

n i

i

i i

n

+

∑ −

− ∗

1 1

100 .
Monthly Labor Review August 1997 7

Chart 3. Employment distribution in engineering and management services, 1996 annual averages

Chart 4. Employment indexes for total nonfarm and management and public relations services, 1988–96

1988 = 100 1988 = 100

1988 1989 1990 1991 1992 1993 1994 1995 1996

100

120

140

160

180

200

100

120

140

160

180

200

Management and public relations

Total nonfarm

0 0

Engineering and architecture

Management

and public relations

Research, 

 development, 

 and testing

Accounting
8 Monthly Labor Review August 1997

grammers in business services worked in the computer services industry.

While occupational evidence shows that business services

added proportionately more workers in occupations key to

personnel supply services, computer and data processing

services, and services to buildings, occupational data for key

occupations in other business services industriesartists and

commercial artists, bill and account collectors, and photographers and camera operatorsdo not exhibit this transition.

Occupational trends in engineering and management

services. Nearly 3 percent of all wage and salary workers

were employed in managerial and administrative occupations

(managers) in 1995, up from 2 percent in 1983. (See table 4.)

Employment of managers in the engineering and management

industry grew at more than 3 times the rate of all wage and

salary managers, expanding by about 6.5 percent per year

from 1983 to 1995. About two-thirds of the managers in the

engineering and management industry were specifically in

management and public relations businesses at the end of this

period.

Engineering and management services employed about 18

percent of all engineers in 1995, with nearly all of these workers in two component industriesengineering and archi-tectural

services (74 percent) and research, development, and testing

services (25 percent). The engineering and management

industries increased their share of engineers by 5 percentage

points since 1983. In fact, the increase of 70,000 engineers in

engineering and management services more than compensated

for a net loss of 6,000 engineers in other industries. Similar

trends are evident for engineering and science technicians and

technologists, with engineering and management services

accounting for 4 out of every 5 new engineering positions.

Percent Percent Percent Percent Percent of workers workers workers workers workers in various various various various various business- business- business- business- businesssupport occupations, employed in business

services industry, 1983 and 1995

1983 1995

Administrative support,

including clerical ......................... 2,135,266 5 9

Communications equipment

operators .................................... 62,607 13 19

Computer operators and

peripheral equipment

operators .................................... 66,258 15 23

Mail clerks and messengers ......... 56,333 16 22

Records processing

occupations ................................ 300,274 4 9

Secretaries ................................... 321,587 5 10

Typists and word processors ........ 154,453 11 24

Helpers, laborers, and material

 movers, hand ............................. 525,082 4 11

Cleaning and building services

occupations ................................ 801,476 17 24

Computer engineers, scientists,

and systems analysts ................. 233,558 18 29

Computer programmers ................ 212,946 24 40

NOTE: Data are for wage and salary workers only.

Table 3.

Percent of various professional and

managerial occupations employed in the

engineering and management services

Percent

Managerial and administrative ....... 210,783 2 3

Engineers ...................................... 232,058 13 18

Engineering and science

technicians ................................. 126,821 9 14

Industry shifts in occupational employment

While occupational data show that business services and engineering and management services increased their use of several

key occupations more rapidly than did all industries combined,

the data also can be used to show which industries may be giving up these occupations. Shift-share analysis will be utilized to

examine changing employment trends by industry group.12

This application of the shift-share technique breaks industry employment into three componentsnational wage and

salary share, occupational mix, and occupational share. Table

5 shows wage and salary employment change in each industry

division along with the division’s shift-share components.13

The national share shows what employment would have been

had the industry grown at the rate of all industries combined.

Employment in an industry is growing more rapidly than the

national average when wage and salary employment change

is greater than the corresponding national share. Business services, for example, would have increased by only one-fifth of

the actual employment gain from 1983 to 1995.

The occupational mix shows how industry employment was

affected by the overall change in occupations, relative to the

average change for all occupations. A negative occupational

mix implies an industry with higher concentrations of declining occupations. The occupational mix statistics in table 5

show that the goods-producing industries, along with transportation and public utilities, government, and engineering and

management services, had relatively more workers employed

in occupations that were decreasing across all industries. Most

of the service-producing industries, including business services, had higher concentrations of expanding occupations.

However, the occupational mix effects were quite small when

compared to total wage and salary employment change in the

corresponding industry.

Table 4.

Occupational group

Percent 1995

 employment

1995

employment

1983 1995

industry, 1983 and 1995

Occupational group
Monthly Labor Review August 1997 9

The occupational share component shows industry employment change due to the difference between an industry’s occupational changes and the growth or decline of those occupations across all industries. Positive occupational shares indicate that the industry had larger concentrations of occupations that were increasing more rapidly than the corresponding national occupational levels. Changes in the number of

administrative support workers in business services best illustrates this point. The growth of occupational share in business services (3,408 workers) resulted, in part, from a 124-

percent increase in the number of administrative support

workers in business services, compared with only a 26-percent increase for those workers across all industries, along

with a high concentration of those workers.

The rapid rise in employment for both business services

and engineering and management services coincides with a

greater share of the occupations they employ. More than threefourths of employment change in business and 43 percent of

job growth in engineering and management services represent increasing occupational shares. Three other industry

groupsconstruction, retail trade, and services, excluding

business services and engineering and management

serviceshad relatively small increases in employment that

were related to their occupational shares, while the remaining

industries had negative shares. Manufacturing stands out, with

the largest negative impact due to occupational share. In other

words, employment in occupational groups in manufacturing

was not rising as rapidly or was falling more rapidly than the

corresponding national averages.

Share indexes based on occupational ratios for the different occupations and industries may identify occupations that

have had a negative impact on employment and, therefore,

explain which industries may be replacing employees with

the purchase of services.14 Table 6 shows share indexes for

selected occupational groups and industries. Share indexes

greater than 1 indicate an occupational group growing faster

in the selected industry than the national average for that occupation, while those less than 1 are growing at a slower rate

than average.

Occupational shifts like those of cleaning and building services workers are exactly what one would expect when businesses subcontract for the services that those workers perform. Business services, which includes services to buildings

and other dwellings, increased its number of cleaners more

rapidly than the national average from 1983 to 1995. Every

other industry group had share indexes less than 1, indicating

that their change in wage and salary cleaning personnel was

below the average for all industries.

Occupational employment in business services was growing

more rapidly in 5 of the 8 specific occupational groups as well

as the “all other” category. The greatest strengths for this industry were in the lower skilled occupationsadministrative support, cleaning, and helpersin which all or nearly all other industries had slower than average growth.

Engineering and management services had better than average growth in all but two of the occupations studied and

Components of change in wage and salary employment by industry groups, 1983–95

[Numbers in thousands]

Components

National share Occupational mix Occupational share

Business services ....................................................... 4,420 961 51 3,408

Engineering and management services ...................... 606 382 –36 260

Agriculture ................................................................... 277 480 4 –207

Mining .......................................................................... –372 275 –1 –646

Construction ................................................................ 1,211 1,139 –37 109

Manufacturing1 ............................................................. 38 5,318 –146 –5,134

Industrial machinery and equipment ........................ 7 592 –9 –576

Electronic and other electrical equipment,

Instruments and related products ............................. –233 777 –46 –964

Transportation equipment ........................................ 54 499 –25 –420

Transportation and public utilities ................................. 1,207 1,431 –19 –205

Wholesale trade ........................................................... 1,128 1,525 4 –400

Retail trade .................................................................. 5,585 4,498 61 1,026

Finance, insurance, and real estate1 ............................ 1,364 1,577 50 –263 

Depository and nondepository institutions ............... 192 663 13 –484

Services, except business services and engineering

and management ..................................................... 9,736 6,793 52 2,892

Health services ........................................................ 3,231 2,049 22 1,160

Government ................................................................. 1,535 2,357 –3 –819

1

 Includes other industries not shown separately.

Table 5.

Industry division Wage and salary

employment change
10 Monthly Labor Review August 1997

tended to show stronger performance in the higher skilled

occupations.

Results are mixed in the other industries shown in table 6.

Nearly all of the divisions added lower skilled occupations at

slower rates than the national average, while the trends were

mixed in the higher skilled occupations. Services, excluding

business services and engineering and management, appeared

to be the anomaly and had stronger than average growth in

most of the occupational groups. Nevertheless, its share index was substantially lower than business services for 7 of

the 9 occupational groups, and was lower than that for engineering and management services for managerial and computer occupations.

Industry output

Industry output trends reflect employment growth, especially

in business services and engineering and management services. Output increased at a more rapid pace in these industries than it did for all industries. (See table 7.) Real industry

output for the total economy grew, on average, 2.4 percent

annually from 1972 to 1994; over the same period, business

services and engineering and management services grew more

quickly. 15

Business services output. Averaging 5.8 percent annually,

the rate of change for output in the business services industry

group was more than twice that for the total economy. The

more rapid advances occurred in the late 1970’s and late

1980’s. Four industry groups were responsible for the strong

output growth in this major group: computer services, personnel supply services, services to buildings, and miscellaneous business services combined with consumer credit and

collection services and mailing, reproduction, and stenographic services.

Output in computer services, with annual increases of 11

Wage and salary employment share indexes by industry division and occupational group, 1983–95

Business services ..... 1.78 1.43 1.60 1.62 1.06 1.39 2.52 1.83 1.88

Engineering and

management

services ................. 1.10 .64 1.68 1.25 1.48 1.36 1.00 1.51 1.03

Agriculture ................. 1.29 .83 .15 .28 .52 1.96 .71 1.07 .89

Mining ........................ .45 .54 .24 .46 .75 .53 .46 .45 .48

Construction .............. 1.06 .48 .62 .55 1.33 .75 .97 1.36 1.00

Manufacturing1 ........... .75 .59 1.01 .66 .93 .89 .80 .81 .78

Industrial machinery

and equipment ...... .69 .54 1.40 .58 .82 .78 .91 .84 .78

Electronic and other

electrical equipment,

Instruments and

related products .... .66 .50 1.34 .57 .96 .86 .67 .80 .69

Transportation

equipment ............. .70 .53 .87 .72 .84 .98 .94 .77 .81

Transportation and

 public utilities ......... .91 .89 .82 .70 .82 .84 1.15 .99 .98

Wholesale trade ......... .90 .75 .68 .63 1.16 1.56 .95 .89 .97

Retail trade ................ .94 .88 1.66 1.27 1.17 1.24 .96 .75 1.11

Finance, insurance,

and real estate1 ...... .93 .91 .82 .98 .80 1.13 .62 1.03 1.00

Depository and

 nondepository

 institutions ............ .82 .63 .66 .71 .70 1.26 .56 .74 1.02

Services, except

 business services

and engineering

and management .. 1.16 .98 1.03 .83 1.80 1.37 1.40 1.22 1.07

Health services ........ 1.22 .85 1.16 1.07 1.02 1.30 .95 1.27 1.12

Government ............... .89 .97 .65 .76 .98 1.01 .91 .98 .92

Table 6.

Occupation

Helpers,

laborers,

and

material

movers

Engineers

Managerial

and

administrative

Engineering

and

science

technicians

Cleaning

and

building

services

occupations

Computer

programmers

Computer

engineers,

scientists,

and

systems

analysts

Administrative

support,

including

clerical

All other

occupations

1

 Includes other industries not shown separately.

NOTE: An occupational share index greater than 1 represents faster than average occupational growth; a value less than 1 represents slower than average

growth.
Monthly Labor Review August 1997 11

percent, was the most rapidly growing industry in business

services from 1972 through 1994. While changes in output

indicate that more computer services were being purchased,

output growth has slowed over time.16

Personnel supply services, which has help supply services

as its major component industry, follows computer services

in terms of output growth, with an average 9.5-percent annual

rate of expansion. This industry differs slightly from computer services, in that the 1980s was the period of the most

rapid growth, averaging 14 percent per year with an astounding 45-percent increase from 1982 to 1983the first year of

recovery from the 1982 recession. Demand for employee leasing services and alternative work arrangements helped spur

output as firms responded to the Employee Retirement Income Security Act of 1974 (ERISA) and the Tax Equity and

Fiscal Responsibility Act of 1982 (TEFRA).17

Three combined industries—miscellaneous business services, consumer credit and collection services, and mailing,

reproduction, and stenographic services—experienced continuous gains in output since 1972, except during recessionary

periods. And, these industries tended to expand more rapidly

than the total U.S. economy.

Services to buildings also had faster output expansion than

the overall economy, 3.2 percent annually from 1972 through

1994. This industry, like miscellaneous business services,

enjoyed its strongest performance during the 1980s, yet was

weaker than the overall economy in the 1990s.

Output trends of five business services industriescomputer

services, personnel supply services, miscellaneous business services, consumer credit and collection, and mailing and related

servicesindicate expanded use of those services because

their output grew more rapidly than the U.S. economy

throughout the study period. Output trends of services to

buildings are less clear due to recent weakness.

Engineering and management services output. Real output

of the engineering and management services industries also

grew faster than that of the overall economy, averaging 3.8

percent per year from 1972 to 1994. The greatest gains occurred during the first half of this period. Three industries

helped boost output: management and public relations services, engineering and architectural services, and research and

testing services.

Management and public relations services exhibited the

strongest output trend, averaging 5.9 percent annually. Annual changes in output varied widely in this industry, from

declines of as much as 12 percent to increases of up to 27

percent. (See chart 5.)

The output trend in engineering and architectural services

was quite strong during the 1970s, while its performance was

more similar to that of the total economy during the 1980–94

period. (See chart 6.) Output in this industry expanded at more

than 5 times the pace of that in the construction sector, an

industry often associated with engineering services.

Research and testing services experienced erratic changes

in real output, but managed to average 4-percent annual

growth from 1972 to 1994.

Output grew faster than total U.S. output in two industries

within engineering and management servicesmanagement and

public relations services and research, development, and testing. These differences indicate increasing reliance on producers

of these services, while output trends in engineering and architectural services are less clear due to recent slowing.

Logically, one would expect output to increase faster in the

services industries if firms are procuring these services instead of directly hiring staff to perform the work. Likewise,

the percent of these services as inputs to production should be

increasing in industries that utilize these services in place of

employees.

Inputs to production

As output of business services and engineering and management services expanded faster than that of the whole economy,

so too did the use of these services as inputs to production for

all industries. In an employer survey, Katharine Abraham

found that more than half of all respondents contracted for at

least one type of business or administrative support service.18

Over the 1977–93 period, U.S. firms from nearly all industrial divisions increased their consumption of these services

Output growth in business services and

engineering and management services,

1972–94

[In million of 1987 dollars]

Percent

annual

growth

All industries ............................. $5,615,793 $9,443,929 2.4

Business services ........................... 82,663 283,160 5.8

Advertising services ...................... 13,095 14,763 .5

Services to buildings ...................... 8,945 18,019 3.2

Miscellaneous equipment rental

and leasing .................................. 14,652 16,585 .6

Personnel supply services ............. 5,616 41,661 9.5

Computer and data processing

 services ...................................... 8,943 88,628 11.0

Miscellaneous business services,

consumer credit and collection

services, and mailing and related

services ...................................... 31,413 103,502 5.6

Engineering and management

services ....................................... 88,470 202,822 3.8

Engineering and architectural

services ...................................... 23,043 64,625 4.8

Accounting, auditing, and other

services ...................................... 31,246 36,753 .8

Research and testing services ....... 16,504 39,139 4.0

Management and public relations .. 17,678 62,305 5.9

Table 7.

Industry 1994

output

1972

output
12 Monthly Labor Review August 1997

Percent change in real output in management and public relations serices, 1972–1994

Indexes of real output in engineering and architectural services and construction, 1972–1994

1972 = 100 1972 = 100

1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994

100

150

200

250

300

350

100

150

200

250

300

350

Engineering and architectural services

Construction

0 0

Percent Percent

1973 1976 1979 1982 1985 1988 1991 1994

–0.2

–0.1

0

0.1

0.2

0.3

–0.

–0.

0

0.1

0.2

0.3

20

Chart 6.

1

–20

10

–10

30

0

20

10

0

–10

–20

20

30

Chart 5.
Monthly Labor Review August 1997 13

as a percent of all production inputs and as a percent of value

added, which includes compensation of employees, indirect

business tax and nontax liability, and other value added, except intermediate commodity inputs.19

Trends in Federal contract actions illustrate the growing

dependence on business services and engineering and management services as inputs to production. The U.S. Government is the largest purchaser of goods and services in the

world. The total number of contract actions increased by more

than a third since 1989, while the total dollar value of contracts was up only slightly. Business services and engineering

and management services, combined, accounted for nearly 30

percent of the 446,121 contract actions and captured nearly

31 percent of total contract dollars in 1995, up from 25 percent and 23 percent, respectively, in 1989. (See table 8.) Thus,

at least one major purchaser of goods and services, the U.S.

Government, relies heavily on contracting arrangements, and

that use is growing.

Business services inputs to production. In 1993, inputs of

business services accounted for 6.5 percent of value added

for all industries, up more than 2 percentage points from 1977.

(See table 9.) In other words, inputs of these services were

expanding more rapidly than total value added, which includes

employee compensation. The largest consumer of business

services in 1993 was the services division, and business services were utilized more intensively, relative to value added,

by this division than by any other industry division. Nevertheless, finance, insurance, and real estate; transportation and

public utilities; and government had more than doubled their

use of business services inputs relative to value added from

1977 to 1993. Business services inputs to depository and

nondepository institutions, holding, and investment offices

rose to nearly 60 percent of value added by 1993, with computer services accounting for about half of those inputs.

Seven of the eight business services were used more intensively across all industries over this period: personnel supply

services, computer services, miscellaneous business services,

consumer credit and collection services, mailing and related

services, advertising services, and services to buildings.

Personnel supply services inputs as a percent of value added

to all industries expanded by a factor of 4 from 1977 to 1993.

All of the major industry divisions and nearly every industry

within each division increased their use of personnel supply

as a percent of value added over this time frame. In her 1988

study, Abraham found that 77 percent of respondents in a survey of firms utilized workers from temporary help agencies.20

The largest relative increase took place in finance, insurance,

and real estate, with an eightfold increase of personnel supply

services as a percent of value added.

Total inputs of computer services as a percent of value

added increased for most of the industrial divisions from 1977

to 1993. The finance, insurance, and real estate industries

exhibited the greatest increase in intensive use of these inputs

over this time. In fact, computer services inputs represented

more than 18 percent of value added in the finance industries.

All of the major divisions except agriculture increased their

relative dependence on miscellaneous business services, consumer credit reporting and collection services, and mailing

and related services; this was especially true of the finance

and insurance industries, which increased these service inputs by 6 times and 9 times the 1977 percentages of value

added, respectively.

Input trends for advertising services vary across industries.

Since 1977 manufacturing reduced its dependence on advertising inputs relative to value added, while retail trade increased

its relative use of this service only slightly. By contrast, transportation and public utilities and finance, insurance, and real

estate industries doubled their use of advertising services relative to value added over the same period.

The use of services to buildings inputs as a percentage of

value added increased only slightly from 1977 to 1993. In

addition, relative utilization of this service expanded more

rapidly in finance, insurance, and real estate industries than in

Federal Federal Federal Federal Federal procurement procurement procurement procurement procurement actions actions actions actions actions and dollars dollars dollars dollars dollars for selected selected selected selected selected industries, industries, industries, industries, industries, 1989–95 1989–95 1989–95 1989–95 1989–95

Engineering Engineering

 and and

 management management

Percent of total actions Percent of total dollars

1989 ....................................... 326 7.4 17.5 168,695 3.6 19.2

1990 ....................................... 368 7.6 17.4 171,301 3.8 19.7

1991 ....................................... 438 7.8 16.6 189,602 4.2 20.0

1992 ....................................... 502 7.2 16.3 177,786 5.0 22.6

1993 ....................................... 445 8.4 18.7 178,367 5.1 24.1

1994 ....................................... 430 9.5 19.2 174,688 5.5 24.9

1995 ....................................... 446 9.7 19.8 180,852 5.8 25.1

SOURCE: Federal Procurement Report, issues 1989–95 (Washington, U.S. General Services Administration).

Table 8.

Year Total actions

(thousands)

Business

services

Business

services Total

dollars

(million)

,
14 Monthly Labor Review August 1997

all other industrial sectors.

The analysis of inputs to production shows that firms increased their dependence on business services across most of

the industries. Although not always the largest consumer of

these services, finance, insurance, and real estate increased

its use of the various business services relative to value added

more than did any other industry division.

Engineering and management inputs to production. Engineering and management services, accounting for 2.1

percent of total value added in 1977, increased its share to

2.8 percent in 1993. Although services consumed the

greatest amount of engineering and management services

inputs, construction, which was the second largest consumer, utilized these inputs more intensively than all other

industries, 13.4 percent of value added in 1993. (See table

9.) Total industry inputs of three services in this major

group increased as a percent of value added: engineering

and architectural services, management services, and research and development.

Engineering and architectural services were used more

intensively in nearly all of the major industry divisions

from 1977 to 1993. At the end of this period, engineering

and architectural inputs amounted to 12.3 percent of value

added in construction, up from 7.7 percent in 1977.

Use of management services as inputs to total production nearly doubled as a percentage of value added from

 Business services and engineering management inputs to production for major industry divisions as a

percent of value added, 1977 and 1993

1977 1993

Engineering Engineering

Business and Business and

services management services management

services services

 All industries ................................................................. 4.4 2.1 6.5 2.8

Agriculture ............................................................................. 1.2 1.6 .7 .5

Mining .................................................................................... .7 .5 .7 .7

Construction .......................................................................... 2.3 8.6 2.8 13.4

Manufacturing1 ....................................................................... 5.2 1.3 5.5 1.5

Industrial machinery and equipment .................................. 3.4 .3 3.1 .8

Electronic and other electrical equipment,

Instruments and related products ..................................... 5.9 .2 5.1 1.1

Transportation equipment ................................................... 5.5 .2 6.9 .9

Transportation and public utilities ........................................... 1.8 .9 3.6 1.5

Wholesale trade ..................................................................... 10.2 2.1 9.2 1.5

Retail trade ............................................................................ 8.2 1.6 9.9 1.8

Finance, insurance, and real estate1 ...................................... 2.8 .9 7.8 2.4

Depository and nondepository institutions,

 holding, and investment offices ........................................ 8.5 .2 59.8 20.0

Services ................................................................................ 8.3 5.2 11.6 5.3

Health services ................................................................... 4.3 .1 10.1 1.5

Government ........................................................................... .1 .2 .3 .6

1

 Includes other industries not shown separately.

Table 9.

1977 to 1993, and nearly all industry divisions saw this

ratio rise for these services. Finance, insurance, and real

estate, which consumes over one-fifth of all management

services inputs, more than tripled its use of these services

as a percent of value added over this period. Increased

demand was mainly in the finance and insurance sectors.

Inputs of research and development increased slightly

as a share of value added from 1977 to 1993, and more intensive use was apparent in most of the major divisions.

In terms of value added, the services division increased

its share of research and development proportionately

more than the other industrial divisions.

Thus, use of the professional services in engineering

and management services increased relative to value added

by most of the industrial sectors. The construction industry exhibited the strongest gains in use of engineering and

architectural services, while finance, insurance, and real

estate demonstrated similar increases in management and

public relations services. Although changing usage was

less intense, services showed signs of heightened use of

research and development services.

Analogous to the rapidly expanding employment and

output trends in business services and engineering and

management services, more intensive use of these services

as inputs to the production process shows that firms increasingly are purchasing services instead of directly employing labor.

Industry division
Monthly Labor Review August 1997 15

Who’s hiring contingent workers?

Trends in employment, occupations, output, and input can

shed light on the shift toward contingent workers and away

from direct hire of permanent workers. Four industries within

business services experienced positive changes in all four of

these factors: personnel supply services, computer services,

mailing and related services, and services to buildings. (See

exhibit 1.) Positive trends in all four factors also occurred in

engineering and architectural services (for which occupational

data most strongly suggest substitution), management and

public relations services, and research, development, and testing services.

Data on occupations and inputs to production indicate

which industries may be purchasing services in place of hiring workers directly. (See exhibit 2.) All industries, except

the services division, have reduced their direct employment

of at least half of the five key business services occupations.

In fact, growth in all of the key business services occupations

for wholesale trade; finance, insurance, and real estate; and

government were slower than the national average (share indexes less than 1). Results from the occupational information

are not quite as strong for the engineering and management

occupations. Only mining, manufacturing, transportation and

public utilities, and government reduced their demand below

the U.S. average for at least 2 of the 3 occupations key to

engineering and management services.

Input trends suggest that 7 of the 10 divisions increased their

use of business services inputs relative to value added from 1977

to 1993. Two industry divisions stand outservices and finance,

insurance, and real estate. The services division, which was the

largest user of business services, inputs to production at the end

of this period, had increased its use of business services, relative

to value added, by 3.5 percentage points. Following services in

terms of total business services inputs to production, finance,

insurance, and real estate increased its usage, relative to value

added, by more than 5 percentage points. Although the manufacturing division used the third greatest amount of business

services inputs, it increased its use of these services, relative to

value added, by only 0.3 percentage points.

Eight industry divisions increased inputs of engineering and

management services. The construction division used about

two-thirds of all engineering and architectural services inputs

in 1993, and increased its use of these services by 4.6 percentage points of value added since 1977. The services division utilized the largest share of management and public relations inputs. However, while services used these inputs more

intensively relative to value added than any other industry

division, there was little change in intensity since 1977. Finance, insurance, and real estate, which used the second greatest amount of management and public relations inputs, nearly

tripled its use relative to value added. The services division

also was the largest user of all research, development, and

testing inputs, purchasing about half of them, and services

increased their usage, as a percent of value added, more than

the other industry divisions.

Evidence Evidence Evidence Evidence Evidence of substitution substitution substitution substitution substitution of service service service service service for direct labor

Industry Employment1 Occupations2 Output3 Production4

Business services:

Advertising services ................................................. Yes No No Yes

Consumer credit and reporting................................. Yes No Yes Yes

Mailing and related services .................................... Yes Yes Yes Yes

Services to buildings ................................................ Yes Yes Yes Yes

Miscellaneous equipment rental and leasing .......... Yes – No No

Personnel supply services ......................................... Yes Yes Yes Yes

Computer services .................................................... Yes Yes Yes Yes

Miscellaneous business services .............................. Yes – Yes Yes

Engineering and management services:

Engineering and architectural services .................... Yes Yes Yes Yes

Accounting services ................................................. Yes – No No

Research, development, and testing services ........... Yes Yes Yes Yes

Management and public relations services .............. Yes Yes Yes Yes

1 Employment grew faster than in all industries for time spans analyzed.

2 The given services employed a greater percentage of key occupations over the time

spans analyzed.

3 Output grew faster in the given services than in all industries.

4 Inputs to production of the given services grew as a percent of value added.

NOTE: Dash indicates that sufficient data were not available to draw a conclusion.

Exhibit 1.
16 Monthly Labor Review August 1997

TRENDS IN THE FOUR FACTORS explored in this article—

employment, occupations, output, and input—provide evidence that firms increased their purchases of services relative

Evidence of industries that could be purchasing services

over direct hires

Agriculture ................................................................. Yes No No No

Mining ....................................................................... Yes Yes Unchanged Yes

Construction .............................................................. Yes No Yes Yes

Manufacturing ........................................................... Yes Yes Yes Yes

Transportation and public utilities ............................ Yes Yes Yes Yes

Wholesale trade ......................................................... Yes No No No

Retail trade ................................................................ Yes No Yes Yes

Finance, insurance, and real estate ........................... Yes No Yes Yes

Services3 .................................................................... No No Yes Yes

Government ............................................................... Yes Yes Yes Yes

to directly hiring labor. Further research is needed to explore

the causal factors behind the shift toward market-mediated work

arrangements. 

Footnotes

1

 See for example: Katharine G. Abraham, “Restructuring the Employment Relationship: The Growth of Market-Mediated Work Arrangements,”

in Katharine G. Abraham and Robert B. McKersie, eds., New Developments in the Labor Market: Toward a new Institutional paradigm (Cambridge, MA, The MIT Press, 1990); Katharine G. Abraham, Flexible staffing

arrangements and employers’ short-term adjustment strategies, NBER Working Paper No. 2617 (Cambridge, MA, National Bureau of Economic Research, June 1988); Katharine G. Abraham and Susan K. Taylor, “Firms’

use of outside contractors: Theory and Evidence,” Journal of labor Economics, July 1996, pp. 394–424; Richard S. Belous, The Contingent

Economy: The Growth of the Temporary, Part-Time and Subcontracted

Workforce, (Washington, National Planning Association, 1989); Sharon R.

Cohany, “Workers in alternative employment arrangements,” Monthly Labor Review, October 1996, pp. 31–45; Susan N. Houseman, “New institute

survey on flexible staffing arrangements,” Employment Research (W.E.

Upjohn Institute), Spring 1997, pp. 1–4; Garth Mangum, Donald Mayall,

and Kristin Nelson, “The temporary help industry: a response to the dual

internal labor market,” Industrial and Labor Relations Review, (Cornell

University), July 1985, pp. 599–611; and Lewis M. Segal and Daniel G.

Sullivan, “The temporary labor force,” Economic Perspectives (Federal

Reserve Bank of Chicago), March/April 1995, pp. 2–19;

2

 See Abraham, Flexible staffing arrangements; Belous, The Contingent

Economy; and Thomas A. Kochan, Harry C. Katz, and Robert B. McKersie,

The Transformation of American Industrial Relations (Basic Books, 1986).

3

 See Belous, The Contingent Economy; Cohany, “Workers in alternative

employment arrangements”; Audrey Freedman, Human Resources Outlook

1992, Report No. 985 (Washington, The Conference Board); and Mangum

and others, “The temporary help industry.”

4

 See Abraham, “Restructuring the Employment Relationship”; Abraham

and Taylor, “Firm’s use of outside contractors;” Cohany, “Workers in alternative employment”; Mangum and others, “ The temporary help industry”;

and Segal and Sullivan “The temporary labor force.”

Exhibit 2.

1

 A “yes” in this column indicates that at least half of key occupations had share

indexes less than 1.

2

 A “yes” in this column indicates that the service input as a percent of value

added increased from 1977 to 1995.

3

 Excludes business services and engineering and management services in occupation

Engineering

and

management

Engineering

and

management

Business

service

Business

service

Inputs Occupation1 2

Industry

columns.

5 Standard Industrial Classification Manual, 1987 (Executive Office of

the President, Office of Management and Budget, 1987). Industries are

grouped according to standard industrial classification codes (SIC). Services

is composed of all 2-digit industries from 70 through 89. Business services,

major group 73, is composed of eight basic industries: Advertising (SIC

731); credit reporting and collection (SIC 732); mailing, reproduction, and

stenographic services (SIC 733); services to buildings (SIC 734); miscellaneous equipment rental and leasing (SIC 735); personnel supply services (SIC

736); computer and data processing services (SIC 737); and miscellaneous

business services (SIC 738). Engineering and management services, major

group 87, is composed of four basic industries: engineering and architectural services (SIC 871); accounting, auditing, and bookkeeping services (SIC

872); research and testing services (SIC 873); and management and public

relations services (SIC 874).

6Employment data used in this article are from the Current Employment

Statistics program, Bureau of Labor Statistics. Not all of the services industries selected for this study have employment history back to 1972 because

of industry reclassification, but all have at least 1988 forward. Trends are

reviewed using all available years of data from 1972 through 1996. For

example, the Engineering and management services time series begins in

1988, but two of the component industries have data at earlier dates.

7 There are two component industries in personnel supply services: employment agencies and help supply services, which is composed of two basic types of staffing services, temporary help and employee leasing services.

Temporary help establishments provide their employees to clients on a temporary basis. Employees of the temporary help firm may work at multiple

client sites and are generally not restricted to one client. Employee leasing

establishments lease their employees to meet all or part of their clients’ staffing needs. Leased workers typically perform their duties for one client only.

8

 Computer services is composed of nine component industries. While the

series for computer services (SIC 737) is available from 1972 forward, these

nine components were not broken out until 1988. Also, see William C.
Monthly Labor Review August 1997 17

Goodman, “Software and engineering industries: threatened by technological change?” Monthly Labor Review, August 1996, pp. 37–45. 9

 For more information about the information retrieval industry, see Laura

Freeman, “Job creation and the emerging home computer market,” Monthly

Labor Review, August 1996, pp. 46–56.

10 From the 1994 BLS Occupational employment matrix, occupations were

selected for review if at least 5 percent of all workers in that occupation

were employed in a business service or engineering and management services industry, except for occupations in personnel supply services, in which

3 percent was set as a minimum. Based on these selections, occupational

employment trends from The National Industry—Occupation Employment

1983–1995 Time Series produced by BLS were analyzed. These changes

should be interpreted with caution as changes in occupational and industry

classification systems, as well as improvements in the occupational surveys, may give misleading impressions.

11Abraham, Flexible staffing arrangements. Results of this study were

based on a survey of 799 firms and a 55-percent usable response rate.

12 For examples of regional employment analysis using the shift-share

analysis technique, see: Philip L. Rones, “An analysis of regional employment growth, 1973–85,” Monthly Labor Review, July 1986, pp. 3–14; and

William G. Deming, “A decade of economic change and population shifts

in U.S. regions,” Monthly Labor Review, November 1996, pp. 3–13.

13 The components of employment change for industries is defined as follows:

∆E EEE i i nn

83 95 83 95 83 1 , = − (( / ) ) (National share)

+∑ − o o on on n n EEE EE 83 95 83 95 83 (( / ) ( / )) (Occupational mix)

+∑ − o o o o on on EEE EE 83 95 83 95 83 (( / ) ( / )) (Occupational share)

where Ei is total employment in industry division i,

Eo is employment for occupation o for each industry division,

Eon is total national employment for occupation o,

En is total national employment.

Occupational employment data for this analysis are from The National Industry—Occupation Employment 1983–1995 Time Series.

14 The share index is defined as follows:

 SEE EE = oi oi on on ( / )/( / ) 95 83 95 83

Where Eoi

t is employment in occupation o in industry i for year t,

Eon

t is employment in occupation o in all industries for year t.

15 Values of output are from BLS input-output tables from the Office of

Employment Projections.

16Two articles may help explain this recent slowing. William C. Goodman,

“Software, engineering industries” and Jacqueline Warnke, “Computer manufacturing: change and competition,” Monthly Labor Review, August 1996,

pp. 18–29.

17The Employee Retirement Income Security Act (ERISA) determines minimum standards for pensions, such as participation requirements and employee rights. For additional information on ERISA, see A Guide to the Employee Retirement Income Security Act of 1974, as Amended by the Retirement Equity Act of 1984, and the Tax Reform Act of 1986 (U.S. Department

of Labor, Pension and Welfare Benefits Administration, May 1988). Section 414(n) of the Tax Equity and Fiscal Responsibility Act (TEFRA) requires

employers to treat all workers who are providing services on a long-term

basis as “leased” employees and to count those leased workers as employees

when applying coverage tests for pension and other benefits purposes unless such employees are covered by a qualifying plan through the leasing

firm. For analyses of TEFRA, see: L.E. Irish and Richard M. Lent, “TEFRA

Brings Sweeping Changes to Pension Plans,” Legal Times, Sept. 27, 1982;

and Leon E. Irish and others, “Tax Act Makes Important Changes in Benefit

Area,” Legal Times, July 23, 1984.

18Abraham, “Restructuring the Employment Relationship.”

19Value added is defined by the Bureau of Economic Analysis as gross

output (sales or receipts and other operating income, plus inventory change)

minus intermediate inputs (consumption of goods and services purchased

from other industries or imported). See Benchmark Input-Output Accounts

of the United States, 1987 (U.S. Department of Commerce, Bureau of Economic Analysis, November 1994).

20Abraham, Flexible staffing arrangements.
18 Monthly Labor Review August 1997

Employment levels and growth in the total nonfarm economy, business services, and engineering and

management services, 1972–96

Employment

(thousands)

Average annual growth

Industry 1972 1988 1996 1972–96 1988–96

Number Percent Number Percent

 Total nonfarm ............................. 73,675 105,209 119,523 1,910 2.1 1,789 1.6

Business services ................................. 1,491 4,638 7,254 240 6.9 327 5.8

Advertising ......................................... 122 229 242 5 3.0 2 0.7

Credit and collection .......................... 76 93 127 2 2.2 4 4.0

Mailing and related services .............. 82 208 297 9 5.6 11 4.6

Services to buildings .......................... 336 780 897 23 4.2 15 1.8

Miscellaneous equipment rental ......... (1

) 180 238 (1) (1) 7 3.6

Personnel supply ............................... 214 1,350 2,646 101 11.4 162 9.0

Help supply .................................... (1

) 1,126 2,341 (1) (1) 152 9.8

Computer services ............................. 107 673 1,208 46 10.7 67 7.6

Miscellaneous business services ....... (1) 1,125 1,600 (1) (1) 59 4.5

Engineering and management ............... (1

) 2,230 2846 (1) (1) 77 3.1

Engineering and architectural ........... 339 730 839 21 3.9 14 1.8

Accounting ......................................... 204 500 566 15 4.4 8 1.6

Research, development, and testing .. (1

) 492 569 (1) (1) 10 1.8

Management and public relations ..... (1

) 508 873 (1) (1) 46 7.1

1 Not available.

NOTE: Employment levels and average annual numbers for growth are in thousands.

Average annual number growth is the difference between the beginning and the end of the period divided by the number of years.

 Average annual percent growth =

( ) x

x

n i

i

i i

n

+

∑ −

− ∗

1 1

100.

Table 3. Percent of workers in various business-support occupations, employed

 in business services industry, 1983 and 1995
Monthly Labor Review August 1997 19

Percent Percent Percent Percent Percent of workers workers workers workers workers in various various various various various business- business- business- business- businesssupport occupations, employed in business

services industry, 1983 and 1995

Occupational group 1995 Percent

 employment

1983 1995

Administrative support,

including clerical ......................... 2,135,266 5 9

Communications equipment

operators ................................. 62,607 13 19

Computer operators and

peripheral equipment

operators ................................. 66,258 15 23

Mail clerks and messengers ..... 56,333 16 22

Records processing

occupations ............................. 300,274 4 9

Secretaries ................................ 321,587 5 10

Typists and word processors ..... 154,453 11 24

Helpers, laborers, and material

 movers, hand ......................... 525,082 4 11

Cleaning and building services

occupations ............................. 801476 17 24

Computer engineers, scientists,

and systems analysts .............. 233558 18 29

Computer programmers ............ 212946 24 40

NOTE: Data are for wage and salary workers only.
20 Monthly Labor Review August 1997

Table 4. Percent Percent Percent Percent Percent of various various various various various professional professional professional professional professional and

managerial occupations employed in the

engineering and management services

industry, 1983 and 1995

Occupational group 1995 Percent

 employment

....................

.................... 1983 1995

Managerial and administrative .... 210,783 2 3

Engineers ........................ ...... 232,058 13 18

Engineering and science

technicians .............................. 126,821 9 14

Employment growth in business services

and engineering and management services

as a percent of the total nonfarm economy,

1972–96

Industry group Percent of employment Percent of job growth

1972 1988 1996 1972– 88 1988– 96

Business services ..... 2.0 4.4 6.1 10.0 18.3

 Personnel supply .... .3 1.3 2.2 3.6 9.1

Engineering and

managemen ............. (1

) 2.1 2.4 (1) 4.3

1 Series not available.
Monthly Labor Review August 1997 21

Components of change in wage and salary employment by industry groups,

1983–95

[Numbers in thousands]

Components

Industry division Wage and salary National share Occupational mix Occupational share

employment change

Business services .............................................................. 4,420 961 51 3,408

Engineering and management services ............................. 606 382 –36 260

Agriculture .......................................................................... 277 480 4 –207

Mining ................................... ....................................... –372 275 –1 –646

Construction ....................................................................... 1,211 1,139 –37 109

Manufacturing1 .......................... .................................... 38 5,318 –146 –5134

Industrial machinery and equipment ............................... 7 592 –9 –576

Electronic and other electrical equipment, Instruments

and related products ..................................................... –233 777 –46 –964

Transportation equipment ............................................... 54 499 –25 –420

Transportation and public utilities ........................................ 1,207 1,431 –19 –205

Wholesale trade .................................................................. 1,128 1,525 4 –400

Retail trade ......................................................................... 5,585 4,498 61 1,026

Finance, insurance, and real estate1 ................................... 1,364 1,577 50 –263 

Depository and nondepository institutions ...................... 192 663 13 –484

Services, except business services and engineering

and management ............................................................ 9,736 6,793 52 2,892

Health services ................................................................... 3,231 2,049 22 1,160

Government ........................................................................ 1,535 2,357 –3 –819

1 Includes other industries not shown separately.
22 Monthly Labor Review August 1997

Table 6. Wage and salary employment share indexes by industry division and occupational group, 1983–95

Cleaning Computer e Helpers,

Occupation Administrative and engineers, Computer Engineering laborers, Managerial

support, building scientists, programmers and Engineers and and all other

including services and science material Administrataive occupation

analysts technicians movers,

hand

Business services ................ 1.78 1.43 1.60 1.62 1.06 1.39 2.52 1.83 1.88

Engineering and

management

 services ........................... 1.10 .64 1.68 1.25 1.48 1.36 1.00 1.51 1.03

Agriculture ............................ 1.29 .83 .15 .28 .52 1.96 .71 1.07 .89

Mining ................................... .45 .54 .24 .46 .75 .53 .46 .45 .48

Construction ......................... 1.06 .48 .62 .55 1.33 .75 .97 1.36 1.00

Manufacturing1 ...................................... .75 .59 1.01 .66 .93 .89 .80 .81 .78

Industrial machinery

and equipment .................. .69 .54 1.40 .58 .82 .78 .91 .84 .78

Electronic and other

electrical equipment,

Instruments and related

 products ........................... .66 .50 1.34 .57 .96 .86 .67 .80 .69

Transportation equipment ..... .70 .53 .87 .72 .84 .98 .94 .77 .81

Transportation and public

utilities ............................... .91 .89 .82 .70 .82 .84 1.15 .99 .98

Wholesale trade .................... .90 .75 .68 .63 1.16 1.56 .95 .89 .97

Retail trade ........................... .94 .88 1.66 1.27 1.17 1.24 .96 .75 1.11

Finance, insurance, and real

 estate1 ................................................... .93 .91 .82 .98 .80 1.13 .62 1.03 1.00

Depository and nondepository

 insitutions ......................... .82 .63 .66 .71 .70 1.26 .56 .74 1.02

Services, except business

services and engineering

and management .............. 1.16 .98 1.03 .83 1.80 1.37 1.40 1.22 1.07

Health services ..................... 1.22 .85 1.16 1.07 1.02 1.30 .95 1.27 1.12

Government .......................... .89 .97 .65 .76 .98 1.01 .91 .98 .92

1

 Includes other industries not shown separately.

NOTE: An occupational share index greater than 1 represents faster than average occupational growth; a value less than 1 represents slower than average

growth.
Monthly Labor Review August 1997 23

Table 7. Output growth in business services and

engineering and management services, 1972–94

[In million of 1987 dollars]

Percent

1972 1994 annual

Industry output output growth

Business services ............................... 82,663 283,160 5.8

Advertising services .......................... 13,095 14,763 .5

Services to buildings ......................... 8,945 18,019 3.2

Miscellaneous equipment rental

and leasing .................................... 14,652 16,585 .6

Personnel supply services ................. 5,616 41,661 9.5

Computer and data processing

 services ........................................ 8,943 88,628 11.0

Miscellaneous business services,

consumer credit and collection

services, and mailing and related

services ......................................... 31,413 103,502 5.6

Engineering and management

services ......................................... 88,470 202,822 3.8

Engineering and architectural

services ......................................... 23,043 64,625 4.8

Accounting, auditing, and other

services ......................................... 31,246 36,753 .8

Research and testing services .......... 16,504 39,139 4.0

Management and public relations ...... 17,678 62,305 5.9
24 Monthly Labor Review August 1997

Table 8. Federal Federal Federal Federal Federal procurement procurement procurement procurement procurement actions actions actions actions actions and dollars dollars dollars dollars dollars for selected selected selected selected selected industries, industries, industries, industries, industries, 1989–95 1989–95 1989–95 1989–95 1989–95

Engineering Total Engineering

Year Total actions Business and dollars Business and

(thousands) services management (millions) Services management

Percent of total actions Percent of total dollars

1989 ....................... 326 7.4 17.5 168,695 3.6 19.2

1990 ....................... 368 7.6 17.4 171,301 3.8 19.7

1991 ....................... 438 7.8 16.6 189,602 4.2 20.0

1992 ....................... 502 7.2 16.3 177,786 5.0 22.6

1993 ....................... 445 8.4 18.7 178,367 5.1 24.1

1994 ....................... 430 9.5 19.2 174,688 5.5 24.9

1995 ....................... 446 9.7 19.8 180,852 5.8 25.1

SOURCE: Federal Procurement Report, issues 1989–95 (Washington, U.S. General Services Administration).
Monthly Labor Review August 1997 25

 Business services and engineering management inputs to production

 for major industry divisions as a percent of value added, 1977 and 1993

1977 1993

Engineering Engineering

Industry division Business services and Business services and

management management

services services

 All industries ............................................. 4.4 2.1 6.5 2.8

Agriculture ................................................................ 1.2 1.6 .7 .5

Mining ....................................................................... .7 .5 .7 .7

Construction ............................................................. 2.3 8.6 2.8 13.4

Manufacturing1 .................................................................................................. 5.2 1.3 5.5 1.5

Industrial machinery and equipment ..................... 3.4 .3 3.1 .8

Electronic and other electrical equipment,

instruments and related products ........................... 5.9 .2 5.1 1.1

Transportation equipment ...................................... 5.5 .2 6.9 .9

Transportation and public tilities ................................ 1.8 .9 3.6 1.5

Wholesale trade ........................................................ 10.2 2.1 9.2 1.5

Retail trade ............................................................... 8.2 1.6 9.9 1.8

Finance, insurance, and real estate1 ......................... 2.8 .9 7.8 2.4

 Depository and nondepository

 institutions, holding, and

 investment offices ................................................... 8.5 .2 59.8 20.0

Services ................................................................... 8.3 5.2 11.6 5.3

Health services ......................................................... 4.3 .1 10.1 1.5

Government .............................................................. .1 .2 .3 .6

1

 Includes other industries not shown separately.
26 Monthly Labor Review August 1997

Exhibit 1. Evidence Evidence Evidence Evidence Evidence of substitution substitution substitution substitution substitution of service service service service service for direct labor

Industry Employment1 Occupations2 Output3 production4

Business services ....................................................

Advertising services ............................................ Yes No No Yes

Consumer credit and reporting ............................ Yes No Yes Yes

Mailing and related services ............................... Yes Yes Yes Yes

Services to buildings ........................................... Yes Yes Yes Yes

Miscellaneous equipment rental and leasing ..... Yes – No No

Personnel supply services .................................... Yes Yes Yes Yes

Computer services ............................................... Yes Yes Yes Yes

Miscellaneous business services ......................... Yes – Yes Yes

Engineering and management services

Engineering and architectural services ............... Yes Yes Yes Yes

Accounting services . .......................................... Yes – No No

Research, development, and testing services ...... Yes Yes Yes Yes

Management and public relations services ......... Yes Yes Yes Yes

1 Employment grew faster than all industries for time spans analyzed.

2 The given services employed a greater percentage of key occupations over the time spans analyzed.

3 Output grew faster in the given services than in all industries.

4 Inputs to production of the given services grew as a percent of value added.

NOTE: Dash indicates that sufficient data were not available to draw a conclusion.

..................................................................................
Monthly Labor Review August 1997 27

Exhibit 2. Evidence of industries that could be purchasing services

over direct hires

Occupation1 Inputs2

Industry Business services Engineering and management Business

services Engineering and management

Agriculture.................................................................. Yes No No No

Mining ........................................................................ Yes Yes Unchanged Yes

Construction ............................................................... Yes No Yes Yes

Manufacturing ............................................................ Yes Yes Yes Yes

Transportation and public utilities ............................. Yes Yes Yes Yes

Wholesale trade .......................................................... Yes No No No

Retail trade ................................................................. Yes No Yes Yes

Finance, insurance, and real estate ............................ Yes No Yes Yes

Services3 ..................................................................... No No Yes Yes

Government ................................................................ Yes Yes Yes Yes

1

 A “yes” in this column indicates that at least half of key occupations had share

 indexes less than 1.

2

 A “yes” in this column indicates that the service input as a percent of value added increased from

 1977 to 1995.

3

 Exclude business services and engineering and management services in occupation columns.