Workers and Internal Pools of Contingent Labor"
BY: JOSEPH M. MILNER
Washington University
EDIEAL J. PINKER
University of Rochester
Paper ID: University of Rochester Simon School WP CIS 97-07
Date: 1997
Contact: EDIEAL J. PINKER
Email: Mailto:pinker at ssb.rochester.edu
Postal: University of Rochester
Simon School of Business
Carol Simon Hall
Rochester, NY 14627 USA
Phone: (716)275-2131
Fax: (716)273-1140
Co-Auth: JOSEPH M. MILNER
Email: Mailto:milner at wuolin.wustl.edu
Postal: Washington University
Campus Box 1133
One Brookings Drive
St. Louis, MO 63130 USA
Paper Requests:
Please send a message to Mailto:mcwilliams at ssb.rochester.edu Or
write to the Office of Public Affairs/Working Papers Office,
William E. Simon Graduate School of Business Administration,
University of Rochester, 2-352 Carol G. Simon Hall, Rochester,
NY 14627. Phone:(716) 275-8378. Fax:(716) 275-9331.
ABSTRACT:
Temporary help agencies are among the largest employers of
American workers today. Depending upon the interpretation, the
Bureau of Labor Statistics counts between 3 and 30 million
Americans in contingent and part-time work arrangements. We
model firms' use of contingent labor in maximizing profits when
facing both uncertain labor demand and supply. We show that
firms should rely on both full-time and contingent labor and
that such contingent labor may be provided by internal pools of
flexible workers or by external labor supply agencies. In
particular, we consider contracts which firms establish with
labor supply agencies to provide contingent labor as well as the
process such agencies follow when supplying labor. We show that
such contracts can be beneficial to both firms and agencies.
Numerical experiments demonstrate that firms should increasingly
rely on external labor sources as labor availability increases
and that they should increasingly rely on formal contracts for
contingent labor as the added value of labor increases. We
validate our results with evidence of the actual behavior of
firms across a wide range of industries.