Quantifying the outsourcing of employment from manufacturing to services

Abstract

There has been debate internationally and in South Africa about the extent to which the relative decline in manufacturing employment and rise in services employment can be accounted for by intersectoral outsourcing of jobs in the domestic economy. This article develops a new methodology for testing for and quantifying outsourcing using decomposition techniques. This methodology is used to analyse intersectoral shifts in employment in South Africa between 1997 and 2005. Trends in employment in the business services subsector of services are also examined. Overall, the results suggest that intersectoral outsourcing accounts for some but by no means all of the apparent shift in employment between the manufacturing and services sectors in South Africa.