Is Part-Time Employment Beneficial for Firm Productivity?

2011– Service sectors often employ high rates of part-time employees what is somewhat surprising since the human capital theory predicts part-time workers to be less productive than full-time workers. Nevertheless, some (part-time labor demand) studies suggested that part-time employment might be beneficial at the firm level. For example when operating hours exceed a full-time work week or when firms face fluctuations in customer demand. This paper analyzes whether part-time employment is beneficial for firm productivity in the service sector. Identification of the relation between part-time employment and firm productivity requires at least three specific data features: the first is a homogeneous sector in terms of capital use and a homogeneous workforce in terms of education level, the second feature concerns information on the work hours of all employees within firms, and the third a “hard” physical or monetary measure of productivity. In this research an unique matched employer–employee dataset on Dutch pharmacies is applied that fulfils all three requirements and that can be considered as a characteristic of service sector firms whose openings hours exceed the full-time work week. The applied dataset enabled the researchers to analyze more precisely whether part-time employment is beneficial for firm productivity.

Results

Analysis shows that the findings can be interpreted in a causal manner: A larger part-time employment share leads to greater firm productivity than firms with a large full-time employment share. Additional data on the timing of labor demand show that part-time employment enables firms to allocate labor more efficiently. First, firms with part-time workers can bridge the gap between opening hours and a full-time work week. Second, the researchers find that during opening hours part-time workers are scheduled differently than full-timers. Part-time workers, for example, enable their full-time colleagues to take lunch breaks so that the firm can remain open during these times. These results may also explain why high fractions of part-time employment are observed in most service sectors and almost no part-time employment in other sectors. In general, service sectors provide good conditions for exploiting the allocation efficiencies offered by part-time employees. In other service sectors, such as restaurants and call centres, fluctuations in customer demand during the work day or work week could constitute such a condition. In both cases, allocation efficiencies of part-time employment can increase firm productivity in service sectors.

The researchers conclude that the allocation and deployment of part-time respectively full-time workers is quite different.Realization of a larger share of part-time workers seems to have a positive contribution in order to increase the efficiency which contributes to greater productivity of the company. Following the findings of this report and this conclusion, the article continues with a discussion in which the question is raised why service companies not only employ part-time workers. The researchers think that the answer can be found in the literature on determinants of part-time employment where the employer demand for part-time workers is discussed further on.

Reference: Fouarge, D., Grip, A. de, Nelen, A. (2011) Is Part-Time Employment Beneficial for Firm Productivity?

Maastricht: Research center for Education and Labour market School of Business and Economics. (The full article