External Churning and Internal Flexibility: Evidence on the Functional Flexibility and Core-Periphery Hypotheses

Functionally flexible systems for organizing work may reduce job instability and insecurity by reducing employers’ reliance on job cuts or contingent work to respond to changes in their environments. Related arguments hypothesize that contingent work allows firms to adjust labor while “buffering” their core of permanent workers from job instability. We find evidence that internally flexible work systems are associated with reduced involuntary and voluntary turnover in manufacturing but that contingent work and involuntary turnover of the permanent workforce are positively related regardless of sector, in contrast to the prediction of the core-periphery hypothesis.