The New American Temporary Workforce - Coursework Example

The New American Temporary Workforce Table of Contents There are different opinions on the widely used practice of hiring contingent/contract employees by mid level and large corporations. Companies are now more than ever using workers that are hired either on a temporary, contingent or contractual basis. Contingent work is not new nor is efforts by workers to regulate it. This paper will study the concepts behind the growing trend for hiring contractual/contingent workers as opposed to permanent workers and the response of workers to meet the current situation. The examination will focus on policies and views regarding this resurgence of the use of hiring contingent/contractual labor versus traditional permanent full time labor, demonstrating throughout how the permanent position is already a thing of the past necessitating change in current policies and procedures. Examining the current employment trends reveals a strong shift toward the contingent worker solution with very little protection for the individual worker. I will first introduce the debate concerning organizations and the evolution of the resurgence in the use of a contingent/temporary workforce. There are continued debates regarding the need for new approaches as to how companies are managing the trends and staffing their organizations with contingent, contract and temporary workers. This paper will also review ideas on the current laws and policies that have been implemented to protect contingent workers or contract employees as they compare with the protections offered to permanent full time workers. As a part of this discussion, this paper will review the continued debate as to the reason companies choose this approach to staffing versus the full time permanent workers. Through this discussion, it will become apparent that the future of the permanent full-time employee is indeed bleak if this trend continues, as the benefits of the permanent employee begin to melt into the background of the flexibility and protections offered the temporary worker in the world of tomorrow. This brings up the need for a revolutionized union system that more closely meets the need of the modern worker, whether ‘permanent’ or otherwise. List of Tables, Figures & Illustrations Table 1 7 Table 2 9 Table 3 14 Table 4 15 Introduction In the early decades of the 20th century most workers were employed in very contingent jobs. The American Heritage Dictionary defines contingent as “Dependent on conditions or occurrences not yet established; conditional … Liable to occur but not with certainty; possible … Happening by chance or accident; fortuitous” (2000). Contingent workers are those who do not have an implicit or explicit contract for ongoing employment (Bureau of Labor Statistics, 1997). Workers in the early 1900s very rarely had any real expectation of long-term employment with a single employer. Often, workers lined up at factory gates every day to be selected for work. Frequent lay-offs meant frequent periods of unemployment. Workers responded to the harsh conditions of the early 20th century with many forms of resistance, both personal and collective. Workers oftentimes switched from one employer to the other depending upon the opportunity offered. Workers joined unions as a means of developing ways to pressure employers, even without a contract, through the use of slowdowns and strikes, to provide fair wages and benefits. By the 1920’s, forward-thinking firms recognized the inefficiency of their employment practices and the high economic cost of worker turnover. Moreover, employers realized that a system in which people worked under uniformly harsh conditions for low wages with little opportunity for advancement was potentially retarding productivity while the harsh working environment further distracted employees from concentrating on the job at hand. New personnel systems were developed by corporations that included seniority bonuses, provided benefits, created internal job promotion potentials, and generally reduced contingent work across most spheres. By the end of the 1920’s, the desirability of employing workers on a permanent basis became conventional wisdom in business and industry. Both because of employer and employee market demands, the trend in non-standard, contingent employment has been growing in recent years. A study conducted in 1997 found that the growth of the temporary employment market was growing at a much greater rate than the growth of the permanent job sector. Comparing information taken primarily from the National Association of Temporary and Staffing Services (NATSS) found “temporary services employment grew from 165,000 in 1972 to over 2 million by 1995. … Even though the industry was starting from a small base, its 11.8 percent annualized growth rate is striking. By way of comparison, aggregate nonfarm employment grew at only a 2 percent annual rate during the same period.” (Segal & Sullivan, 1997, p. 118). Table 1 Temporary Employment Figures (Segal & Sullivan, 1997, p. 119) Theorists have concluded that organizations worldwide are in a state of transition. They are once again looking to find alternative ways to manage their staff and work load in a very competitive global society. Labor management practices and laws are being implemented to handle the increasing demand for workers in a changing and connected global economy. According to Arne Kalleberg, “Global economic changes increased competition and uncertainty among firms and put greater pressure on them to push for greater profits and to be more flexible in contracting with their employees and responding to consumers. Sluggish economic growth triggered high unemployment that made it clear … that economies were incapable of generating enough jobs to provide full-time wage employment for all workers” (Kalleberg, 2000, p. 342). Labor management practices assumed new prominence in the 1990s as concerns persisted about global competition, the internationalization of technology and the productivity of workers. It is argued that these market fluctuations and increased competition have pushed companies and work organizations to adjust their systems of how to effectively manage labor and the costs of doing business in today’s global marketplace, shifting the trend away from the permanent labor force that provided the necessary stability for the growth of the 1900s into something more closely resembling the shifting and unsteady contingent work force seen in earlier times. At the same time this trend was growing, the labor force itself has increasingly pushed for a more contingent, temporary or flexible status due to changes in its fundamental makeup. According to the Bureau of Labor Statistics (1997), independent contractors in the traditional arrangements tend to be men, white, and at least 25 years old. The types of employment they tend to have is part-time and they hold managerial, professional, sales, or precision production jobs. In terms of industries, they were more likely to work in construction, agriculture, and services, and less likely to work in manufacturing or wholesale and retail trade. The demographics of on-call workers including day laborers were similar to those of workers in traditional arrangements, but on-call workers were slightly younger. In terms of job characteristics, they were more than three times as likely to be in the construction industry and also more likely to be in the services industry. Workers paid by temporary help agencies were more likely than workers in traditional arrangements to be women, young, and black and were slightly more likely to be employed part time. They were heavily concentrated in administrative support and operator, fabricator, and laborer occupations. Workers provided by contract firms were disproportionately male. The largest proportion of contract workers was employed in the service industry, although substantial proportions worked in manufacturing and transportation and public utilities. Contract workers were more likely to be in professional specialty or service occupations than were traditional workers (Bureau of Labor Statistics, 1997). Table 2 Characteristics of Permanent and Temporary Workers in 1993 (cited in Segal & Sullivan, 1997) Despite the occasional success stories, many studies show that contingent workers face a lack of equity in pay, benefits, security, and basic labor rights finding that, on average, they receive lower pay and benefits than regular, full-time workers who do the same work (Ferber & Waldfogel, 1996; Kalleberg et al, 1997; Mishel, Bernstein & Schmitt, 1999). A study into the nature and scope of bad jobs that specifically compared contingent jobs with permanent jobs “found that every nonstandard work arrangement we examined is more likely to be associated with bad job characteristics than standard work arrangements” (Kalleberg, Reskin & Hudson, 2000, p. 273). This temporary status of employment affects not only those in contingent jobs, but also other workers who are forced to compete with them. “For many nonstandard workers … any gains in flexibility come at a high price, and for the society, they are likely to exacerbate socioeconomic inequality if qualified workers who seek regular full-time jobs must settle for less desirable alternatives” (Kalleberg, Reskin & Hudson, 2000, p. 274). Contingent work is an issue for contingent workers, but it is also a societal issue that is in need of further examination and societal regulation. Contingent Worker Benefits Before understanding the disadvantages of contingent work situations, it is important to understand what some of the benefits are, both to companies and to workers. In today’s economy, heavy in the service industries whose demands fluctuate with seasons and ‘peak’ times, “firms need flexibility in their labor force, especially within service or make-to-order environments” (Milner & Pinker, 2001, p. 1046). The benefits to companies in using contingent workers of various types far exceed the simple easy adjustment to market fluctuations, though. Temporary workers fill in for full-time employees who are sick, on leave or vacation or otherwise out of the office or requiring an additional helping hand for major projects without forcing the company to hire additional full-time workers for the eventuality. “Employers may also use flexible staffing arrangements in order to provide certain groups of workers with lower wages or benefits. A unionized company may pay above-market wages, and thereby have an incentive to use temporary agency workers or contract workers who are not its legal employees and are not covered by the terms of the collective agreement” (Houseman, 2001, p. 155). In addition, by hiring temporary, contract or contingent workers, companies are able to work around the federal provisions regarding equal opportunity for benefits to all employees because contingent employees are generally not included in these laws. The rising cost of standard benefits such as health insurance only works as tinder to an already inflamed issue. Other reasons companies offer for why they prefer contingent workers include the ability to screen potential full-time employees with less risk of wrongful termination lawsuits and the ability to access highly specialized employees without the expense of finding them or maintaining full-time status for services needed only occasionally. There are also several advantages offered to the temporary worker in exchange for the loss of benefits and security. In an age of large-scale corporate downsizing, outsourcing and cutbacks in both wages and benefits, contingent work is being presented as an equally viable and often most practical alternative to unemployment. With more and more women entering the workforce, there has also been an increasing need for more flexible work schedules that had the capability of working around children’s school schedules and other care needs. Because some of the contingent labor numbers are based on individuals who can reasonably be considered self-employed and others represent a highly skilled and in demand labor pool, not all temporary workers suffer the same low wages and impoverished conditions painted in some of these reports. With the advent of more sophisticated and affordable technology, the possibility of including more members of the disabled community into the workforce through relatively inexpensive adaptations has increased the number of workers available while the ability to work on a part-time or temporary basis affords workers the opportunity to experience a variety of fields and professions before settling into a specific career as well as to screen a potential boss before going to work for him/her full-time. Contingent Worker Detriments The replacement of many traditional, full-time jobs with temporary jobs is an alarming trend for many who see in it a return to harsher living conditions with little to no worker protections in place and a rapidly declining economy. For many temporary and contingent workers, the danger exists in being caught in what is known as triangular employment. In this type of situation, the worker is employed directly by a temporary service firm, such as Manpower, and is hired out to a secondary firm, such as Verizon, on a so-called temporary basis that can last anywhere from a week to six months or longer. Because the employee is a temporary worker for the temporary service firm in terms of taxes and federal laws, it is this firm’s option whether they wish to offer any kind of benefits packaging to the worker. Likewise, the temporary service firm reserves the right to deduct a certain percentage of the worker’s wages for themselves as a type of finder’s or service fee. Because the employee does not work directly within their offices, this firm has little to do with quality control, assessment or promotion, leaving the employee with little room for advancement or protection at the secondary employer’s work location. At the same time, the secondary employer gains a skilled employee to whom they are able to pay lower wages, risk fewer responsibilities and provide little to no benefits. “By now, it is widely recognized that many US employers used temporary help (and other forms of contingent work) ‘not for the sake of … efficiency, but in order to evade their legal obligations’ and that the financial benefits of this use have been considerable” (Gonos, 1997, p. 86). Workers lost the ability to barter for higher wages or to demand better working conditions as their ‘real’ boss was not the firm for whom they were working. Any attempt to strike or negotiate would simply result in their being replaced by another temporary worker. Membership in unions was also limited as an option as the union did not apply to their particular job status, further undercutting any bargaining power they had and forcing them to accept lower wages and fewer benefits in return for more work and often longer hours during peak periods and more unprofitable time off during slow periods. “It is for these reasons that the growth of temporary work and other forms of contingent work are seen as having played an important role in the drift toward lower wages and greater employment insecurity for a significant portion of the US workforce (Harrison & Bluestone, 1987), a statement as true when spoken as it is today. The trend toward using more contingent-based workers was so strong that in 1998, reports were already coming out that reflected a growing perception of traditionally ‘permanent’ jobs as being more in the nature of contingent jobs, indicating a need for people to be concerned regarding their own job security regardless of the type of employment they enjoyed. “Corporate employees who hold ostensibly permanent, professional jobs are encouraged to think of themselves as subcontracted workers of limited utility to their firms (DiTomaso, 1996). Professional workers increasingly face ‘boundaryless careers,’ and must develop mindsets which preclude permanent attachment to any one firm or employer (Arthur & Rousseau 1996). Business consultants remind American workers that they must let go of the traditional career mind-set and become ‘career resilient’ (Waterman, Waterman & Collard 1994) and focus on ‘employability security’ rather than secure employment (Kanter 1995)” (Smith, 1998, p. 414). In the same report, Smith also cited several bodies of research documenting the idea that the increase in temporary or contingent work situations had a positive link to the rise in underemployment figures during the 1990s because people who were looking for full-time employment had to settle for temporary work as their only viable option. This enforced acceptance of lower wages and fewer benefits in exchange for the same amount of work and often the same length of service on the job meant a general reduction in the country’s per capita income, leading to a general decline in the economy overall. In the first available studies to compare permanent and contingent work environments, significant differences were found in worker’s wages as well as other benefits permanent employees received. Table 3 Temporary and Permanent Worker Wages (cited in Segal & Sullivan, 1997, p. 125) Despite these disadvantages of temporary or contingent employment, the trend toward these types of working relationships only continues to rise. The advantages to corporations in being able to sidestep employment laws and reduce expenses encourage big business to continue encouraging the use of contingent employees as opposed to hiring permanent staffs. As less and less permanent jobs are offered, individuals seeking work find themselves reduced to a choice between contingent work or unemployment. Meanwhile, the advantages of a temporary or flexible schedule to couples working to raise children in a hectic world are difficult to resist even when considering some of the pitfalls. Enough success stories of individuals working for themselves or making a decent living as a temporary worker have surfaced to provide a lottery-like sense of possibility for people desperate for a chance. Finally, in a world of uncertainty, when even permanent workers are given a sense of temporary status, it is not surprising to find an increasing number of people turning to contingent work systems. Table 4 Employed Contingent and NonContingent Workers by Selected Characteristics, February 2005 (Bureau of Labor Statistics, 2006) With these increasing numbers and trends in both the corporate and the private sectors, encouraged by business as well as individual worker, it is necessary to look into the current policies that are in place to protect the contingent worker from the type of exploitation seen in earlier times. Policies Although some individuals prefer the contingent or temporary worker option for personal lifestyle reasons, recent reports indicate a growing number of Americans, approximately three of every ten, are being forced into temporary or contingent work by the lack of permanent job availability as more and more companies expand their use of this job category. As has been discussed, a great part of the reason behind this decision lies in the ability of the company to circumnavigate a great deal of their expenses by classifying the majority of their workforce as merely temporary. “Many employment and labor laws exclude contingent workers from coverage. Most contingent workers lack an effective right to union organization. In sum, employers treat workers in nonstandard jobs unequally, and the law permits or ignores this inequity” (National Alliance for Fair Employment, 2006). Of course, different contingent working situations have different rules applied, but generally all temporary workers suffer significant reductions in the observance of their worker rights. Temporary workers in triangular employment systems are caught in a vicious circle in which the secondary employer has power over the worker, but remain free of any kind of liability for violation’s of the employee’s rights. Meanwhile, the employee has little recourse to seek justice as the laws prevent him or her from participating in many of the unions and other organizations that function to protect the rights of full-time workers. For the same reason, most contingent workers are not able to benefit from other workplace protective laws, minimum wage requirements, overtime pay, health, safety or other benefits. With most laws written with the permanent employee in mind, the only way to protect the average worker is through a new system of legislation that directly applies to the contingent worker. Conclusion – New Legislation is Necessary  Critics who oppose the massive use of contingent/contract workers suggest that there must be reform designed to enhance benefits and the pay of the contingent and contract employee. They also suggest that there needs to be an expansion of legal standards to close loopholes that all too often benefit the corporation when companies are hiring contingent/contract labor. There are numerous policy recommendations necessary to protect non-standard workers. Some advocates state that there needs to be a modification to the equal pay act to end pay discrimination based on work performed rather than status of employee. Others state that minimum wage should be indexed to rise automatically with inflation. Still others propose extending the coverage of the Family Medical Leave Act to also cover non-standard workers. The Act currently allows employees who work more than 24 hours per week for 52 weeks at a firm with more than 50 employees to take up to 12 weeks of unpaid leave due to illness or to care for a family member. The strongest suggestion to combat the problem of the contingent economy exists in the concept of the trade unions. “Like the guilds from which unions first arose, craft unions have always defined themselves as defenders of quality” (Herzenberg, Alic & Wial, 1998). In their article, Herzenberg et al (1998) describe how trade unions in the construction industry were instrumental in organizing subcontractors in assisting with the proper training and equipping of apprentice builders, contributing to the quality of the workforce while benefiting from the additional skilled labor available to them. “As in construction, unions rooted in New Economy occupations and industries, rather than in individual firms, could promote training and peer learning. They could make broadly defined occupations the new locus of job security” (Herzenberg, Alic & Wial, 1998). In addition, supporters of this concept envision unions as being the power that is able to transcend company lines in order to better represent the individuals involved in the trade, providing access to the benefits typically only afforded to permanent employees such as health insurance and pensions, while companies would still be able to benefit from the ability to hire employees only when they needed them. Finally, this better world scenario would provide workers with the security they need to be able to support their families, the representation they need to barter for equitable wages and the flexibility they wish for when all other needs are met. Social theory indicates when these basic needs are met, employees will become more inclined to improve performance levels for the benefit of their present employer. This solution sounds very easy but has not been something that is really simple to do. There are major obstacles to union organizing and representation in many sectors of the contingent workforce due to worker disbursement and fearfulness over losing their current employment options. Despite these obstacles, however, there have been some impressive union victories. The two key strikes of the 1990’s – the Justice for Janitors strikes in LA in the early 1990s and the UPS strike of 1997 – involved contingent work issues. Other successes by janitors, home care workers, and construction workers have shown that unions can organize contingent workers. Demonstrating that these actions have had some impact, the organization where I work has extended the collective bargaining agreement to temporary employees and they now have access to skill screening, training, and job-bidding rights as well as to benefits and improved wages. The CWA-Bell South Utilities Operations is another case in point. It is a jointly managed company set up to substitute for external contractors. The contractor workforces are now under the bargaining agreement, with wage and benefit levels that are only slightly less generous than those for regular workers. These are accounts of successes that have been achieved in helping temporary workers obtain some of the wages and benefits that regular employees have been afforded. There are still a lot of strides to be made in regards to these workers getting their full compensation for the job and work that they do. It appears that in order for this to happen, there will have to be continued support in the form of policy implementation and court litigation continually changing the laws in a way that will be in favor of the contract/contingent employee. References (The) American Heritage Dictionary of the English Language. Fourth Edition. (2000). New York: Houghton Mifflin Company. Bureau of Labor Statistics. 1997. Contingent and Alternative Employment Arrangements, February 1997. Washington DC. Press release. Bureau of Labor Statistics. (2006). Employed Contingent and NonContingent Workers by Selected Characteristics. Washington D.C. Ferber, Marianne & Waldfogel, Jane. (1996). “Contingent Work: Blessing and/or Curse.” Cambridge, MA: Radcliffe Public Policy Institute. Gonos, George. (1997). “The Contest over ‘Employer’ Status in the Postwar United States: The Case of Temporary Help Firms.” Law & Society Review. Vol. 31, N. 1, pp. 81-110. Harrison, Bennett & Bluestone, Barry. (1987). “Labour Market Analysis and Employment Planning: The Dark Side of Labour Market ‘Flexibility’: Falling Wages and Growing Income Inequality in America.” Geneva: International Labour Office, Working Paper N. 17. Herzenberg, Stephen A.; Alic, John A. & Wial, Howard. (March 1, 1998). “New Unions for a New Economy.” The New Democrat. DLC. Retrieved August 6 2006 from Houseman, Susan N. (October 2001). “Why Employers Use Flexible Staffing Arrangements: Evidence from an Establishment Survey.” Industrial and Labor Relations Review. 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National Alliance for Fair Employment. (2006). “Contingent Workers Fight for Fairness.” Fair Jobs.org. Retrieved 6 August 2006 from < http://www.fairjobs.org/fairjobs/contingent/cwffe_whyprob.php> Segal, Lewis M. & Sullivan, Daniel G. (Spring 1997). “The Growth of Temporary Services Work.” The Journal of Economic Perspectives. Vol. 11, N. 2, pp. 117-136. Smith, Vicki. (November 1998). “The Fractured World of the Temporary Worker: Power, Participation, and Fragmentation in the Contemporary Workplace.” Social Problems. Vol. 45, N. 4, pp. 411-430. Read More