The Age of Contingent Employment: How changes in employment relationships are impacting worker wages, power, and prospects

By Clermont Ripley and Allan Freyer
October 2015

EXECUTIVE SUMMARY

The American economy has witnessed the explosive growth of contingent employment—any job in which an individual does not have an explicit or implicit contract for long-term employment—over the past 30 years. This report examines several key trends related to the growth of contingent work in general and one form in particular—temporary work—and charts their impacts on workers, the overall economy, and the fundamental relationship between employer and employee. Key findings include

  • Contingent employment takes many forms. It includes using labor contractors, temporary help agencies, employee leasing companies or other labor intermediaries, misclassification of employees as independent contractors, franchising, and contracting out services and the production of goods. Employers use contingent workers for the core business functions of the firm (e.g., manufacturing), and not just for peripheral activities like facilities maintenance or clerical support.
  • About one-third of the entire American workforce can be classified as contingent workers. This includes part-time workers (13.2 percent of the total workforce), independent contractors (7.4 percent), self-employed workers (4.4 percent), and a combination of temporary workers hired through agencies, temps hired directly by an employer, and temps hired as contractors (5.6 percent).
  • Employers have increasingly relied on contingent workers as a strategy for keeping down labor costs, a strategy that has cushioned corporate bottom lines and contributed to middle class wage stagnation. Despite historic productivity gains boosting record levels of corporate profitability, employers have sought to keep labor costs low. Instead, they spent these productivity gains on executive compensation and income distributions to shareholders — benefitting wealthy investors at the expense of workers and their wages. That’s why North Carolina’s workers saw their productivity increase by 86 percent, while their hourly compensation increase by just 22 percent.
  • Although some workers may benefit from the flexibility aff orded by voluntary nonstandard work, many workers are stuck in contingent work relationships involuntarily—a trend that increases the distance between employers and their employees, reduces wages, weakens worker bargaining power, and presents challenges that our nation’s outdated, employment-related regulatory structure is unable to adequately address.
  • An important form of contingent employment involves temporary work, nonpermanent jobs provided through staffing agencies that supply labor to client companies on a short-term basis.
  • Temp work is growing much faster in North Carolina than in the nation as a whole, a troubling trend since temp work pays a lot less the state’s average wage. Between 2009 and 2014, the number of temp workers grew by 52 percent in North Carolina, compared to 39 percent in the national economy as a whole. North Carolina temp workers earned just $30,627, far less than $45,022 average wage.
  • Temp work in North Carolina has grown as a share of the economy over the past five years, from 2.4 percent in 2009 to 3.4 percent in 2014. This trend matters for workers because it suggests that temporary work is growing at the expense of more permanent and stable work—and that there’s proportionally less stable work available in North Carolina than in the nation as a whole.
  • North Carolina needs more permanent work, not less, in order to provide workers with the stable, regular incomes they need to make ends meet, ensure financial security for themselves and their families, and ensure long-term upward mobility.

Policymakers can lead the way to a better future for North Carolina’s workers by recognizing the harmful growth of contingent employment and taking steps to rein in the problems associated with both temp work and broader contingent labor practices. Policymakers should consider the following recommendations:

  • Forbid public contracts from using contingent workers. State and local money should only be used to create stable, quality jobs. Public contracts funded by government money should include restrictions on using temp workers and sub-contractors and ensure that all public contractors pay their workers a living wage.
  • Rein in the over-use of temp workers. North Carolina policymakers should recognize that this temporary workforce model has become a permanent part of the state’s economy and adopt policies that discourage companies from using temps as a means to evade legal responsibilities—including legislation that requires businesses to provide the same wages, benefits, and safety standards to temps that they provide to their standard employees.
  • Explicitly impose joint liability to prevent workplace abuses. The most effective way to ensure that labor intermediaries comply with all workplace laws is to motivate their clients to monitor compliance. Imposing liability on the companies that are purchasing labor and controlling market conditions will force those companies to evaluate whether subcontractors or labor suppliers will comply with workplace laws.
  • Enforce wage and hour laws in contingent employment arrangements. The NC Department of Labor should issue guidance to employers and employees about who is liable for wage violations, and include specific examples for the industries where outsourcing is common, such as janitorial work, homecare work, and construction. The NCDOL should also be more strategic about targeting its resources to industries known for labor violations and trying to evade responsibility through many layers of contracting.
  • Enact policies that provide contingent workers with outside supports and benefits that are mostly available through standard, full-time work, including raising the minimum wage. As contingent work grows, so will the number of workers without access to the basic features of a quality jobs—paid sick days, access to pensions or retirement savings, health insurance, or even pathways for career advancement. The state and federal governments need to promote policies that provide workers with these vitally important supports that contingent workers can rarely get through their jobs.
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