Temp work raises long-term questions for economy

(MoneyWatch) With job growth still weak in the U.S., another trend poses both an opportunity and a challenge for American workers: The explosion in temporary and part-time employment.

To be sure, such jobs can ameliorate the high unemployment that has plagued the economy since the 2008 financial crisis. Yet labor experts also say that the surge in what they refer to as "contingent" work signifies a historic shift away from the kind of long-term employment that workers once expected and that helped power the rise of the American middle class.

"What's changed in the last 20 years is that there's been an unraveling of job security in the labor market, as well as a diminishment of benefit packages and a deterioration of stable, reliable wages and promotion pathways," said Katherine Stone, a law professor at the University of California, Los Angeles, and labor specialist. "There's been a really fundamental shift in the nature of employment -- it's a sea change. Whether you're talking about the expanded use of short-term employees, temporary workers, project workers, contractors or on-call workers, the use of workers who don't have regular jobs has increased a lot."

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Two new studies highlight the rise of the temp economy. First, job-search company CareerBuilder reported Thursday that 40 percent of employers surveyed plan to hire temp workers in 2013. Of that number, 42 percent of those employers say they hope to make some of those workers permanent, full-time employees. CareerBuilder lists several job categories in which hiring of temps is growing, including sales representatives, office clerks, manufacturing assemblers, nurses, home health aides, truck drivers and office clerks.

Meanwhile, a study by consulting firm Challenger Gray & Christmas found that employers in February said they planned to cut more than 55,000 jobs, with over 21,000 of those slated to come from the financial services industry and a healthy dose from defense contractors and aerospace firms. That represented a 37 percent increase in planned layoffs over the same period last year.

The Bureau of Labor Statistics defines contingent employees as "those who do not have an implicit or explicit contract for ongoing employment." By contrast, people who don't continue working because they are, say, returning to school or retiring would not be considered contingent.

Estimates of the number of contingent workers in the U.S. can range widely, depending on how they are defined. But recent data suggest that roughly a third, and perhaps up to 40 percent, of American workers are in part-time, contract or other non-standard jobs. Recruiting firm MBO Partners projects that there will be 23 million contingent workers by 2017, up from roughly 17 million today.

That phenomenon presents problems for workers and society as a whole. Temp and other contingent jobs frequently mean lower wages than those earned by their permanent counterparts, and there are typically no health care or retirement benefits. Lower wages sap people's purchasing power and limits personal consumption, which in turn discourages companies from hiring and slows economic growth.

Erin Hatton, an assistant professor of sociology at the State University of New York, Buffalo, and the author of "The Temp Economy: From Kelly Girls to Permatemps in Postwar America," said that in theory, there is nothing wrong with hiring temp workers. Such arrangements can suit both a worker who needs a  job and an employer with nagging doubts about the health of the economy that is reluctant to hire full-time or permanent staff. But for the worker, the choice is frequently between no job and a temp job with below-market wages and no benefits.

Temp work arrangements "can be useful to both employers and employees, but as we know it has been linked to exploitation," she said. "The fact that temporary workers make less and have no benefits is really problematic. If we could do away with that inequality I would be all in favor of it."

By that measure, the swelling ranks of part-timers, contractors, leased employees and other contingent workers  underscores a bigger shift in the U.S. labor market, one that potentially affects all Americans: Employees who have regular, full-time jobs no longer expect to indefinitely keep those positions. That stands in stark contrast with the employment model that prevailed through much of the 20th century, when workers commonly planned on staying with a company for years, if not their entire careers.

"The perception has shifted," Stone said. "You see that with younger people who are entering the workforce. There's a change in employee expectations of what the labor market has to offer them."

According to Hatton, the staffing industry has played a huge role in creating a myth that it's bad for the bottom line to invest in workers, even though numerous academic studies show that's not true. As Hatton recounts in her book, that ethos dates back to the birth of the staffing industry in the 1950s. By the 1970s, staffing firms were  marketing the notion that it made more sense to "rent" rather than "own" workers.

Ironically, that push came at roughly the same time the best-selling business book of its generation, "Up the Organization, How to Stop the Corporation From Stifling People and Strangling Profits," written by former Avis Rent-a-Car president Robert Townsend, argued that people were a valuable resource who, if properly cultivated, would lead to greater profits.

The emergence of contingent work isn't confined to these shores. In a 2012 study that looked at 10 countries, including Australia, Italy, Japan, Germany and the U.S., Stone found evidence that the kind of standard, full-time employment that was once a feature of the labor market is increasingly a thing of the past. Since 1985, according to data from the Organization for Economic and Cooperative Development, most European countries have seen a decline in permanent employment.

Driving that change: Employers' preference for "flexible" work practices that allow them to adjust their staffing levels as competitive forces change. In the 1980s, as global competition intensified, corporate leaders and human resources executives began to re-think the very idea of employment. The focus shifted away from providing employees with stability and financial security to one that maximized corporate flexibility in managing workers. Such policies became standard practice. In conferences and on conference calls with Wall Street analysts, CEOs touted this new fluid workplace, which they said padded the bottom line and drove innovation.

Another key factor that appears to be associated with the surge in contingent workers is declining union membership, along with the shrinking number of workers covered by collective bargaining agreements.

The upshot? The relationship between companies and companies has changed, perhaps permanently. Said Stone, "Employers are very clear in telling workers that they're 'at-will' employees. The rhetoric has changed, and they don't want to build up expectations of regular work."