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7 - implications of workplace change
(continued)

NONTRADITIONAL WORKERS ARE AN IMPORTANT PART OF THE WORKFORCE

Future employers will demand not only increased skills and high-performance workplace practices but also a more flexible workforce. Labor market experts believe that nontraditional workers—people who work in alternative arrangements such as on call workers, independent contractors, temporary help or leasing agency workers, as well as contingent workers—will be a larger share of the future workforce. This section examines those who make up this growing nonstandard workforce.

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Percent of employed persons with alternative and traditional work arrangements
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Employers use of nontraditional workers, percent change since 1990

Nontraditional work arrangements

Contingent workers. According to BLS, contingent workers are "individuals who do not perceive themselves as having an implicit or explicit contract for ongoing employment." Such workers were 4.4 percent of the workforce in 1997, a slight reduction from 1995 (4.9 percent). 14 (Currently, data are only available for both contingent and alternative work in 1995 and 1997. 15 ) Contingent workers also earn lower wages than noncontingent workers. The median wage earned by full-time contingent workers was 82 percent of that of full-time noncontingent workers. Furthermore, contingent workers are much less likely to have employer-provided health insurance or to be eligible for employer-sponsored pension plans. Younger people are more likely to be contingent workers, as are blacks and Hispanics, although the proportion of black workers who are contingent workers declined from 6.1 percent in 1995 to 4.6 percent in 1997.16

Alternative work arrangements. BLS defines four work arrangements as alternative: independent contractors, on-call workers, employees of temporary help agencies, and employees of contract companies.17 In 1995 and 1997, these workers were 9.9 percent of all employed workers.18 (See chart 7.1.)

There are broad differences in the characteristics and earnings of the four types of workers in alternative work arrangements. For example, in 1997, among full-time workers’ median weekly earnings, contract firm workers’ earnings were the highest of all alternative arrangements ($619), higher even than workers in traditional arrangements ($510). Independent contractors earned $587, while earnings for on-call workers ($432) and employees of temporary help agencies ($329) were lower. These differences are partly reflected in the occupational concentration of each arrangement: for example, independent contractors are more likely to be in higher-paying managerial and professional specialty jobs as opposed to temporary help agency workers, who are typically employed in administrative support and laborer jobs.

Part-time workers. Part-time workers are defined by BLS as persons at work less than 35 hours a week for a reason other than temporary absences such as a holiday. Their proportion of total employed persons rose from 13 percent in 1956 to 17 percent in 1979, but the upward trend slowed in the 1990s.19

Multiple-job holders. BLS data indicate that multiple-job holders tend to be represented in relatively equal proportions at all levels of wages and are as likely to be women as men. Multiple-job holders increased from 5.2 percent of the working population in 1970 to 6.0 percent in 1998.20

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Look who's temping now...

Employer use of nontraditional staffing

Nontraditional staffing is widespread—in all industries and in establishments of all sizes—and it has grown in the 1990s. (See table 7.2.) Part-time workers—used in 72 percent of all establishments—are the most common nontraditional arrangement. However, even when the part-time category is excluded, nearly four out of five employers used some form of nontraditional staffing arrangement, and many used more than one.21

Among the most common reasons employers cite for using nontraditional workers are to accommodate workload fluctuations and to fill positions that are temporarily open due to permanent employees’ short-term absences. Employers expect to use nontraditional staffing arrangements much more in the future.22

Attributes of nontraditional work

Benefits. In a 1996 survey of over 500 employers, the per-employee cost of wages plus benefits was considerably lower for nontraditional workers, especially for on-call workers. It was also considerably lower for part-time workers. This was largely due to the fact that these workers were ineligible for employer-provided retirement and healthcare benefits.23 For example, only 7 percent of temporary help agency workers and 20 percent on-call workers receive health care insurance from their employers.(See table 7.3.) While some non-traditional workers have access to health insurance through another source, they are much less likely than traditional workers to be covered at all. 24

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Percent of workers with health insurance and pension coverage by work arrangements, 1997

A large percentage of non-traditional workers are also excluded from participating in an employer-sponsored retirement plan. In 1997, for example, only 10 percent of temporary help agency workers were eligible for employer-sponsored pension plans based on their own employment. 25 Use of voluntary retirement plans is also often low for a couple of reasons. First, some workers do not earn enough to afford to contribute to a retirement plan. Second, for some, their status as an employee is so uncertain that benefits become inaccessible.

Some nontraditional workers have access to health insurance and retirement plans through their spouses or other sources. Not all nontraditional workers, however, are fortunate enough to have this alternative, and high divorce rates indicate that spouses may not always be able to rely on each other for their future security.

Flexibility. The advantage of nontraditional work for some workers is the added flexibility that helps balance work with family and other responsibilities. For example, in 1997, slightly more than half of the women independent contractors combined their work arrangements with their work at home raising children. Roughly 25 percent of independent contractors, 20 percent of temporary help agency workers, and 53 percent of on-call workers worked part time, as compared to 18 percent of traditional workers. Many individuals in alternative employment relationships report satisfaction with their arrangements, although a majority of temporary agency employees (59 percent) and contingent workers (56 percent) prefer a standard job.26

Regulations and workplace protections. Both employment and labor laws were created primarily with the traditional, full-time, permanent labor force in mind, but members of the nontraditional workforce also need legal protections and recourse. To qualify for coverage under some federal employment laws, a nontraditional worker may face the difficult task of proving the existence of an employment relationship and it may not always be clear who has responsibility for the wellbeing of the worker. 27 In 1994, the Commission on the Future of Worker–Management Relations noted the future challenge of balancing worker needs for diverse, flexible employment options and workplace protections with employer needs for flexibility in order to remain competitive in a global economy.28

The future of the nontraditional workforce

According to one national study, 65 percent of employers believed that, in the future, firms would increase their use of flexible staffing arrangements.29 The use of nontraditional workers fits with the evolving perceptions of employers regarding labor costs, competition, changing obligations, and potential litigation. "Just in time" workers mirror the successful industrial model of "just in time" inventories.

Firms wanting to become more efficient or to protect against layoffs in an economic downturn may use nontraditional staffing arrangements. Such a staffing strategy can improve a firm’s competitive position by using the mix of traditional and nontraditional employees that best meets the firm’s needs. However, nontraditional employees are increasingly viewed as the just-in-time workforce. These employees receive little employer-provided training and are far less likely to receive benefits through their employers. Their hiring arrangements are frequently handled by the firm’s purchasing department, making for a different entry and work status on the part of the firm.

Among nontraditional workers, the number of professionals are increasing. These workers are more likely to command high wages and buy their own health and life insurance. Employers may attempt to attract these workers by increasing portability of pensions and health insurance. Although increasing in number, high-skilled professionals will remain a minority in the nontraditional workforce.

Changing employer–employee relationships. A workforce composed totally of traditional workers is becoming a thing of the past. While its future proportions are still debatable, the nontraditional workforce will probably increase. At the same time, employer–employee relationships are changing. Whether one thinks about the nontraditional workforce in terms of the changing social contract, a move to just-in-time workers, or a way to make human capital flexible in a competitive global economy, the definitions of employee, employer, and workday are certainly changing, raising a number of issues.

There is a growing policy division regarding the nontraditional workforce. Some perceive this as a large and growing workforce which employers relegate to second-class employment—with no worker benefits, little or no mutual loyalty, and all risk borne by the employee—while employers benefit from lower costs. In essence, they see a strong need to contain this type of work. Others see the nontraditional workforce as an opportunity for the worker to achieve flexibility in work schedule, gain new experiences, or use as a bridge between times of full employment. This latter group sees the growth of the nontraditional work-force as a win–win situation to be encouraged.

With the increase in creative staffing arrangements, including temporary help, leasing, and contract work, there may be a need to examine and possibly reformulate the definitions of employer and workplace for determining responsibility for wages and benefits as well as other standards and regulations.

Worker misclassification. It is sometimes difficult to determine whether a worker is an employee of a firm, an independent contractor, or working for a third party. Whether the employer’s record keeping is purposely obscure or there is an honest mistake, workers entitled to benefits may not receive them. Worker misclassification is not an easy problem to solve and will only grow worse as more nontraditional workers join the labor force. Courts and Congress have been asked to address this issue, usually on a piecemeal basis under a specific law. As the nontraditional workforce grows, it will become even more important for the Department of Labor and other government agencies to help employers maintain proper classifications. It is also imperative that private firms, business associations, unions, and intermediary organizations address these complex problems and find solutions that enhance workforce flexibility, while giving workers and taxpayers what they deserve.

Training. Nontraditional workers generally receive less training than do traditional workers for a number of reasons, including employees’ lack of a longterm commitment. Regardless of the reason, this nation cannot afford to let any class of workers fall behind in skill development. Temporary help agencies, labor unions, nonprofit organizations, and employer groups can enhance their training of various work groups. Small businesses that lack resources can participate in sectoral training or train through intermediary organizations such as temporary help agencies. Government can support such training, either indirectly through diverse organizations, or directly, as in the support now given by the Department of Labor and by the Small Business Assistance Programs in various federal agencies.

Worker benefits and protections. Non-traditional workers receive fewer benefits—be they health care, vacation, unemployment compensation, or pensions—than do full-time workers. Some of this is due to eligibility and coverage definitions; some, to improper company record keeping; and some, simply to lack of access. These complex issues are not easily resolved. While not all nontraditional workers will, or perhaps should, receive the same benefits as other workers, much can be done to help them obtain access to essential benefits. This raises challenges for corporations, small businesses, labor unions, contracting firms, and temporary help agencies on a number of fronts. Options include: increase the application of already successful models, such as portable pension plans; broaden eligibility requirements; and keep better records so that workers’ potential wages and benefits can be properly ascertained. While these solutions may at first appear to be disadvantageous to employers because of their costs, to labor unions because they encourage nontraditional work, and to temporary help organizations because it reduces their competitive advantage, self-determination and cooperative ventures in fact offer some of the best solutions.

DOWNSIZING AND INSECURITY: MIXED EVIDENCE ON MAGNITUDES

Another aspect of the changing workplace is the increasing job insecurity for some workers. Job insecurity is a concern of workers in both traditional and nontraditional work arrangements, particularly in a dynamic economy characterized by high rates of job dislocation as well as job creation. It arises from worker concern both about being displaced (losing a job) and about having difficulty finding another equally desirable one. Job insecurity includes both lack of job stability (job change) and workers’ perceptions about job security. Job stability can be measured in terms of how long jobs last and whether there has been a decline in job tenure. Job security, however, is more subjective: workers may voluntarily change jobs more often when economic times are good or change jobs less often when they are more concerned about job security and see fewer opportunities. Involuntary job loss clearly provides one measure of job insecurity.

How much value do workers place on job security? While loss of a job is generally an unpleasant experience, a highly skilled and highly mobile workforce may place a lower value on job stability and may even value voluntary job change and job variety. Concern about job security probably diminishes for many workers during periods of low unemployment when the risk of long periods of unemployment is less.

Many people believe job insecurity has increased in recent years, despite low unemployment rates that would seem to indicate increasing job security. The 1980s and 1990s have been marked by concern about "displaced" workers—those who permanently lost their jobs because their plant or company closed or moved, there was insufficient work for them to do, or their positions or shifts were abolished. In the mid-1990s, several major news publications ran stories on the extent of job displacement in the U.S. workforce, with the implication that job insecurity had increased.30 Yet during 1995 and 1996, employment actually rose by 5 million and the unemployment rate fell to its lowest level since the end of the 1990–1991 recession.

Nevertheless, under strong labor market conditions, workers will lose jobs. Such "job churning" is expected even in a strong economy. The mid-1990s stories in the media about job displacement reflected the number of workers displaced during the early-1990s recession, a number certainly greater than the number who had been displaced in the late 1980s and greater still than the number displaced a decade earlier. During 1991 and 1992, 5.4 million workers were displaced; about half of them—2.8 million—were long-tenured workers, workers who had held their jobs for three or more years.31

Labor market recovery from the 1990–1991 recession was slow compared to recoveries from earlier recessions. But when economic activity accelerated in 1993 and 1994, both the level and the risk of job displacement began to fall. Between 1993 and 1994—a period of strong labor market conditions—2.4 million long-tenured workers were displaced from their jobs, 0.4 million fewer than were displaced between 1991 and 1992. The displacement rate, which reflects the likelihood of job loss during specific periods, fell from 3.9 percent in the 1991–1992 period to 3.2 percent in 1993 to 1994.32 BLS data show that during the 1995–1996 period, the number of workers displaced fell further to 2.2 million, and the displacement rate to 2.9 percent. 33

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Who are displaced workers?

Of the 2.2 million workers displaced in the most recent period, 83 percent were reemployed when surveyed in February 1998, a considerable improvement over the 75 percent reemployment rate found among workers displaced during 1991 to 1992, a period of much poorer labor market conditions. 34

While most displaced workers eventually become reemployed, they often experience large and persistent earnings losses. Annual earnings of displaced workers in one study fell an average of 25 percent from the year prior to job displacement. One year after displacement, their average earnings remained 15 percent below the earnings of similar nondisplaced workers. During the 7 or more years following job loss, their average annual earnings were 6 to 12 percent below expected levels. 35 On average, however, individuals who completed the Department of Labor’s dislocated worker training program and entered employment, exceeded 100 percent of their pre-dislocation wages during the 12 months ending in June 1998.

JOB TURNOVER: MIXED EVIDENCE FOR THE 1980s, SOME SHIFT UP IN THE 1990s

Though media accounts sometime suggest that longterm job attachments are becoming an artifact of the past, the evidence is actually mixed. While the average worker holds nine jobs by the time he or she reaches age 32, high rates of job change have always been found among students and young workers. As in earlier eras, job attachment today grows as workers mature and settle into their careers.

On the other hand, the American worker has some reason to be concerned about job stability and to make every effort to keep skills current and adaptable in the event that job change becomes inevitable. Among men (but not women) in their middle and later working years, the median years of tenure with the current employer have decreased. 36

Job stability overall declined modestly in the first half of the 1990s, but decreased rather sharply for those workers who had already accumulated a fair amount of job tenure. Reductions in job stability in the first half of the 1990s were greater than those of the 1980s. More significantly, in the first half of the 1990s, more-tenured workers experienced declines in job stability. This contrasts with the 1980s, in which the declines in job stability were concentrated among young, less-skilled, less-tenured workers. 37

Thus, while longterm job attachments continue to be important for American workers, they are becoming somewhat less universal. In the future, workers must be ready to manage the changes and dislocations they may face in a rapidly changing economy.

THE FUTURE

Technological change and international competition have placed a premium on workers who are educated and highly skilled. Even if future labor markets are not as tight as those today, there is every reason to believe that the workplace changes that created today’s demand for skilled workers will continue. Workers with post–high-school education and training will have ample opportunities in the workplaces of the future.

The need for skilled workers will be reinforced by continuing changes in how companies and other organizations operate, such as use of work teams and increased worker autonomy. Employers of the future will place increasing value on workers who not only can operate the tools of tomorrow, but who also can find ways to increase their company’s productivity and earnings.

As the workplaces of the future respond to technological change and global competition, as well as the needs of workers, the use of nontraditional employees, such as contingent workers, independent contractors, and employees of temporary help agencies, will likely rise. With the increase in these staffing arrangements, continued attention is needed to ensure that these workers receive worker protections. Additionally, these workforce trends may result in declining job stability. Workers must be ready to manage the changes and dislocations they may face by keeping their skills up to date.


14 Steven Hipple, “Contingent work: results from the second survey,” Monthly Labor Review, November 1998, p. 25.

15 The Bureau of Labor Statistics collected data on contingent and alternative work arrangements in 1999 but at the time of this writing, these data were not yet available.

16 Hipple, pp. 22-35.

17 These categories of alternative work arrangements overlap with the category of contingent workers.

18 Sharon R. Cohany, “Workers in Alternative Employment Arrangements: A Second Look,” Monthly Labor Review, November 1998, pp. 3-21.

19 Chris Tilly, “Reasons for the Continuing Growth of Part-time Employment,” Monthly Labor Review, March 1991, p. 10-17; See U.S. Department of Labor, Bureau of Labor Statistics, “Household Data Annual Averages, Employed and unemployed full- and part-time workers by age, sex, and race,” http://stats.bls.gov/pdf/cpsaat8.pdf.

20 John F. Stinson, Jr., “New Data on Multiple Jobholding Available from the CPS,” Monthly Labor Review, March 1997, p. 4.

21 Susan N. Houseman, “Temporary, Part-time, and Contract Employment in the United States: A Report on the W.E.Upjohn Institute’s Employer Survey on Flexible Staffing Policies,” (Report to the U.S. Department of Labor) November 1996, revised June 1997, p.12.

22 Houseman, p. 20.

23 Houseman, pp. 24-29.

24 Cohany, pp. 3-21.

25 Cohany, p.18.

26 U.S. Department of Labor, Bureau of Labor Statistics, Contingent and Alternative Employment Arrangements, February 1997,” USDL 97-422, December 2, 1997.

27 Anthony P. Carnevale, Lynn A. Jennings, and James M. Eisenmann, “Contingent Workers and Employment Law,” in Contingent Work: American Employment Relations in Transition, ed. Kathleen Barker and Kathleen Christiansen (Ithaca, N.Y.: Cornell University ILR Press, 1998).

28 Report and Recommendations of the Commission on the Future of Worker-Management Relations, December 1994, p. 35.

29 U.S. Department of Labor, Report on the American Workforce, Chapter 2—The Many Facets of Skills, September 1999, forthcoming.

30 For a series of seven articles on the “Downsizing of America,” see New York Times, March 3 through March 8, 1996. Also see USA Today, February 19 - 21, 1996 for another series on worker dislocation fears, and Business Week, March 11, 1996 for a story entitled “Economic Anxiety.”

31 Jennifer M. Gardner, “Worker Displacement: a Decade of Change,” Monthly Labor Review, April 1995.

32 Steven Hipple, “Worker Displacement in an Expanding Economy,” Monthly Labor Review, December 1997.

33 Steven Hipple, “Ongoing Labor Market Strength Reduces Worker Displacement.” Monthly Labor Review, 1999 (forthcoming).

34 Hipple, 1999.

35 Ann Huff Stevens, “Persistent Effects of Job Displacement: The Importance of Multiple Job Losses,” Journal of Labor Economics, 1997, vol. 15, No. 1, pp. 165-188.

36 The most recent BLS data show that for men between 35 and 44 years of age, median years of tenure with their current employer was 6.5 years in January 1991, and it was 6.1 and 5.5 years in February 1996 and 1998, respectively. In contrast, in January 1983 and 1987, median tenure for this same age group of men was 7.3 and 7.0 years, respectively. Similarly, median years of tenure in current job was down for men between the ages of 25 and 34, though not quite so dramatically. For these younger men, median tenure in current job was 2.8 years in February 1998, down from 3.2 years in January 1983. Bureau of Labor Statistics, “Employee Tenure in 1998,” News release, September 23, 1998, http://stats.bls.gov/news.release/tenure.toc.htm.

37 David Neumark, Daniel Polsky and Daniel Hansen, “Has Job Stability Declined Yet? New Evidence for the 1990s,” Working Paper No. 6330, National Bureau of Economic Research, Cambridge, Massachusetts, 1997.

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