January 22, 2011
In 2010, the economy reclaimed little more than 1.1 million of the 8.4 million jobs lost in the Great Recession, barely keeping ahead of what’s considered natural growth in the working population. Temporary workers accounted for more than a quarter of those gains.
That isn’t unusual. Temps typically are the first to return to the workplace after a downturn because employers uncertain about the pace of recovery can release them at the slightest hint of economic weakness – without major legal or financial consequences. Desperate job-seekers may prefer temporary work to no work at all, and temporary jobs can turn into permanent positions.
But this time could be different, says Jeffrey A. Joerres, chairman and CEO of Manpower Inc. He notes that the recovery is 18 months old, and most economists expect the unemployment rate, currently 9.4 percent, to stay above 9 percent this year. Some 6.4 million Americans have been unemployed for more than six months, a record 44 percent of job-seekers. “Companies have to be more flexible because of the uncertainty and the slowness and unevenness of demand,” says Joerres.
The economic consequences can be significant. The prevalence of temporary workers can keep a lid on wages for everyone. Since they often don’t get benefits and can’t depend on their positions to last very long, temporary workers may be less willing to spend money, creating a drag on the recovery. A less stable workforce further exaggerates the divide between the haves and the have-nots.
More kinds of companies are tapping the temp market, from high-tech to manufacturing. Today, the “Kelly Girl” is likely to have an advanced degree in civil engineering. The shift in the temp workforce has paralleled structural changes in the labor market in which highly skilled workers are getting the jobs –whether temporary or not. Less-skilled workers don’t have the same leverage. “There are not going to be anywhere near the number of jobs for non-degreed persons to access a middle class life.” says Carl T. Camden, president and CEO of Kelly Services Inc. “Permanent employment is an oxymoron. The whole idea of security is laughable.”
Recent college graduates are among those feeling the pinch – and their unemployment rate now hovers near 5 percent, the highest since data collection began in 1992. One 2010 grad spent months at a hedge fund working what he says were 100-hour weeks for $500 a month, hoping for a permanent job that never materialized. He then bounced around working at $14-an-hour accounting jobs with no benefits. (He says he’s finally on the verge of permanent employment in the insurance business and prefers to remain unnamed because he hasn’t yet received a formal offer.)
A Sign of the Times
“What was once a good leading indicator of future labor demand is now merely a sign of the times ― a ‘just in time hiring’ strategy for companies that continue to focus on cost cutting to drive their bottom line performance,” David Rosenberg, chief economist and strategist for Gluskin Sheff, a Toronto money manager, wrote in a note to clients. That raises troubling questions about opportunities for advancement. Staffing agencies offer some training but that can’t replace the traditional mentoring that helped individuals move ahead in their careers.
With temporary employees, The Channel Group, which develops and manages life science companies, can save $10,000 to $15,000 per year on such things as health care, sick leave, vacation, payroll taxes and unemployment insurance on a $50,000 base salary, estimates Philip Sussman, managing partner. Although interim employees hired through agencies may cost more than a direct hire permanent employee, in part because of agency fees, he says his firm prefers to pay a bit more upfront, if necessary, typically for six months, for the flexibility of knowing whether the candidate is a good fit. The company also can avoid higher unemployment insurance premiums and potential litigation expenses if disgruntled workers are forced out the door. Sussman notes that California labor laws, in particular, are very onerous, making it both difficult and costly to release an employee who doesn’t meet expectations.
Flexibility in the face of uncertainty is one reason Harry Griendling both reduced staff and increased temporary workers from about 5 percent to nearly one-third of his human resources consulting practice, Chester, Pa.-based DoubleStar Inc. “I would like a more stable workforce,” says Griendling, the CEO. “It’s easier to manage and easier to deploy. Having said that, I can only implement what the marketplace will allow me under the umbrella of keeping my company viable.”
In the past, temp workers came in with the same benefits and wages as permanent hires, says David Bergene, president, UAW Local 833 in Sheboygan, Wisconsin. The most recent contract his local negotiated with Kohler Corp., the maker of plumbing fixtures, created a two-tiered system of payment for both temps and permanent workers. The bottom line, Bergene says, is that in a few years, workers doing the same work could be earning 65 percent of their peers and with fewer benefits. Nearby Harley-Davidson and Mercury Marine recently signed even more onerous two-tiered contracts that pay temps less and eliminate benefits.
The Gig Economy
It’s hard to measure the exact number of what Tina Brown once famously called the “gig economy.” Temps who get jobs through agencies are a minuscule slice of the nonfarm workforce, just 1.7 percent at 2.2 million workers. There’s also a much larger pool of individuals known as contingent workers, independent contractors, free agents, or consultants. The Labor Department has tried in the past to measure the size of this gig economy but found it next to impossible.
In the Great Recession, temporary employees lost a stunning one-third of their ranks, according to Staffing Industry Analysts, a Mountain View, Calif., research group, and the 2010 rebound in temps has been just as dramatic, surging as a percent of the workforce. Barry Asin, president of Staffing Industry, says a survey of private employers indicates that the temporary-employment sector is likely to include 12 percent of the workforce in the next few years, up from 8 percent in 2005.
Asin says temp staffing penetration has simply returned to the levels last seen at the bottom of the 2001 recession. But, if temps continue to blaze ahead at this heated pace, then something truly different is at hand. The next six months will tell.
The most recent Federal Reserve survey of the economy suggests that the job market is firming a bit. But Manpower’s Joerres says that while he’s cautiously optimistic about the return of more traditional jobs, the unusually drawn out downturn in permanent employment signals the danger isn’t over. “Long-term unemployment is turning into structural unemployment,” he says.
Temporary work once provided a bridge for workers to satisfying, secure jobs. As employers pick through the rubble of the Great Recession the link between temps and better jobs may have become a bridge too far.
Increase in Temp Workers is Both Encouraging, Concerning (USA Today)
Temporary Employment Agencies See an Uptick (Los Angeles Times)
Temp-Jobs Market Rebounds (Wall Street Journal)