Volume 6, No.3
Fall 2000

Feature Articles:
The Workforce Info Center (WIC): New Employer and Jobseeker Resource

WIC / Skills Match Link

America's Jobline

Contingent Workers and the New Economy

Archives

Contingent Workers and the New Economy
By: Franklin D. Latin

For more on Contingent and Alternative work arrangements, go to the Bureau of Labor Statistics website: http://stats.bls.gov/news.release/conemp.tn.htm

The growth and significance of the contingent workforce has been viewed by many as evidence of the emerging new economy. This new economy is one in which employers place heavy emphasis on labor flexibility. Employers who are able to adjust labor requirements enjoy a competitive advantage over those with less flexible human resource policies. Due to the structure and characteristics of the New Economy, the contingent workforce has become an increasing segment of the labor market.

Although the full time, permanent job remains the standard work arrangement many variations to the standard are now common throughout virtually every industry. However, categorizing the many variations can become confusing as the definitions of alternative and contingent labor vary widely. The Bureau of Labor Statistics (BLS) defines contingent workers as persons who hold jobs that are not expected to last for longer than one year. Workers with alternative employment arrangements are those who work part-time, independent contractors, on call, temporary help agency workers, or those who work for a contract firm. Contingent workers and workers with alternative employment arrangements are not mutually exclusive. Therefore a worker could be classified as both contingent and have alternative employment arrangements. In this article, the definition of contingent workers will be expanded to include those who do not expect their jobs to last more than one year as well as those with alternative employment arrangements, as it often does.

Administrative support, professional service, and labor occupations are areas where we would expect to find high numbers of contingent workers. They may be found in all wage categories, from entry level clerical and cleaning occupations to highly paid athletes and entertainers. The general notion of contingent work as being low skilled and low wage jobs does not adequately reflect the entire scope of the contingent workforce. Many occupations such as computer programmers, editors, directors and writers are typically contingent but do not fit the stereotypical picture. In fact, in many cases contingent workers such as software engineers are paid at a higher rate than their full time, permanent counterparts. However we can safely assume that the vast majority of contingent workers are on the lower end of the wage spectrum.

According to the latest Current Population Survey (CPS) data from February 1999, 4.3 percent of all workers in the U.S. were working on jobs that were not expected to last more than a year. Another 9.4 percent were employed in alternative employment arrangements bringing the overall share of contingent workers to roughly 13.7 percent. These figures are down from 1995, the first year CPS began collecting contingent and alternative arrangement information. In that year 4.9 percent of all workers in the U.S. were working on jobs that they did not expect to last more than a year, while 9.9 percent had alternative employment arrangements, reflecting a total share of 14.8 percent. Although their overall share has declined, contingent workers are still very much a part of the New Economy.

One group of contingent workers is distinguished from the others in that they have agreed to short-term employment contracts arranged through temporary agencies. This group of temporary employees is the only part of the contingent workforce that is identified in the Standard Industrial Classification (SIC) structure. Therefore more data are available for this group than the others. Businesses are increasingly turning to temporary agencies or personnel supply firms to supplement their workforce. Historically, this industry has been associated with staffing for seasonal and fluctuating workloads. At these times, firms fear the hiring of permanent staff since they may later be forced to cut employment if the increased activity does not prove sustainable.

The New Economy reflects a market that is less regulated, more affected by international trade, and more subject to rapid change than ever before. Due to this increased uncertainty, firms desire a more flexible labor market. In order to facilitate this, businesses seek to contract labor for a specific purpose and for a specific time period. The added costs of providing benefits, as well as the hiring and firing of permanent personnel, have made temporary help workers the most visible segment of contingent workers and extremely attractive to employers.