The challenges of the growing contingent workforce

Contingent workers comprise about 16 percent of the national workforce, growing by 9 million between 2005 and 2015, according to the latest estimate. The U.S. Department of Labor describes these workers as those without “an implicit or explicit contract for ongoing employment,” meaning they are employed in jobs that come with an expiration date from the start. It includes independent contractors, those hired through temp agencies, and contract company workers.  In the Pittsburgh Metro area, the temp industry employs about 16,000 people and is expected to grow by 13 percent over the next decade. Two-thirds are prime-age workers (25-54 years old).

Economists believe this rise of the contingent workforce is transforming the labor market. Beyond hours worked and wages, it affects a slew of social guarantees – minimum wage, overtime, collective bargaining, unemployment insurance, employer-sponsored health insurance and pensions – associated with the traditional employer/employee relationship. While some benefit from this trend (e.g., those interested in temporary work only), there are concerns about workers seeking permanent, full-time employment who end up taking contingent jobs. Some may be working in a full-time capacity for a single employer, yet they are classified as a contractor, not an employee. As such, they have less access to employer-sponsored benefits, such as health insurance and retirement savings plans.

Through conversations with local job seekers, Partner4Work hears concerns first-hand about this trend. They convey that contingent opportunities don’t offer benefits or lament it takes too long for a contract-to-hire opportunity to turn into an employee position.

For businesses, there are clear incentives to engage in alternative work arrangements – it allows employers to flex their workforce to meet demand, save money by outsourcing recruitment, and in contract-to-hire arrangements, provides a trial period to see if a worker is a good fit. Despite these incentives, employers may need to take into consideration other changes in the current labor market. As the trend of low unemployment continues, a tightening labor market could lead to increased competition for talent. This could create new opportunities for workers in the contingent workforce to seek more stable work arrangements with traditional benefits.

Author: Edgar Largaespada, MID, Partner4Work research fellow