Is the Bloom Off the Rose of Contract Workers?

L.A. TIMES Monday, February 24, 1997

The downside of having non-staff employees is becoming more apparent to
companies, some observers say. But others disagree.

In 1993, Time magazine boldly predicted that "contract workers" (non-staff labor)
would soon account for half the nation's work force. Time's prognostication had
sound basis. Embattled corporations were hurriedly downsizing to reduce costs.
Technological advancements were rendering many jobs obsolete. And increasing
numbers of workers were seeking nontraditional employment arrangements, such
as job sharing, part-time work and short-term contract jobs, to complement their
lifestyles. Contract workers--individuals employed for specific tasks of finite
duration --could "plug the labor holes" that America's recessive economy was

But according to David Lewin, vice dean of UCLA's MBA program, the American
labor market, so volatile in the early 1990s, may finally be stabilizing, causing an
Actual decrease in contract work. That's right folks, the "Gold Watch Club" could
be returning to vogue again. "In the short term," says Lewin, "corporations thought they were saving money by using contract workers to keep their head count down. But they're finding out that it's risky business to be dependent upon contractors. You don't have the same internal controls." * * * Lewin joins a growing number of market analysts who are admonishing corporations about the potential "hidden costs" of contract labor. Hiring individuals for limited duration assignments can be unexpectedly expensive, these analysts claim, due to several factors: fluctuations
in productivity, potentially l low returns on investments, "downtime" taken for training, safety hazards, disrupted teamwork and increased supervisorial demands.
Employing contract workers can also occasionally place corporations at risk,
particularly in cases where the contract workers are exposed to confidential
material, trade secrets and other "delicate" corporate materials.

Currently, however, an estimated 12 million contract or "contingency workers" are
employed in the United States, making up nearly 10% of the nation's work force
and generating $39.2 billion in temporary-worker-related billings, according to the Labor Department. The vast majority (8.3 million) are classified as "independent contractors"--self-employed workers who "lease" their services to others. Another
2 million are "on-call employees" who work seasonally or on an "as-needed" basis for select corporate clientele.

Nearly 1.2 million additional workers, mostly clerical laborers and students, secure
their employment through temp agencies. And, lastly, another 650,000 operate with
formalized contractual agreements for specific short-term projects. Historically,
hiring contingency workers has seemed a great economic tactic for cash-strapped firms. The workers typically require no health benefits, payroll and unemployment taxes, or pension plan contributions. In many cases, they can beterminated by the firms for far less cause than their permanent counterparts. Additionally, according
to a recent Labor Department study, contingency workers tend to be paid less
than full-time personnel for similar work: In 1995, contingency workers garnered
an average of $285 a week, while permanent workers earned $416. * * * UCLA's Lewin isn't prophesying the demise of the contract worker labor market. He
believes that demand for contingency clerical staff, as well as for certain lower-level data processing and sales personnel, will continue to rally. But the highest-skilled contract workers, particularly managers and those who interact with corporate
customers, says Lewin, may find their services less in demand. Ron Neville,
executive director of the Osborne Group of Toronto, a 20-person firm of "contract executives" disputes this prediction. "We're definitely seeing an increased demand for our services rather than a decrease," says Neville, whose company's "for hire" personnel include CEOs, top-level executives and human resources and marketing specialists, who "loan out" their services to corporations in the U.S. and Canada. "Companies in transition, who are experiencing fast growth or need to achieve a new level of sophistication, or who are simply in trouble and need help, are more
frequently seeking skilled outsiders who can help for the short-term--maybe three months to a year--until they're over their hurdles," Neville says. Phyllis Murray, area director of AccuStaff Accounting Pros, a West Los Angeles firm specializing in
temporary accounting support, concurs. Her company employs a range of skilled accounting professionals--from accounting clerks and data-entry workers to vice presidents of finance--who accept short-term and part-time assignments at various Southland firms. "It's definitely a busier time for us than in past years," Murray says. "We're getting more calls [from employers], and there are increases in openings at all job levels." Some industries, particularly banking, construction, technology and teaching, are showing no slowdown in their need for contingency workers, due to the volatility of their marketplaces. Will the job market for contingency workers
increase or decrease in coming years? Prognosticators remain divided. In view of the constant vicissitudes of the American economy, and the break-neck pace of technological advancement, perhaps only a modern-era Nostradamus could make an accurate prediction.

©Copyright Los Angeles Times

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