Politics, Workforce Development

Is this the hour of reckoning for contingent labor?

Warehouse employees of the world’s most valuable company walk hand-in-hand into the brisk Minnesota morning to protest a canceled shuttle route. Rideshare drivers crowd the busy sidewalks of San Francisco’s Market Street to advocate for unemployment insurance and worker’s compensation. A neatly formatted business memo, signed by nearly 1,000 full-time employees, is presented to leaders of the world’s preeminent internet company to protest the termination of contractors ranging from Seoul to Mountain View. 

Each of these scenes, taking place in the last 12 months, draws attention to an essential and divisive aspect of today’s economy – contingent or contract-based work. Contingent labor is one of several converging forces (globalization and automation being others) that have drastically shifted the dynamic between workers and employers. This shift has fueled the growth of today’s most innovative companies and contributed to (what was) a record unemployment rate but has also shed light on the lack of benefits afforded to those outside the archetype of full-time employment. In this post, I’ll define what it means to be a contingent worker – its benefits and risks – and why it’s time for our government to reevaluate how we think about employment altogether. 

Staffing agency HCMworks defines contingent workers as “freelancers, independent contractors, consultants, or other outsourced and non-permanent workers who are hired on a per-project basis.” This broad category can include workers as diverse as freelance designers, highly-paid business consultants, or retail employees. Many of today’s most innovative companies and their funders (e.g., Softbank and Uber) use gig or app-based work to quickly scale their operations without needing to account for long-term labor costs (including its associated employee benefits.) This model has connected job-seeking individuals with employers at previously unheard of scale while expanding entry to industries that were historically difficult to enter, such as taxis or hotels. 

The rise of contingent labor can also be tied to another source – technology companies. According to the NY Times, “Contingent labor accounts for 40 to 50 percent of the workers at most technology firms,” translating to nearly 122,000 temps, vendors, and contract workers at Google alone (virtually the only large tech company to release this kind of data). Organizations bring in contractors for specific time-bound projects such as marketing campaigns or new technology capabilities in emerging or experimental areas. Employing individuals in this way allows organizations to target specific, in-demand skills while only budgeting for the duration of the project (saving approximately $100,000 annually per person.) This model is likely to expand as the shelf-life of employee skills shortens, and companies target increasingly specific capabilities. For those who are looking to expand their employee base, contingent workers can serve as a valuable recruiting pipeline, with some companies converting up to 47% of their contractors to full-time employees. 

Contingent work can provide immense value to individuals as well. Contract-based jobs can often mean higher pay while offering flexibility to those looking to take on a second job, pursue a passion project, or care for a family. Access to a network of opportunities, such as in the gig economy, ideally provides individuals the ability to seek out companies with the highest pay, the best culture, or the most innovative products. Contractors, particularly freelancers, often feel a sense of creativity and control in their work that they fear may be missing otherwise. For those with nontraditional backgrounds (e.g., lack of a college degree), these roles can also offer a valuable and accessible pathway to full-time employment in high-paying fields.

The reality for many is that, without the government-mandated protections of full-time jobs, promises of flexibility and access have given way to uncertainty and inequality – what the NY Times calls, “a distinctly modern version of the bait-and-switch.” In a country where benefits are seen primarily as discretionary recruitment and retention tools, a distinct division is likely to grow between those with access to company events, facilities, and world-class training programs, and those without. The result, as we’ve seen this week, is likely to be a massive gap in our national safety net – or as Warren Buffet said, “you only find out who is swimming naked when the tide goes out.” 

Some groups are already sounding the alarm about the lack of protections afforded to contingent workers. In California, labor unions such as Gig Workers Rising and the California Federation of workers have been central in the push for AB5, which broadens the definition of “employees” to include any worker for whom their job forms a part of a company’s core business (e.g., a driver for a rideshare business.) This type of re-classification would provide workers with benefits such as sick leave and unemployment benefits. These groups are also looking to build on the success of the Domestic Bill of Rights, which pushes for a higher minimum wage, overtime pay, and termination notices. However, as companies look to reverse these bills or create new classifications, it’s clear we must look beyond re-classifications to a complete rethinking of how we view employment altogether.

The time has come for us to create a strong foundation of protections for all workers regardless of their employment status. First and foremost is detangling health care insurance from full-time employment while guaranteeing it for all. The current system, only as old as WWII, provides employers with remarkable power and creates unnecessary uncertainty for workers. We should start viewing training as a similarly valuable commodity and begin exploring programs akin to COBRA for re-training. Lastly, we need to expand policies that benefit all workers, including unemployment insurance and paid leave, while eliminating non-compete clauses and mandatory forced arbitration. Companies will find that these policies provide long-term upside by increasing retention and motivation – saving them HR costs and contributing to their culture. For these policies to go into effect will require influential voices from labor groups as well as the government, but they will strengthen and stabilize the economy in the long run.