Leadership: Shocker: 40% of Workers Now Have ‘Contingent’ Jobs, Says U.S. Government…U.S. General Accounting Office is a Startling Statistic: 40.4% of the U.S. #Workforce is now made up of Contingent Workers—That is, People who Don’t Have what We Traditionally Consider Secure #Jobs.

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Tucked away in the pages of a new report by the U.S. General Accounting Office is a startling statistic: 40.4% of the U.S. workforce is now made up of contingent workers—that is, people who don’t have what we traditionally consider secure jobs.

Senator Kirsten Gillibrand, D-NY (Photo credit: MANDEL NGAN/AFP/Getty Images)

There is currently a lot of debate about how contingent workers should be defined. To arrive at the 40.4 %, which the workforce reached in 2010, the report counts the following types of workers as having the alternative work arrangements considered contingent. (The government did some rounding to arrive at its final number, so the numbers below add up to 40.2%).

  • Agency temps: (1.3%)
  •  On-call workers (people called to work when needed): (3.5%)
  • Contract company workers (3.0%)
  • Independent contractors who provide a product or service and find their own customers (12.9%)
  • Self-employed workers such as shop and restaurant owners, etc. (3.3%)
  • Standard part-time workers (16.2%).

In contrast, in 2005, 30.6% of workers were contingent. The biggest growth has been among people with part time jobs. They made up just 11.9% of the labor force in 2005. That means there was a 36% increase in just five years.

The report uses data from the Bureau of Labor Statistics. It begs an important question: Are traditional jobs—the foundation of our consumer economy–running their course and going the way of the typewriter and eight-track tape? And if so, what do we do about it?

 

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This report is important because it’s the first time since the Great Recession that the U.S. government has taken stock of how many people are working without the protections that come with traditional, full-time W-2 jobs. It reinforces estimates of the independent workforce that have come from observers ranging from the Freelancers Union to Faith Popcorn and are in a similar ballpark.

Many people in this workforce are struggling economically. In a note issued with the report, Senators Patty Murray (D-WA) and Kirsten Gillibrand (D-NY) write, “Because contingent work can be unstable, or may afford fewer protections depending on a worker’s particular employment arrangement, it tends to lead to lower earnings, fewer benefits, and a greater reliance on public assistance than standard work.”

And, as the reports point out, contingent workers often lack employer-provided benefits such as health insurance—and access to the government safety net traditional W-2 workers have when their work dries up. It notes, “[fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][K]ey worker protection laws generally apply to employees and therefore do not apply to independent contractors, self-employed workers, and contingent workers who are not classified as employees.”

Certainly, some experts believe the contingent workforce should be defined more narrowly. If the definition of these workers only includes agency temps, on-call workers and contract company workers—which the government calls “core” contingent workers–this percentage of the working population in contingent jobs makes up 7.8%. Compared to the general working population, this group is younger, more likely to be Hispanic and to have no high school diploma or GED. But this group is still pretty varied demographically. The median age is 40.7, compared to 41.9. And 16.8% of contingent workers have some college education.

Meanwhile, the findings about contingent workers are pretty startling when you look at them as a whole. Consider some of the challenges they face.

  • Higher poverty rates: While only 10.8% of standard full time workers have a family income of less than $20,000, 33.1% of core contingent workers—meaning agency temps, on-call workers and contract company workers—report family incomes this low. (In comparison, 18.8% of independent contractors are in this income range).
  • Low pay: Contingent workers had median hourly earnings in 2012 of $11.95, compared to $17 for workers with standard full-time jobs. They earned about 10.6% less per hour on average. Reflecting the fact that many contingent workers are involuntary part-timers and can’t always get work when they want it, their median annual earnings were $14,963 vs. $35,000 for full-time workers.
  • Greater job instability: Among core contingent workers, 28.5% said they were laid off in the past year, compared to 18.4% of independent contractors, 8.2% of standard full time workers and 5.9% of standard part time workers.
  • Less access to to private health insurance: Among contingent workers, 61% were covered by any private insurance plan, compared to 77.9% of workers in standard jobs. Some may be receiving government heath benefits, but I didn’t see a statistic for how many in the report.
  • Higher reliance on public assistance: Among contingent workers, 11.1 percent were part of a family in which someone received Supplemental Nutrition Assistance Program (SNAP) benefits—which used to be called food stamps–vs. 5.6% of workers in standard jobs. Contingent workers also had a higher rate of using other public benefits. Among these workers, 1.8% received cash benefits from a state or country welfare program, compared to .4% of workers in standard jobs. And 1% received Supplemental Security Income (SSI), compared to .3 percent of workers in standard jobs.

Another trend the report underlines is the fading of good, blue-collar jobs–traditionally a source of stable, middle class jobs for men. It is increasingly becoming contingent work, assigned through agencies.

In 2009, 41.2% of staffing agency jobs were for blue collar work, compared to 27.8 in 1990. At the same time, traditional office work is less commonly done through agencies. Only 23.4% of staffing agency workers now do this administrative work, compared to 41.8% in 1990.

Of course, not all contingent workers are hanging by a thread economically. The report shows there are really two worlds of contingent workers. Self-employed folks and independent contractors are pretty happy with their situation overall, compared to other continent workers. They’ve often chosen to run their own businesses because they love the freedom and independence, in my experience.

Asked if they would prefer a different type of employment, only 7.5% of self-employed people and 9.4% of independent contractors said yes. In stark contrast, 48.3% of on-call workers and day laborers and 59.3% of agency temps said yes.

But self-employed people and contractors are vulnerable, too. Whether they are plumbers, doctors or owners of local clothing boutiques, they generally are sole proprietors who don’t get paid unless they show up to work. And with the economic models of many industries changing in recent years—and making them less profitable—and taxes on upper-middle income Americans higher than ever, many of these folks, especially those in high-cost states, have less in emergency savings to protect their families than you might think. Many have put a big chunk of their savings into starting their businesses or practices and have substantial overhead to pay.

So what do we do with this new information? As the senators point out, “Information about contingent employment helps to determine whether the existing framework of labor market protections, predicated on employer-employee relationships, will continue to be appropriate and adequate in the future.”

Do we revamp our social safety net to reflect the fact that so many million of Americans are untethered from employers who once provided security? Should we crack down on businesses that try to avoid paying a living wage or benefits through new legislation–or amp up enforcement of existing labor laws, even though they were created long before our current digital economy existed? Should we revamp our education system so all Americans are prepared for the reality that they’re nearly as likely to become free agents as to have a traditional job–and provide  more support and incentives for the self-employed?

There are no easy answers, but it’s clear from this report that it’s time to start asking these questions and looking for fresh–and realistic–answers.

 

Forbes.com | May 25, 2015 | Elaine Pofeldt 

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