The Temp-Nation of America An increasing portion of the labor market is characterized by what many observers call “just-in-time employment.” This sector of the labor market is more commonly known as the contingent labor market, consisting of temporary and contract employees.
Temporary workers are the fastest-growing segment of the workforce, according to the Bureau of Labor Statistics. The market for temporary and contract labor has grown considerably over the past three decades:
? In 1972, only 214,000 temporary workers were part of the American workforce. ? By June 2003, U.S. companies were using 2.2 million temporary workers.
The temporary worker industry is big business. In the third quarter of 2003, the American Staffing Association reported that U.S. sales of temporary and contract services totaled $14.5 billion.
The industry is poised for further explosive growth this decade. According to government figures, personnel supply services will be the largest growth industry in the United States between now and 2010 in terms of the number of jobs it will create.
Temp workers will also help to fuel the explosive growth of other industries. For example, two of the fastest-growing industries for the rest of this decade will be data processing and health services. Companies in these fields are major clients of the temporary staffing industry.
The deployment of temporary workers allows companies to use organizational structures that are lean, highly flexible, and quick to respond to surges and dips in demand.
This is precisely what futurist Charles Handy forecasted in his book The Age of Unreason in 1989. As Handy foresaw with uncanny precision, we’re seeing the emergence of the “shamrock organization,” which is composed of three parts, like the leaves of a shamrock.
American companies are increasingly paring their work forces down to a core group of permanent employees who add the most value. The members of this core group earn high salaries and full benefits. They are surrounded by a much larger group of temporary workers who can be brought in and sent away as demand fluctuates. The temps are paid hourly and the benefits they receive, if any, are limited.
The third leaf Handy envisioned consists of all the outsourced functions of the organization. We will discuss outsourcing and off-shoring as Trends #5, 6, and 7.
The shamrock organization allows a business to expand and contract in response to customer demands, new technologies, or booms and busts in the economy.
Increasingly, the vast majority of companies are using temps for strategic reasons, rather than to save money. The Conference Board found that 81 percent of employers who hired contingent workers sought labor flexibility, while only 12 percent cited cost reduction as a factor.
This conclusion is backed up by research from the W.E. Upjohn Institute. Its study found that 52 percent of executives cite unexpected increases in business as an important reason for employing temporary workers. Another 47 percent cited the need to fill a vacancy temporarily. Only 12 percent reported that they use temps to save the costs of wages and benefits.
In other words, most companies are not hiring temps to fill customer orders because they’re too cheap to hire full-time employees. They’re doing it because customer orders are pouring in faster than firms can recruit, hire, and train new people to do the job ? and in an economy that rewards speed, calling in temporary reinforcements is often the quickest way to keep up with demand.
Research studies have demonstrated the economic wisdom of using temps instead of hiring new employees. According to a study published inDecision Sciences journal, businesses that engage temporary and contract employment services do better. “Increased reliance on contingent labor … is associated with superior subsequent performance … [and] no increase in systematic risk.”
Economists Nandkumar Nayar of Lehigh University and G. Lee Willinger of the University of Oklahoma compared firms in a carefully constructed sample and found that earnings, gross margins, and stock returns improved after the increased use of contingent labor.
Based upon the preceding discussion, we predict the following developments:
First, a new category of contingent employees ? itinerant executives ? will emerge over the decade. These professionals will move from one senior-level assignment to another. Although many assignments will last only a few months, these executives will often earn more than they could in the same period in a permanent position. The ability to earn 1 percent of their former salary in a single day will lead many high performing executives at Fortune 500 companies to opt for itinerant careers.
Second, if you are beginning your professional life, expect to count yourself at some point during your lifetime among those workers holding alternative employment arrangements. Some career counselors estimate the average American worker will have over six different careers after school. Not jobs, but careers. As Heminia Ibarra of the prestigious business school INSEAD outside Paris notes in her book Working Identity, published last year by Harvard Business School Press, each big career transition will take three to five years.
Third, the growing use of temps, independent contractors, consultants, part-time employees, and outsourced labor will change the way both employers and employees think about jobs, loyalty, and the pursuit of goals. We predict this will put greater pressure on human resources to manage diverse groups of workers ? often with wildly divergent values and attitudes. “It’s a very different environment than it was only a few years ago,” says John A. Challenger of outplacement firm Challenger, Gray & Christmas. “The challenge is to build synergy, teamwork and a cohesive culture from all the fragments.”
Fourth, because of this uncertainty, we anticipate some states will expand their public employee residence requirements to include temporary and contract workers. This will prevent many outsourcers from using out-of-state call centers and processing facilities with off-shore workers (which we will discuss in Trend #6). We expect many political battles in state legislatures during the next decade over this issue.
Fifth, we forecast an increase in the number of professional freelancers in the U.S. who are motivated primarily by their desire to control the number of hours worked, rather than by the entrepreneurial spirit to launch and develop their own business. These self-employed workers will increasingly use Web-based clearinghouses to post their availability and to be matched with employers looking for temporary or project-based help.
References List :
1. The Age of Unreason by Charles Handy is published by The McGraw-Hill Companies. ⓒ Copyright 1989 by Charles Handy. All rights reserved. 2. To download the report "Financial Implications of the Decision to Increase Reliance on Contingent Labor," visit the Decision Sciences website at: www.decisionsciences.org/dsj/Files/32_4_661.pdf 3. Working Identity: Unconventional Strategies for Reinventing Your Career by Herminia Ibarra is published by Harvard Business School Press. ⓒ Copyright 2003 by Herminia Ibarra. All rights reserved.
