The Rise Of The Temp Economy: More U.S. Employers Than Ever Want A ‘Disposable Workforce’

EAD ^ | 01/02/2015 | Michael Snyder

[SeekAndFind]

In this day and age it seems like almost everything is disposable, and many employers have found that they can make a lot more money if they have a workforce that can be turned on and off like a faucet. In America today, there are more than 17 million “independent workers”, and they represent a bigger share of the workforce than ever before. Federal laws give a lot of protection to “full-time workers”, but for temporary and contract employees it is a much different story. Temp workers don’t get health insurance, vacation time or retirement benefits. They are simply paid for the limited amount of time that they are needed and then they are disposed of immediately. There has always been a role for such workers in our economy, but these days some of the biggest corporations in the entire country are getting rid of “full-time workers” and replacing them with temp workers just so that they can make a few extra bucks. As a result, the ranks of the “working poor” continue to expand, and the decline of the middle class is accelerating.

Steven Hill, a senior fellow with the New America Foundation and the author of “Raw Deal: How the Uber Economy and Runaway Capitalism Are Screwing American Workers“, says that the rise of the “1099 economy” is fundamentally shifting the balance of power between employers and employees…

This practice has given rise to the term "1099 economy," since these employees don't file W-2 income tax forms like any regular, permanent employee; instead, they receive the 1099-MISC form for an IRS classification known as "independent contractor." The advantage for a business of using 1099 workers over W-2 wage-earners is obvious: an employer usually can lower its labor costs dramatically, often by 30 percent or more, since it is not responsible for a 1099 worker's health benefits, retirement, unemployment or injured workers compensation, lunch breaks, overtime, disability, paid sick, holiday or vacation leave and more. In addition, contract workers are paid only for the specific number of hours they spend providing labor, or completing a specific job, which increasingly are being reduced to shorter and shorter "micro-gigs."

Yes, there have always been temp agencies. And there has always been a need for workers that can come in and do a job on a short-term basis. But today, many of the largest and wealthiest corporations in America are purposely getting rid of “full-time workers” and instead are bringing in “independent contractors” to do the exact same jobs.

In some instances, the full-time workers that get fired are actually brought back as the new “temp workers”…

Merck, one of the world's largest pharmaceutical companies, was a vanguard of this underhanded strategy. When it came under pressure to cut costs, it sold its Philadelphia factory to a company that fired all 400 employees--and then rehired them back as independent contractors. Merck then contracted with the company to carry on making antibiotics for them, using the exact same workers.

An Arizona public-relations firm, LP&G, fired 88 percent of its staff, and then rehired them as freelancers working out of their homes, with no benefits. Even Outmagazine, the most-read gay monthly in the U.S., laid off its entire editorial staff and then rehired most of them as freelancers, without benefits and with salary cuts.

All of those companies should be absolutely disgusted with themselves.

How can the executives responsible for those decisions even sleep at night?

Don’t they understand what they are doing to people?

When you go from being a full-time worker to being on “temp status”, the changes can be quite dramatic. If this has ever happened to you, then you know what I am talking about. Having to pay “the other half” of the payroll tax or having to find your own much more expensive health insurance are just two of the big negatives that “independent contractors” have to face…

Suddenly I was responsible for paying for my own health care, arranging for my own IRAs and saving for my own retirement. I also had to pay the employer's half of the Social Security payroll tax, as well as Medicare -- nearly an extra 8 percent deducted from my income. The costs for my health-care premiums zoomed out of sight, since I was no longer part of a large health-care pool that could negotiate favorable rates.

The decline in the quality of our jobs is a theme that I have revisited repeatedly in my writing. In order for us to have a thriving middle class, we need lots of good paying middle class jobs.

But our economy is not producing many of those jobs. Instead, most of the growth has been in low paying service jobs. The Middle class in the United States is being slowly but surely shredded, and our politicians don’t seem to care. If you doubt that the middle class is falling apart, just check out the following numbers which come from my previous article entitled “Sayonara Middle Class: 22 Stunning Pieces Of Evidence That Show The Middle Class In America Is Dying“…

#1 This week we learned that for the first time ever recorded, middle class Americans make up a minority of the population. But back in 1971, 61 percent of all Americans lived in middle class households.

#2 According to the Pew Research Center, the median income of middle class households declined by 4 percent from 2000 to 2014.

#3 The Pew Research Center has also found that median wealth for middle class households dropped by an astounding 28 percent between 2001 and 2013.

#4 In 1970, the middle class took home approximately 62 percent of all income. Today, that number has plummeted to just 43 percent.

#5 There are still 900,000 fewer middle class jobs in America than there were when the last recession began, but our population has gotten significantly larger since that time.

#6 According to the Social Security Administration, 51 percent of all American workers make less than $30,000 a year.

#7 For the poorest 20 percent of all Americans, median household wealth declined from negative 905 dollars in 2000 to negative 6,029 dollars in 2011.

#8 A recent nationwide survey discovered that 48 percent of all U.S. adults under the age of 30 believe that "the American Dream is dead".

#9 At this point, the U.S. only ranks 19th in the world when it comes to median wealth per adult.

#10 Traditionally, entrepreneurship has been one of the engines that has fueled the growth of the middle class in the United States, but today the level of entrepreneurship in this country is sitting at an all-time low.

#11 If you can believe it, the 20 wealthiest people in this country now have more money than the poorest 152 million Americans combined.

#12 The top 0.1 percent of all American families have about as much wealth as the bottom 90 percent of all American families combined.

#13 If you have no debt and you also have ten dollars in your pocket, that gives you a greater net worth than about 25 percent of all Americans.

#14 The number of Americans that are living in concentrated areas of high poverty has doubled since the year 2000.

#15 An astounding 48.8 percent of all 25-year-old Americans still live at home with their parents.

#16 According to the U.S. Census Bureau, 49 percent of all Americans now live in a home that receives money from the government each month, and nearly 47 million Americans are living in poverty right now.

#17 In 2007, about one out of every eight children in America was on food stamps. Today, that number is one out of every five.

#18 According to Kathryn J. Edin and H. Luke Shaefer, the authors of a new book entitled "$2.00 a Day: Living on Almost Nothing in America", there are 1.5 million "ultrapoor" households in the United States that live on less than two dollars a day. That number has doubled since 1996.

#19 46 million Americans use food banks each year, and lines start forming at some U.S. food banks as early as 6:30 in the morning because people want to get something before the food supplies run out.

#20 The number of homeless children in the U.S. has increased by 60 percent over the past six years.

#21 According to Poverty USA, 1.6 million American children slept in a homeless shelter or some other form of emergency housing last year.

#22 The median net worth of families in the United States was $137, 955 in 2007. Today, it is just $82,756.

So is there a solution?

Is our transition to a “1099 economy” inevitable?

[TigerClaws]

It’s interesting Hillary is running against the Obama economy she helped to create.

And the abuses of the Clinton economy (NAFTA), which also hurt the middle class.

Who would vote for her?

[DesertRhino]

Yeahhhh,,, we kinda already picked up on that whole temp disposable workforce thing.

[infowarrior]

The Rise Of The Temp Economy: More U.S. Employers Than Ever Want A ‘Disposable Workforce’

Then, they will find, albeit altogether too late to save their sorry business hides, that loyalty is a two way street. If you are loyal to the workers which are producing your profits, then they will largely return that loyalty to your company.

If, on the other hand you betray your workers, then you can expect disloyalty in return. And *THAT* can cost you more in lost profits than any amount of chicanery could ever net you. This is something those fancy MBA's are apparently *not* learning in their high-tuition schools, which will bite them in sensitive areas, when they least expect it...

the infowarrior

[dfwgator]

I’m not a fan of government-run healthcare, but we do need to decouple health-care insurance from employment.

[fatnotlazy]

Who would vote for her? The same ones who voted for Obama because he would be the first black president. They will vote for Hillary as the first woman president. To them it's all about FEELINGS — the euphoria of being part of history by electing the first whatever — not whether that candidate can do the job or what he or she will do or — and to— the country.

[TigerClaws]

Women are... catty. They know other women are crazy.

Black and Hispanics men will never vote for a woman.

Hillary’s only audience are lesbians and old liberal women.
Bernie has the young people and true leftists. Hillary is now too conservative for her own party.

[the_Watchman]

In the final years of the Clinton presidency, my sister worked for a temp firm in the Los Angeles area. She said that there was a steep increase in temp placements during those last two years indicating a very strong weakness in the economy. Of course, Bush got blamed for the economic downturn since the traditional indicators went south shortly after he was inaugurated.

So there have been other periods when increased temp employment is associated with a pessimistic view of employers that don’t want to take on more permanent employees. The ACA just makes it so much worse.

It’s interesting that the authors of this article are willing to throw rocks at the businesses for their practices, but they fail to accept blame for supporting the ACA, which makes the economic problems so acute.

[the_Watchman]

I also had to pay the employer's half of the Social Security payroll tax

Stupid people don't realize that they are already "paying" the other half of the Social Security payroll tax. An employer has to treat that as the cost of having an employee and takes it into account when your salary is set.

[gattaca]

bump

[Read Write Repeat]

Suddenly I was responsible for paying for my own health care, arranging for my own IRAs and saving for my own retirement.

I don't understand the complaint. I was called many names for wanting to do the same thing for myself.

It appears Romney was off by two points!

[garandgal]

And of course when the employees were rehired as contractors their wages were higher since the employer no longer had to pay the other half of the SS Tax. Yeah, right.

That has always been the problem...socialists have stupid utopian ideas...but so do the stupid “free labor market” morons on the right. Well, to be fair, only the politicians and some talk show/journalists types on the right are stupid...the people perpetrating this know perfectly well what they are doing.

There was never going to be any other end to this (which should have been obvious to anyone with a decent IQ). When you export manufacturing and import cheap labor to fill the lesser jobs that are left, there was absolutely nowhere to go but to achieve an “equilibrium” re: standard of living with shit-holes of the world.

[Jimmy Valentine]

Seeing this in the banking industry. Churn and burn.

[alexander_busek]

Suddenly I was responsible for paying for my own health care, arranging for my own IRAs and saving for my own retirement.

I don't understand the complaint.

Yeah, neither do I! It's like complaining about having to wipe your own *ss. I WISH that I could have taken all those S.S. payments I was forced to make and invested them! The return would have been much higher.

Regards,

[Original Lurker]

Zackly!
I find myself explaining this often but usually just get the “deer in the headlights” look while doing so.

[Alberta's Child]

We can complain about this all we want, but as I've gotten older I'm getting more convinced that this kind of arrangement is actually the norm in human existence -- and especially here in America. The idea that a company would employ tens of thousands of people for 30+ years -- while providing all kinds of benefits beyond the basic compensation for the work those people do -- is an anomaly in human history.

This is also where democratic forms of government break down, because eventually this arrangement only works in situations that are economically untenable over time: where most people work for government, or where most people work for large corporations that function as an arm of the government and work under government mandates.

[Alberta's Child]

I’m not a fan of government-run healthcare, but we do need to decouple health-care insurance from employment.

That's exactly what a company is doing when it fires its workers and re-hires them as contractors.

[fatnotlazy]

“Hillary�€™s only audience are lesbians and old liberal women.”

---

That may be. My female friends are huge fans of Hillary and they are all 60 plus.

I don't usually trust polls, but most have Hillary as the likely choice. However, Bernie is closing in. It will be interesting to see which demographic wins the nomination: Lesbians/old women or the younger free stuff crowd.

[setha]

Permatemping, which is the name of this practice, indicates that the economy is in an unhealthy and unnatural state. Healthy economies do not require cost dodges, risk offloading, and/or other similar mechanisms for labor markets.

Permatemping tends to decouple the work ethic as well. Europe’s rampant use of contractors combined with decoupled health care systems have reduced the motivation to work. In the US, it acts as a coping mechanism for a stagnant economy.

[DannyTN]

Yeah, there is a solution...

• Restore the import tariffs so that
  1. more goods are made in the US
  2. Demand for workers rises, causing companies to offer more benefits
  3. Government gets a source of income from foreigners seeking to sell into our economy.
• Close the border and deport the illegals reducing the supply of labor.
• Raise and/or tax the H1B to the point that there is no financial incentive to hire foreigners over Americans.