The Wall Street Journal’s in-depth story, The Life of a Contract Worker Is a Grind of Snubs, Anxiety and Stagnation, focuses on workers heretofore been largely ignored by the press, in part because they are not tracked in labor surveys. Think of these contractors, typically hired by large corporations via agencies, as long-ish term temps. An overview section:
Millions of contractors now do heavy lifting, paper pushing and other jobs for American companies that have replaced employees with outside workers. Within the next four years, nearly half of the private-sector workforce in the U.S. will have spent at least some time as a contractor, temporary employee or other type of outside job, estimates MBO Partners, a provider of support services to self-employed professionals.
The contractor model offers companies lower costs, more flexibility and fewer management headaches. Workers get far less from the arrangement.
The costs hit home in every paycheck and every day on the job…Outside workers usually aren’t surprised when they get no paid holidays, sick days, employee-sponsored health insurance, 401(k) plan or other perks routinely offered to traditional employees at the same companies.
What wounds more deeply are things taken for granted or barely considered at all by regular employees, outside workers often say. The work lives of contractors frequently feel like a series of tiny slights that reinforce their second-class status and bruise their self-worth. Even when contracting jobs are easy to get, they can vanish instantly, and turning a series of contract assignments into a real career remains out of reach…
No one knows how many Americans work as contractors, because they don’t fit neatly into the job categories tracked by government agencies. Rough estimates by economists range from 3% to 14% of the nation’s workforce, or as many as 20 million people. The surge might help explain a riddle of today’s labor market—jobs are plentiful, but many Americans feel anxious and insecure about their finances and careers.
This situation parallels that of “freeters” in Japan, which became common in the wake of their financial crisis. Because large companies had offered career employment, to preserve their workforces, Japanese firms compressed wages (as in the wage gap between entry level workers and top executives which was already narrow by Western standards, became even tighter) and cut back on the number of hires out of college who were on a lifetime employment track. Many were hired as temps, with no job security and no solid attachment to their employer. Because identification with social groups is central to Japanese culture, being in but not really part of a company is stressful. And even thought corporate freeters are generally better paid than other underemployed workers like convenience store clerks, they are not seen as good marriage material.
Even for supposedly thicker-skinned Americans, the second class citizen status is trying:
At many companies, contractors aren’t allowed to attend important meetings, go to the company gym or bring their kids to Take Your Child to Work Day. They keep quiet because only full-time employees are expected to speak up. Working harder, smarter or longer offers little advantage when applying for a job directly with the company.
Nothing is loathed more than the nametags or identification badges that advertise the lowly ranking of contractors in the workplace pecking order. Technical writer Don Cwiklowski Jr. worked as a contractor at Mastercard Inc. for four years. He says co-workers often glanced at the badge dangling from his neck, saw the red color that signaled his contractor status and looked right past him.
He got a green badge when he was hired as a full-time employee at Mastercard in St. Louis in 2012. Some of the same people who had shunned him started saying hello in the hallways, says Mr. Cwiklowski, 53.
If this Journal’s sample is representative, most of the US contractors, by contrast, worked for some of their careers in traditional corporate jobs but fell into contractor roles. As author Lauren Weber stresses, “People usually don’t go looking for contract work. It finds them.”
And even though the ones profiled want full time jobs, making the transition from contractor to employee is rare.
Bear in mind that these workers are not consultants and are effectively temps. By contrast, a consultant writes his own proposal for an engagement, specifies what the end product will look like, works on his own schedule, and supplies his own materials. Consultants typically also charge a large premium to what an employee in the same general skill areas would be paid. The reason is that consultants typically have more highly developed expertise and fancier credentials than staff in the same area of most clients, plus it is understood that the client is paying more to rent specific skills than if it bought them.
By contrast, these corporate contractors work like employees but without the benefits. They have to show up at the office like everyone else and usually work on premises and report to a manager. They do not get benefits like vacations, sick days, 401 (k)s and medical coverage. Most important, they are hired for gigs that typically run for months at a time, but can still be terminated early. And their pay is typically lower than that of the employees with which they work. And the corporation hiring their services does not pay employer FICA taxes.
Mind you, this approach is long-standing, but the Journal indicates that it is becoming more common. I’m sure readers have their own stories, but for instance, on Wall Street, many if not most of the IT professionals that looked like employees were on long-term contracts. Similarly, an ex-sister-in-law was the manager of a small unit at Ford for seven years…as a Kelly Girl. Another example is the use of adjuncts who are often paid around $30,000 a year despite having advanced degrees.
The Journal also describes how contracting also being implemented to treat the contractors a more like second-class citizens, out of a view that that reduces the tax risk of having the contractors deemed to be employees and have the company that engaged them hit with a tax bill. This key paragraph comes well into in the story:
Ever since Microsoft agreed to pay $97 million in 2000 to settle an eight-year-old class-action lawsuit filed by “permatemps” who accused the tech giant of using temps to do the work of employees, companies have tried to keep their outside workers at a distance.
An article at Fast Company at the time of the settlement described the problem for workers:
To be a permatemp is to sit in the oxymoronic crosshairs of the new economy. You enjoy — or you suffer — the worst of both worlds. Free agents choose to work as independent contractors because they want to, because it gives them more leverage in the job market and more control over their lives. Permatemps work as not-so-independent contractors often because they feel as though they must. They’re stuck — or at least that’s how they feel. The ones who worked at Microsoft are case studies of the dark side of free agency, examples of how an experimental human-resources policy that was intended to encourage flexibility can have unintended consequences.
And it and other commentaries made clear that the legal win didn’t necessarily help workers all that much, as this article attests. Microsoft’s solution was to make sure no contract workers had an assignment of more than a year, with breaks of at least 100 days. If you can’t line up a new gig when the Microsoft assignment ends, that means no income. Although the Journal article does not say so, at least right after the Microsoft settlement, many companies also adopted the “one year maximum” rule. Weber also intimates that the other measures that make contractors into second-class citizens were to bolster the case that they weren’t de facto employees.
On the one hand, given how more and more jobs are McJobs, it may seem misguided to depict these contractors as downtrodden. They work, presumably most of the time, for more than Amazon warehouse workers make, in not-physically taxing jobs in corporate offices.
But like adjuncts at universities, the fact that things are not as bad as they might be does not mean that they are good. These workers are mainly downwardly mobile, visible examples of the decline of the middle class. Uncertain incomes and the lack of benefits, particularly health care, makes it hard for them to plan and save, and even get by. Pressure to keep your head down at work even more than employees do adds to financial stress.
Even though many of the comments on the article took the “this is how the market works, too bad” posture, there was some pushback, such as:
Alan Sewell
It’s also interesting to remember that Americans elect Socialist-minded Presidents like FDR and LBJ when they are relentlessly exploited by anti-social employers who beat them out of their paychecks and pensions, and then hog all the wealth that the workers created for the 1%. More Liberals and Socialists are waiting in the wings, including Bernie Sanders.
Bob Ruff
Agreed. I think this all started when we outlawed child labor. Now, kids expect their parents to pay for everything. Also, why do we have Social Security? People used to work until they dropped dead, and that’s what the free market said was right.
I take the arguments among Wall Street Journal readers as a sign that even well-heeled individuals are becoming less and less enamored of businessmen squeezing workers. Some of them said as employers they paid more not just to get better workers but to reduce turnover, and they had a better bottom line as a result. But the trend still seems to be more and more towards labor-squeezing. So Sewell may be right. If short-sighted employers can’t save themselves from their worst impulses, the pressure for a fairer deal will have to come through political channels.
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“many if not most of the IT professionals that looked like employees were on long-term contracts”
I and an associate, both in IT, are in this labor class. But we work on-site for the government as our customer, while our actual official employer is off-site. We do have some benefits, but there is constant pressure from Washington to reduce costs, so what typically happens long term, is our labor gets re-categorized to a lower echelon, which pays less … thanks to creative HR writing. We actually continue to do the same work, or more work, while benefits and salaries slowly erode. Part of this creative HR writing is the “job reqs” for the position keep getting lowered … to questionable levels. The people writing the “job reqs” like many HR situations, have no idea what they are writing, never having done the work themselves, or know anyone who does. HR just follows orders. And people are just lines in a spreadsheet who can be downgraded or eliminated … even though the work still needs to be done by someone, locally. Not all IT can be off-sited.
Agree, this is extremely common in the IT word here in NYC, in particular the finance sector. I’ve spent the past 17 years in the market data field and all but 4 of them were as an on-site contractor of some sort. It isn’t uncommon to find entire IT depts for a business unit where 40%+ of the people at the desks are contractors. For a few notables the percent is higher than that.
Most of these contracts are not short term, the shortest I’ve ever been on site (other than a ‘fill in for the person on vacation’ gig) was 6 months and that was singular occurrence. All of the others were year to multi-year contracts where you can be let go at any time.
Employees can be fired at any time for any reason other than discrimination causes.
The perception that you’re somehow safer if you’re an employee is a myth.
My sister in law has been a work at home tech contractor for years. Now my brother, who works in a managerial position in a similar area as an employee, may be out of a job soon. My sister in law is picking up more work so he has something to do when if/when it happens, and he can put it on his resume and he doesn’t have to look (gasp!) “unemployed.” He’s not entirely sure he wants to go back either. So maybe this will become their new modus operandi.
(Almost) everyone is part of the precariat. Sometimes being able to operate in a nontraditional manner is self defensive. (Or, this is actually traditional?)
..Boeing, Microsoft, others in Seattle, “employ” independent contractors-often computer ops, to avoid healthcare provision, layoff, unemployment, state industrial insurance-on job injury determinations…friends have been so designated over nearly decade now…
but for true horror stories, recall Katrina workers “contracted” (and think Irma-Harvey)..many of whom were never remunerated-immigrant workers…
half the want ads posted in IT around here (specifically development of various sorts) seem to be for contract work. No, it’s not impossible to get a full time job, but with half the jobs being contract the odds are definitely lower. I fear it might get worse (get a sTem degree folks! /s)
I’m not so sure the pay is always less because recruiters will often encourage anyone applying for a contract work to increase their salary rate quite a bit from what they would request for a full time position to make up for the loss of benefits, so there seems some compensating going on there at least in I.T., though I don’t know if it fully makes up for it. With all the benefits that come with an actual full time job (and I mean even very minimal white collar benefits of healthcare, some minimal paid time off etc.) I don’t think contract work is a positive development. Around here many of the contracts do seem to be short term as well, although long term contracts also exist. Apparently, we’re supposed to spend our entire lives going from 3-6 month gig to 3-6 month gig. Noone can build a life that way IMO,but that is a lot of the want ads out there.
Several decades ago, I had a coworker who was a contractor, but with a different company … he was more independent, had to pay all his own benefits including both sides of SS .. so he did have to charge a higher base rate.
Yes, get a sTem degree if it won’t set up back too much. Also IT industry credentials are very important now. If I hadn’t had a sTem degree, it would have been hard for me to be considered for my present position, back when I started. Since then, IT industry credentials are more important. Get those first, then the sTem degree for greater responsibility later on.
That’s exactly how Hollywood works and why connections are so important there.
“My past is your future.” Freelancing in the Movie & Television Business is tough.
It does sound as if the IT industry needs to look at the way IATSE works.
I’m extremely interested in your observation that HR people blindly screw over IT people because they don’t understand the value of the work that IT folk do. I have always thought that I was being screwed over by IT people – those high school kids who write the code that structures my work without knowing what my work means or its social context. It is interesting to read an IT perspective. I guess we are all kept so isolated from each other that it is easy for us to screw each other without appreciating what we are really doing. Who profits from that?
It seems like the article is cut?
The post ends at “…well into in the story:” for me.
Working now.
How embarrassing. I had completed the post well before the launch time and resaved it but the update hung and I didn’t see it. Fixed now. This is really bad. Sorry.
Hint to the labor movement: The precariat needs unions too.
I think one of the reasons contractors are so popular is that it is hard to unionize them. I am an contractor in a government office, but any union contract would have to be with my direct employer, not the government. But it is the government that determines working conditions, job duties and just about everything else. About the only thing that I could negotiate with my legal employer is trivial stuff like when I get paid. Anything that would have a real impact on the government would just result in my employer losing their contract, and me losing my job.
Between contract work and H1-B’s, it would be very difficult to unionize IT.
Actors are also hard to unionize. But Actors Equity has existed for a long time.
Ditto for on-air and on-screen talent. Organizing them is like herding cats. But that doesn’t stop SAG-AFTRA.
Add adjunct college and university professors to the “gig” list of highly educated, well-trained contracted workers. Estimates are that 87% of all collegiate teaching is done by graduate students and adjuncts.
The average adjunct earns around $20,000 per year, has no benefits, with contracts from semester to
semester. Classes can be cancelled the first of classes due to small enrollments without compensation or notice to the adjunct professor. This is the normal way of providing higher education for students who are going deeply into debt for educations.
The opposite is true in Canada, at least for IT contractors. Many are reluctant to be hired as FTE because the pay is lower, especially when factoring in lack of overtime pay.
It’s not for the faint of heart, though, as skills must be kept sharp.
yes the pay could make up for it even in the U.S.. But overtime pay, legally they are supposed to, but I’ve interviewed at one place that told me they were breaking labor law right in the interview (“yes you have to work overtime, but you can’t report it”). Maybe most places obey the law but not 100%, so job seeker beware.
You article has been cut off in the middle.
Please provide link to the WSJ story that provides the substance of this interesting post. It is worthy of broad circulation, but the source is important.
This looks like the article
https://www.wsj.com/articles/the-contractors-life-overlooked-ground-down-and-stuck-1505400087
Off the top—Microsoft was blasted for its in-house contractors a long time ago. Eh?
Sticks in the mind because it wasn’t as if the company wasn’t vastly profitable. But then we all know new investors/”investors” have to be fed.
(Don’t have a WSJ sub. to see if a new angle is in view or perhaps Yves’ writing is cut off in the middle. . .)
Those first stories about Microsoft contractors a few decades ago were warning signs about pending class divisions. Two people could sit together in some cube farm, doing identical work, and only one was on the magic gravy train while the other was a step from living in that old car.
Learning about how they interacted, and how there was some unspoken, or at times quite obvious and vocal disdain and treatment as second-class citizens (oh, if only limited to citizenry, how little I knew what the H1-B future held!), made me vow not to be in a contractor situation. I wouldn’t mind being a contractor for a reputable, decent, honest company, just not in that Microsoft type of situation!
My wife is a financial reporter for a company who does research about corporations (mostly calling managers and trying to get them to reveal financial info) and she has been under this system for about 20 years. No vacation, sick time, etc. They used to give her medical insurance ONLY if she made a large number of hours and the work they gave her wasn’t enough to make the required hours about 75% of the time. After the passage of the ACA they stopped offering the coverage. They call her a “consultant” officially but she has annual performance reviews, a boss, used to go to a yearly “get together” with all the other employees and consultants but they also cut that out because too expensive. Every fringe benefit has slowly been removed. She used to get a christmas bonus too every year but that was cut years ago too.
A couple of years ago, I met a lady who was (air quotes) freelancing for one of the major business magazines. Forbes or Fortune, I can’t remember which.
Any-hoo, freelancing for that magazine was all she did. It wasn’t like she had a roster of other freelance writing clients.
Well, I had to go and open my big mouth and say that the magazine should have had her on the payroll with a benefits package. Let’s just say that she didn’t welcome my opinion.
Requiring a contractor to show up at the office may be not be a problem per se in the independent contractor versus employee dichotomy. However, if the employer dictates the specific work hours that usually makes the individual an employee not an independent contractor.
I wonder how many of the people, like those profiled in the article, are improperly classified as independent contractors.
Most, if not all, are probably W-2 employees of a contracting agency, avoiding the misclassification issue. If any of those workers are actually classified as 1099 contractors, I agree they’re probably misclassified.
The article is behind a paywall, can’t access it otherwise. Shame because I would like to send it to a good friend of my that has been a contractor for a major defense company for the last six months. She works in a corporate office for this firm.
From some of the conversations we have had, they are treated like second class, a hard line is drawn between contractors and full time, even though they all sit together in the office and are working on the same project. Examples include FT employees attending meetings where the contractors aren’t involved, FT employees all going to lunch together and not inviting the contractors to join, and some contractors just being let go at the drop of the hat, one day they are there and then next day gone, even though according to her they seemed to be working fine. It’s a lot of ‘little’ things, but they start to add up.
I’ve tried to explain the reason for it (as mentioned mitigating risk of them being considered employees), and she get’s it, however it is impacting her mentally. She’s always been an A+ employee (I’ve worked with her prior) and she is continuing questioning her skills and performance now. From the stories she has shared w/me, the FT employees are pretty smug about their positions, often making snide comments, basically just acting like jerks and flaunting their ‘superiority’. They also tend to slack off a bit, while the contractors work around them. Management will stop by and ask the FT employees questions and acknowledge them, and ignore the contractors.
Yesterday she called me at lunch and was quite upset. A manager was talking to one of the FT folks and asking questions about my friend (simple stuff like when did she start, what was she doing..) and she was sitting right next to the FT employee that the questions were directed to. Needless to say it made her feel like a second class citizen. She kept repeating to me “I was right there!” and “he wouldn’t even look at me or acknowledge me”.
My friend is one of the ‘lucky’ contractors, the agency she works for does provide healthcare insurance, and the pay isn’t bad. My friend is not the sensitive type and she is a confident person, but this treatment is impacting her negatively. I don’t think she will stay there much longer, she has skills and other options. She thought the company would be a good bet (defense industry) in these economic times, and she was excited about the project she is working on, and she’s conveyed that the FT folks treat each other with respect and everything else about the company is great.
Due to the culture of FT vs: the lowly contractors, she’s looking for another job now. Too bad for the company, I’d bet my last dollar she is doing a bang up job there, and they will lose a great employee over this.
Like the Awan brothers.
You’ve somehow deleted the substance of this post, Yves…
No, it was that I had updated the post when I completed it and didn’t see that the update failed. Apologies. The full version is up now.
Large corporations have been trying to shift their low-level payrolls to temp agencies for a long time; that isn’t new. But there’s another element of this that I think is worth discussing. The temp agency shell game has the effect of insulating the workers from their true employer, stifling collective bargaining efforts.
Before the NLRB’s Browning-Ferris decision in 2015, and after it gets overturned by Trump’s NLRB, employers could hire employees through temp agencies and structure the relationship in such a way that the temp agency had just enough illusory “control” to be considered the sole legal employer of the employees under the NLRA. If the workers got fed up and unionized, they were left to bargain with the temp agency alone. No meaningful collective bargaining can occur without the true employer being required to participate in the bargaining, because the true employer is the temp agency’s customer and must pay for any increases in wages, benefits, etc. Temp agency contracts are usually shopped around and put out for bid, so the agency’s margins are unlikely to be adequate to fund any meaningful improvements.
Worse, the true employer can retaliate against the workers for unionizing by cancelling the current agency’s contract and hiring a new agency with non-unionized workers. Then, the agency can legally fire its unionized workers because they no longer have work for them. Everyone keeps their hands clean, even though the actual effect was to retaliate against workers for unionizing. That kind of retaliation is normally prohibited by the NLRA (and would be if the temp agency was directly responsible for the retaliation), but if the true employer isn’t considered the employer under the NLRA, it’s legal.
The Browning-Ferris decision was a major step forward. By holding the true employer to be a joint employer, the true employer must participate in collective bargaining discussions and can be held responsible for unfair labor practices committed by them or on their behalf. Unsurprisingly, the Republican minority on the Board dissented, and the Republicans have been fighting it since. Trump has already filled one of the two Board vacancies and has nominated William Emanuel, an attorney at Littler (one of the largest union-busting/management-side labor law firms in the country), for the second vacancy. Once the Republican majority is in place, it’s a near certainty that Browning-Ferris will be overturned.
https://www.nlrb.gov/news-outreach/news-story/board-issues-decision-browning-ferris-industries
An unintended(?) side-effect of having contractors among the regular employees is that the regular employees then get to see, daily and first hand, what could happen if they too lost their jobs. Do not step out of line and please do read about what happens to whistle-blowers….
The worse the management is the more management have to tilt the playing field to management advantage. A skilled manager hires the right person, leads and organises the team even if it all consists of full time regular employees. A bad manager does not have the skill to hire the right person, does not know how to motivate other than by fear and can’t plan/organise the team without having to resort to zero-hour employees or hired contractors.
These sorts of contractors often work for their former employer. They do similar work for less money and no benefits. To avoid being reclassified – or properly classified – as employees rather than “contractors”, they often work for a year, take a forced leave for six months, then return. The return, of course, is subject to the needs of the employer. Precariat is exactly the right word, even if the work and environment are less unfriendly than working in an Amazon warehouse or an abattoir.
Companies that treat their employees like this are gone in the long run- creating opportunities for the competition that will kill them.
But the 1984-ishly named “right to work” laws (= right to be fired at any moment for no reason) are very bad and one thing that would actually improve workers’ lives (and the employers’ longevity) would be a legal requirement for employment contracts of fixed term as in Europe. Whether group contract (union) or individual, everyone employed by larger enterprises is protected by contractual rights.
I’ve said this many times already, but I think we need to stop making employers the default administrator of the social welfare state. Then all these distinctions between “employees” and “contractors,” etc begin to dissolve because one major motivating force behind contractor status is corporate evasion of welfare state burdens that our American forbears, in their infinite plantation overseer wisdom, perversely assigned to them.
Single payer is a good place to start. And, philosophically speaking, I am more or less of the opinion that if we as a society and a nation want people to have healthcare, and income in old age, etc, then we as a society and a nation should collectively give that to each other.
Employers then begin to decline in importance in the life of the nation and we can better hold them to account and cease coddling them “because life and death and jobs.” I don’t understand at all the singular importance of this one kind of social institution.
Seriously. I be like http://www.youtube.com/watch?v=VvYIpa1Ulvw all the time.
Ultimately we have to come to terms with the fact that most corporations are purely for the benefit of the rich shareholders and executives.
Any good they do is purely an unintended byproduct of this goal of profit seeking. Likewise, corporations don’t care about negative externalities, seeing it as PR at worst.
This may be why in Canada, for example, contracting is a relatively appealing option for skilled IT workers. The benefits of FTE, especially when factoring in the erosion of overtime pay in most companies, don’t add up: health care is covered by single-payer, and other typical FTE perks like dental care can be covered out of pocket and incorporated into a vacation at medical tourism resort. Canada’s RRSP plan makes it easy to save money for retirement. More money in your pocket means you can invest where you like.
Indeed the situation is almost the opposite described in the article above – there is often a resentment that the contractors are making more money than the FTEs that work with them or manage them, can charge their overtime hours and easily change jobs if they’re treated badly. Your job security comes through your skills and capabilities, which is as it should be.
I’ve worked both as a contractor and a FTE in the tech industry for the last twenty years. I’ve pretty much seen it all – I’ve been treated as a second-class corporate citizen, I’ve encountered hostility and exclusion from the FTE’s, but I’ve also had the luxury of looking at my boss and telling him: “I’ll be happy to put in 20 hours this weekend, as long as you sign my timecard that shows all the hours I worked.” When they had to put money on it, it was amazing how often the “emergencies” could wait until Monday.
My experience has been that in contracting, like ANY job, how well you are treated is directly related to how hard it is to replace you. If you have a generic skill set, and there are ten other people lined up willing to take your job, then the company will probably treat you like shit. If it took the company 18 months to fill your position, and they know that it’ll likely sit empty for another 18 months while they search for your replacement, you’ll mostly be treated well.
I was a FTE at a Fortune 500 company. I resigned and took a contract because after surviving three waves of layoffs in six months, I got tired of wondering when the axe was going to fall. The immediate 40% pay increase more than made up for the loss of “benefits”.
As a contractor, I’m paid a straight hourly rate, and almost always work 40 hours a week. That’s something I don’t blame the FTE’s for resenting: They’re all working 50 – 65 hours/week because they’re “exempt” and if they don’t work the hours, they at the very least won’t be promoted, or get a raise, and will likely be at the top of the list for the next layoff.
I don’t have to play in a lot of the office politics: I’m not going to get promoted, and I’m not trying to butter someone up for a raise. If I want a raise, I ask for a higher rate on my next contract.
I can generally take time off with minimal hassle: I don’t get paid for it, but it’s always been ten times easier to get time off as a contractor than as a FTE.
I have no job security: I can be met at the door by the manager on a Wednesday morning, informed that my services are no longer required, and 45 minutes later be standing on the street unemployed. However, this has only happened to me three times in the last twenty years, and in all three cases, the trainwreck was pretty obvious.
Contractor or FTE, if you work customer service/phone bank/warehouse/front-line IT, your job will be pretty awful. I write embedded systems firmware….I rarely have to put up with the garbage this article describes.