The One Big Economic Problem That No One Is Talking About
Just when you thought America had gotten back on track, with a low unemployment rate, record stock market highs, and businesses posting huge profits, something had to come along and wreck the party. Many Americans are already acutely aware that there are still a few big issues hamstringing the economy, namely wage growth and the swelling ranks of the long-term unemployed, but it turns out there has been another problem brewing for some time now, and it may lead to further complications down the road.
According to a report from the U.S. Government Accountability Office, a huge number of America’s jobs — we’re talking as many as 40% — are “contingent” jobs. That means that those jobs are not particularly secure, and are made up of positions that require employees to work on contracts, on-call, or as independent contractors.
These jobs are not only less secure than full-time positions, but they also come with limited benefits including subpar healthcare, sick days, and retirement plans. Those missed benefits can be problematic for many workers, but it’s the general lack of job security that can really be stressful. As companies have downsized and worked toward building leaner organizational structures following the economic meltdown from the Great Recession, the number of contingent workers has grown greatly.
“Contingent employment remains an important concept for understanding the dynamics of the labor market,” the GAO report reads. “Our own work suggests that many of these contingent workers receive lower wages and benefits than workers in standard employment arrangements. Many questions remain as to whether contingent employment and alternative work arrangements are growing or evolving, about the impact of the recent recession and recovery on this segment of the labor force, and about the longer term implications of contingent employment arrangements for workers, employers, income equality, and economic growth.”
This is an issue that has somewhat flown under the radar and been hidden by the improvement shown in traditional economic indicators, notably the unemployment rate. These contingent jobs do get people back to work and earning paychecks, but these are positions that are shaky at best in terms of security. What Americans need, and have been clamoring for, are good, well-paying jobs that will allow the middle class to flourish and return to a healthy state. But what we’ve seen instead is the spread of the contingent workforce. Part-time work has taken off at unprecedented rates, and temp jobs are up 57% over the past five years. The growth in these types of work has helped bolster the unemployment rate and get America’s economic engine running again, but that has left the middle class on shaky ground.
With as much as 40% of the American workforce being a part of that contingent workforce, another large economic shudder could lead to some huge problems as companies can quickly and more efficiently shed labor costs. If we were to experience another recession in the near term (which could very well happen), it’s conceivable that as much as 40% of the American workforce, the contingency workforce, could be very quickly out of work.
That’s not to say that these are all bad jobs, and that people don’t want them. It’s more of a detraction from what we have traditionally thought of as important to sustaining a vibrant middle class. There are actually plenty of workers, particularly young people, as a recent Slate article explains, that are perfectly happy working as part of the ‘contingency.’
What young workers find particularly enticing about contingency jobs is that they are far more flexible than traditional full-time gigs, and allow for them easily jump from one job to the next. One important thing to note here is that these workers, many in their early 20s, are also benefiting in a large way from the Affordable Care Act. That is, they can remain on their parents’ health insurance until the age of 26, so there’s no need to find a job that supplies them with that perk.
While younger workers may enjoy their stint as independent contractors and freelance workers, people who need full-time jobs with benefits and reasonable pay still have plenty of reason to be worried about the GAO’s findings. But what the GAO report could really be pointing at is something bigger — perhaps a whole new economic makeup.
If companies value fluidity and flexibility, that’s what they’re going to look for in employees. If that’s the case, we may need to rethink compensation, benefits, and perks packages as a society, not just for a portion of the workers in the labor market.
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