Changing U.S. Workforce

▪ 1994

Introduction

by Mary H. Cooper

      When the latest recession in the U.S. officially ended in March 1991, workers had reason to hope for better times. Mindful that unemployment, which had risen to 6.7% from 5.5% during the nine-month downturn, traditionally falls during an economic recovery, unemployed workers were optimistic about their job prospects. Usually factory managers, service providers, and other employers would begin calling furloughed workers back to their old jobs and start hiring new employees to meet the growing demand for their goods and services.

Weak U.S. Recovery.

      The sluggish recovery, however, was a disappointment to those who had counted on history's repeating itself. The recovery was unexpectedly anemic, undermined in large part by the cuts in defense spending that accompanied the end of the Cold War. During the early months of 1992, unemployment actually rose to 7.8%, earning this upturn a reputation as the "jobless recovery."

      The news, however, was not all bad. By mid-1993 almost two million new jobs had been added to the U.S. economy, and by August unemployment had fallen to 6.7%. But those optimistic statistics belied a more dismal trend: fewer laid-off workers were being called back to their old jobs because those jobs had disappeared for good. In addition, the kinds of positions workers had to choose from were in many ways less attractive than those offered in the past. Well-paid, full-time manufacturing jobs with generous benefits—the backbone of the U.S. postwar economy and the road to the middle class for millions of Americans—were scarce. Many unemployed workers had to settle instead for part-time or temporary positions with relatively low pay and often no benefits. By 1993 as many as 37 million Americans—more than a quarter of the workforce—held part-time or temporary jobs. All indicators pointed to the trend toward such "contingent" work as continuing well into the 1990s.

Corporations Restructure.

      The change in the quality and quantity of jobs available in the U.S. occurred because of a widespread and profound restructuring of U.S. industry, a movement that had been under way since the early 1980s. Faced with growing competition from foreign producers, U.S. companies were forced either to become more efficient or to go out of business. In searching for ways to save money, corporate giants of virtually every industrial sector automated assembly operations, weeded out unnecessary layers of management, sold off less productive divisions, and transferred operations to countries where workers are paid low wages. The effects of this corporate restructuring on U.S. workers have been wage and salary freezes, cuts in fringe benefits, and, in many cases, unemployment. The Congressional Budget Office reported that on an annual average, two million full-time workers lost their jobs during the 1980s.

      Unfortunately for the country's 118 million workers, the restructuring continued into the 1990s, affecting a broad range of industries. In 1993, well into the recovery, a succession of corporate giants announced that they would lay off tens of thousands of employees. The list included such household names as computer manufacturer IBM (85,000 workers), automaker General Motors (80,000), retailer Sears, Roebuck & Co. (50,000), aerospace manufacturer Boeing (30,000), consumer-goods producer Procter & Gamble (15,000), and telephone company U.S. West (9,000). Tens of thousands of government workers also joined the jobless rolls, victims of budget-cutting efforts at the federal, state, and local levels.

      More Americans were being squeezed out of the traditional "core" workforce—full-time employees making a decent living at one job that offered health insurance, pension coverage, paid vacation, and other fringe benefits. Typically, core workers also enjoyed some degree of job security, with the implicit promise that as long as they performed their jobs competently, they would remain with the firm, perhaps advancing in rank and income, until retiring with a comfortable pension. In the past when companies went out of business, many full-time, permanent workers found new jobs offering equivalent earnings and benefits.

Contingent Workforce Emerges.

      Unemployed workers now face less promising prospects. In a quest to trim labour costs, companies increasingly have hired temporary or part-time workers to do the jobs once performed by permanent staff. Once hired mainly for low-skilled "McJobs" by fast-food restaurants, telemarketing firms, and other service providers, these so-called contingent workers are now found at virtually all skill levels and in all industries. Many are clerical workers contracted through temporary-help agencies such as Manpower Inc. to take care of paperwork backlogs. But these clerical "Kelly Girls," who once made up the bulk of the temporary workforce, are now joined by managers hired on a consultant basis to reorganize departments, by professional freelance writers called on to prepare executives' speeches, and by blue-collar workers brought in to meet surges in demand for hot product lines.

      Nevertheless, the shift toward contingent work has benefited some workers. Married women who want to supplement family income with a part-time job, for example, are finding more suitable openings available to them than in the past. Skilled professionals and managers, who felt tied down in corporate staff positions, also have thrived on the independence they can achieve as self-employed consultants.

      But for most contingent workers, the costs have far outweighed the benefits. Although a few might later be hired as permanent employees, most temporary workers have to look for new work once the current job has been completed. Typically, both temporary and part-time workers also receive lower wages and salaries than permanent, full-time staffers. The Congressional Budget Office found that more than a third of the laid-off workers who had found new jobs during the current recovery made less than 80% of their former earnings. Consequently, many contingent workers are forced to hold down more than one job to make ends meet or work longer hours in an attempt to maintain their standard of living. Because contingent workers rarely receive fringe benefits of any kind, they are heavily represented among the 37 million Americans who lack health insurance.

      The benefits of a contingent workforce to employers are obvious: lower labour costs and greater flexibility in shifting jobs to other locations or changing operations in other ways that might be resisted by permanent workers. Outside temporary workers also can be a source of useful information, bringing expertise from former jobs to innovate operations. Hiring temporary workers to meet current demand for goods and services also helps an employer hedge against a sudden downturn during periods of sluggish growth.

      But even for employers, contingent workers have posed new problems. With little or no prospects for permanent work or advancement, these workers have few incentives to demonstrate loyalty by putting in extra hours to complete a deadline, for example, or to be especially gracious to a new client. Hiring temporary workers to fill out a staff of core workers also can create morale problems, with contingent workers resentful of the two-tier wage system that pays them less for the same work and with permanent staffers apprehensive about their own job security.

International Labour Woes.

      American workers are not alone in suffering the consequences of mounting competition in the global economy. In an effort to eliminate barriers to internal trade, the 12 member states of the European Community are encountering equally wrenching problems resulting from corporate downsizing and automation. Europe's average unemployment rate stood at 10.5% in July, while the jobless rate ran as high as 16% in Spain and 12% in France. Critics of Europe's highly regulated economies have complained that unemployment rates have remained so much higher on the Continent, in part, because of government protections granted to workers. Though these protections have helped prevent a shift to a contingent workforce in most countries, there is mounting evidence that European companies are being forced to take drastic measures to remain competitive.

      The German auto industry, suffering its worst slump since World War II because of the recession and growing competition from less expensive Japanese models, experienced an 18% drop in sales in 1993. The chairman of Daimler-Benz AG, Edzard Reuter, announced a $776 million loss during the first half of 1993 and stated that "there is no room for protected species and taboos if production locations in Germany are to remain competitive." Daimler executives announced that 40,000 jobs (20% of staff) would be eliminated by the end of 1994. The problems associated with the changing international labour market have reached such proportions that U.S. Pres. Bill Clinton called for a special "jobs summit" in early 1994. The meeting is expected to bring together labour experts and policy makers from all the leading industrialized nations.

The Outlook.

      Meanwhile, the Clinton administration has proposed new initiatives to help U.S. workers make the transition to a more competitive global economy. Labor Secretary Robert Reich, for example, promoted a national system of apprenticeship programs to train youths in a variety of skills, such as computer programming, that are expected to be in growing demand. Contingent workers also would benefit from President Clinton's health reform proposal, announced in September. If passed by the U.S. Congress, the health plan will extend insurance coverage to all Americans. Several lawmakers also introduced bills aimed at improving the conditions of contingent workers. Rep. Patricia Schroeder (Dem., Colo.), sponsored a measure that would offer part-time workers federal pension protection under the Employee Retirement Income Security Act.

      In the short term, however, there appears to be little encouragement for workers seeking the kinds of permanent, well-paid jobs that Americans have come to expect. As trade barriers continue to fall, companies will continue to come under competitive pressure to automate, downsize, and cut labour costs. And as long as the economic recovery remains sluggish, few employers appear likely to expand their core workforce greatly. As a result, contingent work seems likely to remain a significant source of employment.

Mary H. Cooper is a staff writer for The CQ Researcher at Con- gressional Quarterly and the author of The Business of Drugs (1990).

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