The Rise of the Contingent Work Force:The Key Challenges and Opportunities

I. The Law and Contingent Labor MarketsWhen one mixes the law with contingent labor markets, one would be well advised to also add a teaspoon of humility. I learned this in the 1980s while I was conducting research for my original study of contingent work forces.(1) At that time, some of the best legal minds on Capitol Hill and on K Street told me that the 1986 Federal Tax Law would effectively shut down the employee leasing industry. Not being a lawyer, I assumed that these so-called legislative and practitioner experts were correct that the mushrooming employee leasing industry -- a key part of the U.S. contingent work force - would be held in check if not reduced. In addition to using a wide range of national survey data, for my research I conducted over fifty detailed case studies with a wide range of corporations and nonprofit organizations representing many different segments of the American economy. I thought my research was faulty when it detected in the late 1980s that the employee leasing industry was growing even faster than it did in the early 1980s, despite the 1986 Federal Tax Law.The data demonstrate that one should never underestimate the creativity of labor market participants to obviate regulations or to risk violating laws. Given the significant cutbacks in resources devoted by the Labor Department and others to enforcing federal labor laws, it is not surprising that many, and probably a growing number of, employers and employees have made a "rational" utility-maximizing decision to violate federal and state labor laws because the probability of punishment is often low and the fines are often cheap. Laws can define who is and who is not a legal temporary, part-time, or subcontracted worker; but, following the law of unintended consequences, the actual impact on labor markets can be very different from legislators' and legal scholars' visions. Unintended consequences are very important in many aspects of labor market regulations, including the Fair Labor Standard Act(2) and occupational safety and health regulations. However, unintended consequences may be an even more important consideration when one is concerned with the murky world of the contingent work force. In many cases, the laws applied to the contingent work force are hazy, definitions and regulations are easily stretched, and enforcement mechanisms are very weak.This paper attempts to address some of the key questions raised by the growth of the contingent work force in the current economic and political climate. However, many of the important questions surrounding the contingent work force may not be answered for quite some time.II. Describing the Contingent Work ForceThe dramatic growth of the contingent work force in the United States has alarmed many observers. Some, including Time magazine,(3) have predicted that the contingent work force could grow so rapidly that in a few years it will represent approximately 50% of the U.S. labor force. However, these predictions need to be qualified because the concept of contingency is in many ways difficult to define and measure. Two specific definitions and time series measurements will be presented for discussion: a liberal upper boundary estimate and a conservative lower boundary estimate of the size of the contingent work force.The work force of a corporation, a university, a government, and a nation can be divided into two very general groups. The first group contains "core workers" who have a strong affiliation with an employer and are treated by the employer as having a significant stake in the organization. Core workers are part of the "corporate family." They show long-term attachment to the company and have a real measure of job stability. In the language of economists, core workers have an implicit contract with their employers: If the workers follow certain rules and norms and meet certain standards, their employers will provide long-term employment and some measure of advancement. …