The Labor Market Transformed: Adapting Labor and Employment Law to the Rise of the Contingent Work Force

Since World War II, the American labor market has been transformed. The U.S. economy has changed from predominantly a manufacturing economy to predominantly a service economy.(1) Women have entered the paid labor market in record numbers, and women and African Americans have enjoyed increased opportunity to enter professions from which they previously were barred.(2) Finally, the U.S. economy has become much more integrated into an international economy in which its businesses and workers are subject to intense international competition.(3)An important facet of this transformation has been the recent increase in the number of employees working in temporary, part-time, or subcontracted positions. Probably no one has done more to document the recent increase in this contingent labor force than Dr. Richard S. Belous.(4) As Dr. Belous points out in his current work, by 1993, between 25% and 30% of the American labor force were contingent workers, and the contingent work force was growing considerably faster than the rest of the work force with between 40% and 55% of the jobs created between 1980 and 1993 going to contingent workers.(5) Although contingent employment has increased within every demographic group and within almost all sectors of the economy, as Dr. Belous observes, contingent workers are disproportionately female, disproportionately African-American, and disproportionately service industry workers.(6)Although our regulation of the employment relationship in the U.S. has kept pace, in some instances, with the transformation of the U.S. economy,(7) and, in some cases, even prompted the transformation,(8) as Dr. Belous has documented in his article, our regulation of the employment relationship has not kept pace with the rise of contingent workers. Contingent workers often are excluded explicitly from the definition of "employees" covered by protective legislation. For example, subcontractors typically are excluded from coverage under workers' compensation statutes, unemployment insurance statutes, and the National Labor Relations Act (NLRA).(9) Even when contingent employees are included among those "employees" governed by protective legislation, the nature of their employment relationship often proves a barrier to the receipt of protection or benefits under these acts. For example, temporary workers are less likely to meet statutory recency or vesting requirements(10) and, thus, are less likely to qualify for such benefits as unemployment insurance, Social Security disability payments, and pensions.(11) As Dr. Belous's article demonstrates, contingent workers also are less likely to receive benefits such as health insurance and pensions, which have been left largely to private voluntary provision under our system of regulation.(12) As Dr. Belous has noted, although the rise of contingent employment has made the U.S. labor market more flexible in terms of the number of hours of work that employees supply and employers purchase, our social welfare system of regulatory protection, government benefits, and private benefits has not achieved similar flexibility in covering contingent workers.(13)I agree with Dr. Belous that the solution to this problem is not to restrict or discourage contingent employment, but instead to try to adapt our social welfare system to better meet the needs of contingent workers.(14) In this essay, I hope to elaborate on Dr. Belous's arguments in favor of extending our social welfare system to contingent workers. I accept his basic argument that contingent workers need the protections and benefits of our social welfare system as much, or even more, than core employees.(15) However, I would argue also that, by failing to extend regulatory protection to contingent workers, our laws create artificial incentives for employers to employ more contingent workers, needlessly exposing employees to the risks of unemployment and denying them valuable training. I also will discuss the issues that must be addressed to extend our social welfare system to contingent workers. …