Date: 2024-05-15 Page is: DBtxt003.php txt00018154
Employment
Work and Wages
The Real Future of Work ... Forget automation. The workplace is already cracking up in profound ways, and Washington is sorely behind on dealing with it.
Peter Burgess
The Real Future of Work ... Forget automation. The workplace is already cracking up in profound ways, and Washington is sorely behind on dealing with it.
Vinik-lede-ByChrisGash.jpg
In 2013, Diana Borland and 129 of her colleagues filed into an auditorium at the University of Pittsburgh Medical Center. Borland had worked there for the past 13 years as a medical transcriptionist, typing up doctors’ audio recordings into written reports. The hospital occasionally held meetings in the auditorium, so it seemed like any other morning.
The news she heard came as a shock: A UPMC representative stood in front of the group and told them their jobs were being outsourced to a contractor in Massachusetts. The representative told them it wouldn’t be a big change, since the contractor, Nuance Communications, would rehire them all for the exact same position and the same hourly pay. There would just be a different name on their paychecks.
Borland soon learned that this wasn’t quite true. Nuance would pay her the same hourly rate—but for only the first three months. After that, she’d be paid according to her production, 6 cents for each line she transcribed. If she and her co-workers passed up the new offer, they couldn’t collect unemployment insurance, so Borland took the deal. But after the three-month transition period, her pay fell off a cliff. As a UPMC employee, she had earned $19 per hour, enough to support a solidly middle-class life. Her first paycheck at the per-line rate worked out to just $6.36 per hour—below the minimum wage. “I thought they made a mistake,” she said. “But when I asked the company, they said, ‘That’s your paycheck.’”
Borland quit not long after. At the time, she was 48, with four kids ranging in age from 9 to 24. She referred to herself as retired and didn’t hold a job for the next two years. Her husband, a medical technician, told her that “you need to be well for your kids and me.” But early retirement didn’t work out. The family struggled financially. Two years ago, when the rival Allegheny General Hospital recruited her for a transcriptionist position, she took the job. To this day, she remains furious about UPMC’s treatment of her and her colleagues.
“The bottom line was UPMC was going to do what they were going to do,” she said. “They don’t care about what anybody thinks or how it affects any family.” UPMC, reached by email, said the outsourcing was a way to save the transcriptionists’ jobs as the demand for transcriptionists fell.
It worked out for her former employer: In the four years since the outsourcing, UPMC’s net income has more than doubled.
What happened to Borland and her co-workers may not be as dramatic as being replaced by a robot, or having your job exported to a customer service center in Bangalore. But it is part of a shift that may be even more historic and important—and has been largely ignored by lawmakers in Washington. Over the past two decades, the U.S. labor market has undergone a quiet transformation, as companies increasingly forgo full-time employees and fill positions with independent contractors, on-call workers or temps—what economists have called “alternative work arrangements” or the “contingent workforce.” Most Americans still work in traditional jobs, but these new arrangements are growing—and the pace appears to be picking up. From 2005 to 2015, according to the best available estimate, the number of people in alternative work arrangements grew by 9 million and now represents roughly 16 percent of all U.S. workers, while the number of traditional employees declined by 400,000. A perhaps more striking way to put it is that during those 10 years, all net job growth in the American economy has been in contingent jobs.
Vinik-secondary1-ByChrisGash.jpg Illustration by Chris Gash
Around Washington, politicians often talk about this shift in terms of the so-called gig economy. But those startling numbers have little to do with the rise of Uber, TaskRabbit and other “disruptive” new-economy startups. Such firms actually make up a small share of the contingent workforce. The shift that came for Borland is part of something much deeper and longer, touching everything from janitors and housekeepers to lawyers and professors.
“This problem is not new,” said Senator Sherrod Brown of Ohio, one of the few lawmakers who has proposed a comprehensive plan on federal labor law reform. “But it’s being talked about as if it’s new.”
The repercussions go far beyond the wages and hours of individuals. In America, more than any other developed country, jobs are the basis for a whole suite of social guarantees meant to ensure a stable life. Workplace protections like the minimum wage and overtime, as well as key benefits like health insurance and pensions, are built on the basic assumption of a full-time job with an employer. As that relationship crumbles, millions of hardworking Americans find themselves ejected from that implicit pact. For many employees, their new status as “independent contractor” gives them no guarantee of earning the minimum wage or health insurance. For Borland, a new full-time job left her in the same chair but without a livable income.
In Washington, especially on Capitol Hill, there’s not much talk about this shift in the labor market, much less movement toward solutions. Lawmakers attend conference after conference on the “Future of Work” at which Republicans praise new companies like Uber and TaskRabbit for giving workers more flexibility in their jobs, and Democrats argue that those companies are simply finding new ways to skirt federal labor law. They all warn about automation and worry that robots could replace humans in the workplace. But there’s actually not much evidence that the future of work is going to be jobless. Instead, it’s likely to look like a new labor market in which millions of Americans have lost their job security and most of the benefits that accompanied work in the 20th century, with nothing to replace them.
The scale of the change, for many economists, clearly suggests that it’s time for Congress to rethink the social contract around work, updating it for the new relationship between employers and workers in the 21st century. Letting it slide further risks hamstringing the country with an outdated system that hurts both middle-class workers and, experts fear, the economy that depends on them. The shift is already well underway. What’s far less clear is whether Washington is paying any attention.
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If anyone was in a position to help the federal government get its head around the problem, it was David Weil. A management professor at Boston University, Weil has spent the past few decades researching and documenting the changing nature of work, including informally advising the Bill Clinton administration on labor policy. In 2013, President Barack Obama nominated him to head the division at the Department of Labor that oversees the government’s laws on wages. He was confirmed by the Senate in April 2014.
When Weil looked at the landscape of American business, he saw a change that went beyond the traditional labor-employer power struggle. Instead, he saw a shift in management philosophy. “There was something bigger than just trying to outsource for the sake of lower labor costs, to get around unions, to get around labor laws,” he said in an interview last year. “All of that was true, but there was this larger theme of business organization restructuring that was going on. The more industries I looked at, the more commonly I saw that it was happening.”
The very first Washington failure he had to grapple with was the failure to measure the problem at all. There simply weren’t numbers to work with. Back in 1995, after early rumblings about outsourcing, the Department of Labor conducted a count of the contingent workforce in America. It followed it up with four surveys over the next 10 years. But under budget pressure, the department hasn’t run the survey since 2005. Officially, today, Washington has no idea how big the problem is.
Over the past two decades, the U.S. labor market has undergone a quiet transformation, as companies increasingly forgo full-time employees.
Weil eventually did have some picture, though, because two economists decided to do it themselves. Lawrence Katz and Alan Krueger updated the count in 2015 by fielding a similar survey, funded with university research money, with a smaller sample size. Today, their data are acknowledged as the best measurement of the contingent workforce—they refer to it as “alternative work arrangements.” What they found was startling.
In some cases, the Katz-Krueger data confirmed what was already known about the labor market, such as that construction is a highly subcontracted industry; about a quarter of construction workers were contingent workers in 1995, a share that has stayed roughly constant over the past 20 years. But in many other industries, they found the curves had begun to bend sharply upward. Among “transportation and material moving workers,” a category that includes everything from taxi drivers to flight attendants, the share of contingent workers had doubled: In 2005, it was 9 percent; it was 18.2 percent by 2015. Among health care support workers like Diana Borland, it nearly doubled, from 9.5 percent to 17.9 percent. The share of food preparation workers in contingent work had quadrupled. And this trend wasn’t limited to blue-collar jobs: The rise in contingent work was as large for people with a bachelor’s degree as it was for those without a high school diploma.
It was also clear from the Katz-Krueger data that the shift to contingent work wasn’t driven by the rise of the sharing economy. Just 0.5 percent of workers are in the sharing economy, accounting for at most 10 percent of the labor market shift over the past 10 years. In other words, for all the concerns about Uber and other sharing economy companies using independent contractors to skirt state and federal labor laws, the shift toward these workplace arrangements predates those companies. They’re followers, not leaders.
Vinik-graphic-large.png Source: Current Population Survey; Lawrence Katz and Alan Krueger (2015)
When Weil considered how to address this, he focused on two separate but related factors in the rise in contingent work. The first was on one key question: How do companies classify their employees? From a policy perspective, worker classification is crucial. In the mid-20th century, the federal government developed a litany of workplace protections—minimum wage, overtime, collective bargaining, workplace safety, tax withholding, unemployment insurance, worker’s compensation—that apply to people only classified as employees. Even more importantly for many people, benefits like employer-sponsored health insurance and retirement saving plans are also administered by employers, and are less accessible for independent contractors. As new benefits arise, they’re built on the same model. For instance, Republicans included a new credit in their 2017 tax bill that encourages companies to provide paid leave to their workers—a break that would apply to only employees, not independent contractors.
Congress didn’t create similar workplace protections for independent contractors because they were considered to effectively be their own small business, setting their own hours and responsibilities, providing their own benefits and determining their own economic outcomes. More independence came with fewer social protections, a trade-off that many Americans support. According to a 2015 Government Accountability Office report, independent contractors are slightly more likely to be satisfied with their jobs than full-time employees, and fewer than 10 percent said they would prefer a different type of employment.
Businesses prefer these arrangements, too, because they can shed expensive benefit packages and are not responsible for following federal labor laws. But that also gives them an incentive to “misclassify” their workers, overseeing them as if they were employees but officially classifying them as independent contractors to cut costs. Data on misclassification are limited, but state-level audits indicate that about 10 percent to 30 percent of American workers are currently misclassified. There are also some indications that misclassification is becoming more widespread. And even if independent contractors aren’t misclassified, they have less access to benefits and more job insecurity. The GAO study found that, compared with full-time employees, independent contractors are more than twice as likely to say that their benefits aren’t good and almost three times as likely to say that they will lose their job in the next year.
The second, and perhaps more important, trend that Weil focused on was the increasing number of Americans who aren’t classified as independent contractors but whose work has become less secure, such as on-call workers or workers whose jobs have been subcontracted out to third-party companies—often, like Borland, reporting to work at the exact same office. According to the Katz-Krueger data, the rise in contingent work is centered on these types of workers. Companies can save money by focusing on their core business, but a growing body of evidence indicates that it harms workers in myriad ways. According to the GAO study, these types of contingent workers are twice as likely as full-time employees to say they are “not at all” satisfied with their jobs; they earn considerably less per hour than their traditionally employed counterparts, even after controlling for characteristics like age, sex and education; and they work fewer hours per year and have far less access to workplace benefits, like health insurance and 401(k)s.
“The key positive is that [contingent workers] still have a job,” said Alex Passantino, who was acting head of the Wage and Hour Division during the Bush administration and now represents companies in federal labor law disputes. “I don’t want to be too blunt, but the economics are driven by this ancient law and ancient legal structure. They are causing those types of decisions.”
Congress, however, hasn’t shown much interest in providing extra resources for enforcement, and some on the left are skeptical it ever will. In the meantime, business moves faster than Congress can keep up, and the fissuring continues apace—leaving workers like Diana Borland in its wake. At UPMC, according to the hospital, new voice-recognition technology reduced the need for transcriptionists, and led to outsourcing to avoid “significant reductions” in staff. When the change came for Borland, she and her colleagues were never reclassified as independent contractors; she was just passed from one employer to another. She wasn’t fired, or replaced. But the change still led to a huge cut in her paycheck and, after she quit, a two-year period of instability in her life, creating real financial challenges for her four kids. And hers is something of a best-case scenario.
Nuance, her contract employer, declined to answer questions on Borland’s situation. Eric Tinch, vice president of global services for Nuance Healthcare Solutions, said in a statement that the company offers “a highly competitive benefit package to full-time and progressive part-time employees who work more than 32 hours per week.”
When Borland visited Allegheny General Hospital for a job interview in 2015, a supervisor asked her why she had left her previous job at UPMC. It would’ve been easy to disparage her former employer, but Borland simply answered that she had retired. “I don’t care where you go,” she explained. “You don’t burn bridges.”
A few decades ago, that answer—the refusal to criticize a former employer—may have been considered part of the implicit social pact between workers and companies, in which both sides had responsibilities to each other. For Borland, the entire episode has left her asking bigger questions, wondering about the future of the country and the ability of the economy to continue delivering widespread benefits and protections to working Americans.
“I would like to know where the American dream is for our children, for my 13-year-old, for my two granddaughters who are 2 years and 4 years,” she said. “We made UPMC what it is. I can tell you, I missed one day of work in 13 years. I never called off—ever. Where is the American dream?”