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October 1996, Vol. 119, No.
10
Earnings and benefits of workers in alternative work arrangements
Steven Hipple and Jay Stewart
Approximately 1 of 10 workers was employed in an alternative work arrangement, according to data from the February 1995 Contingent Worker/Alternative Work Arrangement Supplement to the Current Population Survey (CPS). Alternative work arrangements include working through a temporary help agency, working for a contract company, working on-call, and working as an independent contractor.
It has been argued that some alternative work arrangements have come about through companies’ efforts to reduce costs. Firms often find it cheaper to contract out for services such as security and payroll than to perform these functions in-house. In addition, the use of temporary help agencies can reduce costs by allowing firms to expand production during periods of increased demand without having to hire permanent workers or incur the costs of firing unneeded workers. Having a pool of on-call workers available serves the same purpose. By hiring independent contractors, firms can gain access to workers with highly specialized skills on an as-needed basis.
Have these developments been detrimental to workers? Not necessarily, if these arrangements allow workers to better direct their talents to where they are most highly valued, they may actually be better off. This article compares the earnings and benefits of workers in these alternative work arrangements with those of workers in traditional arrangements.
Earnings
The earnings of workers in alternative work arrangements relative
to those in traditional arrangements vary significantly. Workers
employed by temporary help agencies and those who are on call
earned less than workers in traditional arrangements, while
contract com-pany workers and independent contractors earned
more. (See table 1.) Some of the difference between the various
alternative arrangements can be attributed to the occupational
make-up of each arrangement. For instance, people employed by
temporary help agencies were more likely to work in
administrative support or laborer occupations which tend to pay
lower wages. In contrast, independent contractors were more
likely to work in higher paying managerial and professional
specialty occupations.
This excerpt is from an article published in the October 1996 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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