Chapter 5

America’s Flexible Labor Market

Flexibility is a hallmark of the American labor market, which places a high value on the freedom to choose one’s work and the terms of employment.  America’s labor market is characterized by a dominance of the at-will employment relationship, which provides labor market flexibility by keeping hiring costs and separation costs relatively low. 

In the workplace, flexibility can take many forms and can involve combinations of arrangements to suit the needs the worker and the requirements of the job.  Because flexibility involves tailoring to the job as well as the worker, it can vary greatly by occupation. 

Flexibility in its many forms will continue to be a key factor in maintaining a dynamic U.S. workforce.  While dramatic changes in how work is done have yet to be realized, employers and workers will need flexibility to respond and adapt to changes in the global economy as well as technological innovations, allowing new opportunities for when, where, and how we work

• In 2004, longer employment tenure was most common among men in their 50s, with just over half of those men reporting ten or more years of employment with their current employer.
• Over the last two decades, the proportion of men with ten or more years of employment with their current employer has declined for all age groups.  For example, among employed men age 40-44 years, 51.1 percent had worked for their current employer for at least ten years in 1983.  In 2004, the proportion was only 36.2 percent.

• The proportion of women employed by their current employer for at least ten years increases with age.  Longer employment tenure was most common among women in their 60s, with just over half reporting ten or more years with their current employer in 2004.
• For women, changes over time in these proportions vary by age.  Longer employment tenure has become somewhat more common among women age 40-54.  For example, for women age 40-44 years, the proportion increased from 23.4 percent in 1983 to 28.5 percent in 2004.  In contrast, for women 30-34 years old, the proportion decreased from 14.8 percent in 1983 to 9.8 percent in 2004.

• Alternative work arrangements have become more common in recent years.  According to the Current Population Survey, in the last decade, the number of workers with alternative arrangements has increased by 21.3 percent, representing about 11 percent of the employed in 2005. 
• Since 2001, the number of independent contractors and on-call workers has risen by almost 20 percent each and the number of contract firm workers has increased by almost one-third.  According to the Current Population Survey, the number of U.S. workers reporting work for temporary help agencies has remained steady.  However, data from the establishment-based Current Employment Statistics program suggest that employment in temporary services actually increased by over 8 percent between 2001 and 2005.

• Independent contractors and workers provided by contract firms are more likely than other types of workers, including those with traditional work arrangements, to have a bachelor’s degree or higher.  At the other end of the education spectrum, temporary help, on-call, and contract firm workers are more likely than traditional workers or independent contractors to have less than a high school diploma.
• In general, demographic characteristics differ among workers with various alternative work arrangements.  Independent contractors are more likely than traditional workers to be white and male.  Independent contractors also tend to be older.  In 2005, 27.3 percent of independent contractors were age 55 and over, compared to 15.5 percent of traditional workers.

• Today, part-time workers (less than 35 hours per week) account for about 17 percent of the workforce.  Some part-time workers would prefer full-time work but are unable to find it.  However, the vast majority of those who work part-time do so for so-called noneconomic reasons, such as to care for family members or to make time for educational pursuits.  Since 1994, among workers who usually work part-time, the proportion of those who do so for noneconomic reasons has held steady at about 8 in 10.
• Those who usually work part-time for noneconomic reasons are more likely to be women and older.  In 2005, 68.5 percent of those who usually worked part-time for noneconomic reasons were women, and 22.7 percent were age 55 or over.  Except for workers provided by contract firms, workers with alternative arrangements are more likely to work part-time than are workers with traditional arrangements.

• In 2004, 20.7 million persons usually did some work at home as part of their primary job.  These workers, who reported working at home at least once per week, accounted for about 15 percent of total nonagricultural employment in May 2004.  About one-third of persons who usually worked at home in May 2004 were self-employed.
• About 3.3 million wage and salary workers, or 1 in 4 wage and salary workers working at home, had a formal arrangement with their employer to be paid for the time they put in at home.
• The likelihood of working at home increased with educational attainment.  Employed persons 25 years and over with a bachelor’s degree or higher were more than 6 times more likely to work at home as those without a high school diploma.  Much of this disparity is due to the varying occupational patterns of workers with different levels of education.  For example, college graduates are much more likely to be employed in managerial and professional occupations—which have a greater work-at-home rate—than are high school dropouts.

• Certain jobs may be more amenable to particular mechanisms for flexibility.  For example, among workers with alternative work arrangements in 2005, independent contractors were more likely to be in management and business, sales, or construction occupations than were workers with traditional arrangements. 
• Flexibility in the form of flexible scheduling and work at home are more common in management, sales, and professional occupations, while working part-time for noneconomic reasons is more common in sales, service, and office occupations.  These forms of flexibility tend to be less common in production, transportation, and related occupations (not shown).