Spotlight Exclusives

The New Economy Brings New Challenges for Workers

Nancy K. Cauthen, NKC Consulting Nancy K. Cauthen, NKC Consulting, posted on

As employers search for new ways to cut costs and increase profits, they are increasingly shedding traditional notions of employment. Moving away from full-time, year-round jobs on an established schedule with a clear employer of record, businesses are creating an array of nonstandard work arrangements that depress wages and reduce employer obligations to workers, often by evading U.S. labor laws.

In Promoting Security in a 21st Century Labor Market: Addressing Intermittent Unemployment in Nonstandard Work, Annette Case, Sarah Wilhelm, and I document the extraordinary ways in which traditional notions of employment have already been upended and the resulting negative consequences for workers. It’s a troubling trend that threatens to undermine the basic economic security and stability that employment is expected to provide.

Examples abound: retailers redefine “full-time” work as less than 35 hours a week and shipping companies misclassify employees as independent contractors, denying workers benefits such as health insurance and paid time off. Employers in the service sector schedule workers for erratic hours, often with little advance notice and last-minute changes. Large corporations outsource various operations, creating multiple layers of contracting that complicate efforts to identify which employer is responsible for labor violations. Players in the new “gig economy,” such as Uber, Lyft and TaskRabbit, offer the promise that anyone can be a “micro-entrepreneur,” yet gigs may pay less than the minimum wage.

A heightened risk of periodic unemployment and underemployment is inherent in many types of nonstandard work, including self-employment; part-time work; contract and temporary work; and last-minute, unpredictable and on-call schedules. Part-time workers with fluctuating schedules may routinely experience periods with little or no work. Independent contractors and freelancers assemble a series of temporary projects with no guarantee of sufficient or ongoing employment. The majority of workers seeking work through temp agencies would prefer a permanent position yet increasingly end up in one temporary job after another, with inevitable gaps between paychecks.

At the same time, workers in nonstandard jobs typically aren’t covered by Unemployment Insurance (UI). Designed to assist full-time workers who experience involuntary job loss while they search for work, the program’s architects could not have anticipated an industrial labor market in which a significant share of workers supporting families worked in nonstandard jobs.

In more than 20 states, part-time workers and those not seeking full-time employment are not eligible for UI when they lose their jobs. State rules often bar temporary workers from claiming UI if they wish to find a permanent job and do not accept the next offer of temporary employment. Self-employed workers are not covered at all.

Some states have modernized their UI eligibility criteria to recognize “good cause” separations from work, that is, certain family circumstances under which workers can voluntarily quit a job and still qualify for UI. These may include caring for a sick family member, escaping domestic violence or relocating for a spouse’s new job.

But many other so-called voluntary separations from work are due, at least in part, to a structural mismatch between current employer practices and the realities of adult life. Last-minute and inflexible schedules make it difficult for workers to secure childcare, care for a sick family member, pursue education or training, seek needed medical care, and arrange transportation. Conflicts invariably arise and some employees quit because they can’t make it work or want to avoid being fired, yet they are disqualified from receiving from unemployment benefits.

Policy reform is desperately needed. There are already encouraging signs at the state and local levels, with increased momentum and victories around increasing the minimum wage, requiring paid sick days, and creating paid family leave insurance programs. All of these measures increase income security, give workers more flexibility and reduce job turnover in low-paying, nonstandard jobs. Lower levels of turnover also benefit employers, who save money on training costs; higher levels of employee satisfaction can also lead to productivity gains.

Continuing to reform UI is essential. UI recipiency – the percentage of unemployed individuals actively looking for work who receive UI benefits – is only 23 percent, its lowest level in 40 years. Other policy efforts, such as adopting minimum hours and fair scheduling legislation, would also help alleviate some of the insecurity in nonstandard employment.

But there are larger issues at stake: the health of the national economy, the overall well-being of workers and the prospects for opportunity for the next generation. When employers collectively decrease their own economic risk – and increase profits – by replacing full-time employees with part-timers, demanding increasing amounts of scheduling flexibility, classifying employees as self-employed entrepreneurs, outsourcing core functions to staffing agencies that employ nonunionized workers, and engaging in other cost-cutting strategies, they create a class of insecure workers who can’t adequately provide for their families nor support their local economies.

A thriving economy requires that risk and responsibility be shared by employers and workers alike. It’s time to recalibrate that balance.

To print a PDF version of this document, click here.

Nancy K. Cauthen is principal of NKC Consulting. Follow her on Twitter at @NancyCauthen.

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