Snowden Debacle Spotlights Contracting Hazards

Harvard Business Review’s Tammy Erickson describes in glowing terms “The Rise of the New Contract Worker “. The Defense Department would appear to be reevaluating this popular labor trend, though. The Huffington Post reports that while contractors comprise less than a quarter of the Defense Department’s labor force, they account for 50 percent of its cost.

Questioning the cost-savings attributed to parsing out projects to temporary talent is a good start — but it shouldn’t end there. Some experts anticipate that as many as 50 percent of the jobs created in the wake of the Great Recession are contract-based, to comprise approximately 35 percent of the nation’s workforce.

Everybody works for somebody — and no one at all.

Consider Edward Snowden, the government contractor who leaked classified documents on efforts to track citizens’ cell phone records, among other digital communications, within the U.S. Would Snowden have been as likely to leak information if he had enjoyed the added security of permanent employment? This is but one of the disconcerting questions the rising tide of just-in-time employment begs.

Apart from the obvious concerns the Snowden bombshell raises about national security and the public interest, the subject of contract labor bears discussion in its own right. At stake: Does contracting add value and stability to our economy or not?

There are compelling downsides that call this labor trend into doubt:

  • Who, me?: Contractors are not stakeholders. Conceivably, the loyalty of a full-time employee with a stake in the company’s future may be better than that of someone who is paid on a per-assignment basis, and for whom a paycheck comes from a third-party. The proliferation of temp workers calls to mind the truism of “easy come, easy go”.
  • Pass the Buck: An “independent contributor” may be more prone to over-state their qualifications to recruiters even as recruiters on behalf suppliers of talent cut corners, figuring that what the client doesn’t know won’t hurt them. This portends a breakdown in communication and accountability. One example of this fact is that many contractors lack workers’ compensation insurance coverage. The client assumes the agency has verified that a self-employed worker carries adequate coverage and the agency may assume the client will make the necessary verifications. In reality, nobody looks, nobody checks and nobody tells. The self-employed and underemployed contractor may also be less likely to take federally-mandated breaks and are apt to become an under-represented, at-risk component of the workforce.
  • Ten Times Removed: Sensitive corporate and government information is not best served by temp workers and the recruitment agencies who supply them. It is difficult to vouch for the quality of any given recruit when a corporation or government body overly-complicates “chain of command”. Contract assignments are often farmed out many times over, with a multiplicity of contributors and third-party agents attempting to communicate and coordinate. When relay-style communication breaks down, the result may be lost time, money and productivity.
  • Money, Money, Money!: With too many “hands in the pot”, contracting may not represent the cost-savings presumed. With each assignment and every job that is subcontracted yet again, middlemen take their cut. What may be spared in eliminating benefits and taxes over hiring “in house” may be offset by paying steep fees to managed service providers even as contractors work for low pay or few benefits. The “efficiency” of using temp workers may be more perception than reality.

It is unclear whether the growth in contingent labor represents a liberation of talent, as Erickson suggests, or an act of employment desperation hastened by troubling economic times. While there are certainly personal networking gains to be made through this approach, there are many consultants and contractors who find that in spite of the experience they have accrued it is difficult to step out of a roving role into full-time, regular employment. Worse, would-be employers may perceive members of this nontraditional “migrant” labor force as one precarious step removed from the ranks of the unemployed — and typecast such applicants accordingly.

Like most things in life, however, the subject is far from black-and-white. For contractors with a conventionally-employed spouse or partner, the flexibility of picking and choosing assignments may be attractive. Nonstandard work may also be a good fit for the semiretired who wish to cut their workloads but retain their skills. Gigs, as such jobs are sometimes referred to, are also a worthy consideration for college grads wishing to gain coveted real-world experience. For many, nonetheless, freelance work represents irregular hours, irregular pay and few, if any, benefits.

The growth in contingency opportunities may be a lifesaver to those who are having difficulty securing a regular job. But it could also be the case that because so many public- and private-sector employers are actively paring down in-house staffing levels and outsourcing non-core functions to citizens and H1-B visa-holders, working-age Americans are increasingly deprived of permanent, full-time “growth opportunities”.

Therein lies the rub.

Can an already weakened economy sustain mounting losses in living-wage jobs to the proliferation of transient labor?

Somehow I doubt that the simultaneous forces that drive over-specialization on the one hand and workplace fragmentation on the other hand — bifurcating and disenfranchising the workforce  — bodes well for national and economic security.

A white paper from the California Labor Federation puts it in even starker terms:

“A failure to address the proliferation of contingent work will result in more than just the creation of a permanent underclass; it will make rebuilding a middle class impossible.”

 

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