A Workforce Divided
Rising Use of Temps Is
Creating Two Classes of Employees
By Margaret Webb Pressler
Washington Post Staff
Writer
Sunday, June 23, 2002; Page H01
For a few months now, Julie Lenzer Kirk has been in the seemingly enviable position of having too much work for her small Germantown company, Applied Creative Technologies, to handle.
But this has also put Kirk in a quandary. She needed someone to do graphic design and marketing work, but she didn't know whether the demand would last long enough to justify hiring a new person. Adding an employee is a big decision for a company with a staff of just 20, so Kirk did what thousands of business owners across the country are also doing: She hired a temp.
"I'm not sure if it's just a temporary bubble or a long-term need," said Kirk, whose company designs software for manufacturers, such as bar-code systems. She could always lay off a new employee if the available work dwindled, "but that . . . really eats into the morale of the company."
Kirk's move is a microcosm of the new world for temporary workers. No longer limited to secretarial and administrative positions, temps can be found in just about every sector of the economy -- and all the way up and down the corporate ladder.
Look at the desk next to you, and you may see one. There are temporary computer programmers, accountants, manufacturing workers and even executives. And they are being used more and more by all kinds of companies, from Fortune 500 giants to tiny firms such as Applied Creative Technologies.
The number of temp workers employed in the United States more than doubled from 1992 to 2000, despite the strong economy in that time. In fact, the rising use of temps may be one reason for the economy's strength, as some economists argue that a significant temporary workforce allows corporate America to be leaner, more flexible and more competitive.
There is also some evidence that the use of temporaries may have kept the recent recession from being even worse. Companies were quick to let their temps go when growth went south a year ago, and that reduced costs in a heartbeat. Now businesses are picking them back up, allowing for a rapid response to improving economic conditions.
"It's really hard to compete" without temps, said Richard Wahlquist, president and chief executive of the American Staffing Association of Alexandria, the temp industry's main trade association.
Naturally, the change is also having a big impact on the culture of the workplace, where companies increasingly are dealing with two classes of employees -- those who work for a company, and those who merely work at the company. If you think corporate loyalty is already eroding, just wait.
This dichotomy in the workforce is likely to intensify, as companies increasingly find it safer to let temps metamorphose into permanent workers once business conditions (and personalities) are proven. Experts say more and more job offers are likely to come structured in this "temp-to-perm" way.
"It's the wave of the future," said Lori DeCesare, president of Legal Placements Inc. of Washington, which places temporary lawyers, paralegals and legal secretaries, many on a temporary-to-permanent status. "A year ago, they'd see one person, they'd say, 'Oh, that person is fine, let's hire them.' Definitely, that has changed."
The temporary-staffing industry is almost giddy about the prospects for its long-term business after the dramatic gains of the past decade. Even though last year was a disaster for the temp business -- with 360,000 jobs lost -- it's hard to deny the freight train coming down the tracks. And the recent signs of growth in the temp business suggest the engine's back on track and moving.
For the past three months, the number of temporary workers employed nationwide has grown solidly, according to the Bureau of Labor Statistics, even as overall job growth has been relatively anemic. Last month, 25,000 of the 41,000 new jobs added in the nation's economy went to temps.
It's been a long time coming. At the beginning of the 1990s, most temps were still filling clerical and administrative positions, as well as some manufacturing needs. By the end of the decade, about a fifth of the industry's revenue came from professional positions.
Last month, there were 2.9 million people working in temp jobs, according to the BLS, or about 2.5 percent of the employed workforce of 134.4 million people. Ten years ago, a million temps accounted for less than 1 percent of all workers.
"I would make an argument that one of the reasons this downturn has been relatively short-lived is that companies had far more flexibility, from a cost standpoint, with their largest line-item expense, their people," said Gary Peck, president of the Spherion Staffing Group of Fort Lauderdale, Fla., one of the nation's largest temporary services firms.
The temp business argues, and so do some economists, that the swelling ranks of temporary workers are the result of more responsive business models throughout corporate America. For the past decade, companies from all sectors have invested heavily in technology to make their operations more efficient. It has become critical to more closely monitor inventories, sales, billing and shipments so that services can be delivered according to need rather than tie up capital in excess capacity that would only be used up in spurts. The temp industry allows that same strategy to be employed in a company's workforce: Hire 'em when you need 'em, and let 'em go when you don't.
"While firms have really concentrated on just-in-time inventory, the concept of just-in-time workforce makes sense," said Wahlquist of the trade association. "No one likes to do layoffs. It's bad for business, bad for morale."
Technology has driven the growth of the temporary industry in other ways, too. The explosion in Internet, software and telecommunications companies in the 1990s was tailor-made for the temp business. Many of these businesses were started on a shoestring, so temps were a good, cheap source of manpower. Tech companies also experience big swings in the need for workers as a product wends its way through the cycle of development, testing and release, requiring more workers at some times than at others, which again is a problem easily solved by hiring temps.
Additionally, tech companies are likely to have positions that may require a particular generic skill -- such as programming -- but little innate knowledge of a company's strategy and business. That makes it easier to hire people for short bursts of time.
For all these reasons, the use of temp workers in Silicon Valley is three times the national average. But now there appears to be no stopping the trend throughout the economy.
After the recent, and sudden, economic downturn, and with the pace of the recovery feeling shaky at times even now, businesses are hedging their bets on new hires. Temporary staffing agencies say firms are hiring workers for anywhere from three months to a year before deciding to make a full-time offer.
That's how Kirk of Applied Creative Technologies is approaching many of her new hires these days, citing the opportunity it gives her to "test-drive" a worker and gauge the company's long-term need in the meantime. And more workers are willing to take such temporary jobs to get into the fields they want, given that jobs are scarcer now.
April Crews of Alexandria once worked in public relations but signed up with the local temporary firm Millennium Staffing a year ago to try to find a job in the media world. It has taken that long for a job to materialize, but last week Crews started work as a temp for a major media company in the city (neither she nor her agency wanted to identify the company). Her job right now is doing administrative work, but she hopes it will lead to something better.
"I'm using it to get my foot in the door," said Crews, who's in her early twenties. "I just like being in the environment of a media company, and if I'm in the field, then I'm happy."
The fact that Crews finally found a job is another sign of the building momentum in the temporary business, and it could be a good sign for the economy as a whole. In previous business cycles, the temp industry has been a good predictor of where the economy was heading, both on the way into a recession and on the way out.
"The staffing workforce operates as very effective shock absorbers to balance out the highs and lows in economic cycles," Wahlquist said. "It's very, very good for the economy as a whole."
It's hard to sell the notion that the temp explosion is great for the American worker: Temps may not particularly appreciate being the economy's shock absorbers. And their growing ranks mean more employees at U.S. companies with little sense of job security.
Staffing executives are sensitive about the lopsided impact a downturn can have on their industry, even if it is the first to recover. Executives argue that temporary workers who are let go are better off than permanent workers who are let go because they have the staffing agency to back them up in their hunt for a new position.
They also cite the growing ranks of temporary workers who do nothing but jump from temp job to temp job because they like the flexibility. Indeed, that's easier to do now that temp agencies almost universally offer their workers the option of buying into a benefits program for health care and paid vacation.
But Francoise Carre, director of the Radcliffe Public Policy Center at Harvard University, cites a 1999 study that showed 60 percent of temps would rather have a permanent job. She said the contentment of temp workers is also variable, depending, logically enough, on how much demand there is for work -- last year, for example, was a lousy time to be a temp -- and how long a temp must stay that way before getting that coveted full-time position.
"Temp workers may see this as a foothold into a workplace, particularly a good workplace," she said. "But if they're in there for five years and never get hired, they may get disillusioned."
That issue was at the heart of a long-running and acrimonious court battle waged throughout the 1990s between Microsoft Corp. and thousands of temporary workers at the software giant. The case centered on Microsoft's history of employing what it called "freelancers" for long periods of time while giving them no benefits and no access to the kinds of stock options that were making many regular employees rich.
The plaintiffs' case painted a clear picture of a caste system with two tiers of employees -- the regular workers who wore blue badges, and the temporary workers who wore orange badges. Workers with an orange badge had a separate set of rules to live by on a daily basis: They could not shop at the company store, use company athletic fields or even park in the company parking lots. Many of the plaintiffs worked for Microsoft for years.
In January 2000, the U.S. Supreme Court refused to hear an appeal by Microsoft, letting stand a decision by the 9th U.S. Circuit Court of Appeals that the company's temporary workers were actually common-law employees who deserved the same benefits as regular employees and the chance to buy discounted stock.
Carre says this kind of two-tier system has also become more common throughout Silicon Valley, and that may be a cautionary tale for the rest of the country as it charges ahead into a "flexible workforce" culture.
For companies looking for such flexibility, the decision may be as much about the kind of corporate culture they want to create as it is about the business justifications. Managers may increasingly be faced with the task of leading two types of workers, the permanent and the temporary. And co-workers will have to learn to be sensitive to the subtle differences in status between two employees who may otherwise be doing the same job.
Sociologists are starting to study the issue more, after seeing the complicated and demoralizing effect the wide use of temps has had at some companies in Silicon Valley.
"In those places where you have high-volume, systematic use of temporaries, then the issue is not only for the temps themselves, but also the co-workers and the managers," Carre said. "How do you deal with them when there is a birthday party, or a staff picnic, or any other reward mechanism you might use for your employees. Do you include them, or not?"
Or, to put it another way, suppose they created a new economic boom, and not everybody was invited.