Disposable Workers

By Janice Castro

The corporation that is now the largest private employer in America does not have any smokestacks or conveyor belts or trucks. There is no clanging of metal on metal, no rivets or plastic or steel. In one sense, it does not make anything. But then again, it is in the business of making almost everything.

Manpower Inc., with 560,000 workers, is the world's largest temporary employment agency. Every morning, its people scatter into the offices and factories of America, seeking a day's work for a day's pay. As General Motors (367,000 workers), IBM (330,500) and other industrial giants struggle to survive by shrinking their payrolls, Manpower, based in Milwaukee, Wisconsin, is booming along with other purveyors of temporary workers, providing the hands and the brainpower that other companies are no longer willing to call their own.

Even as its economy continues to recover, the U.S. is increasingly becoming a nation of part-timers and free-lancers, of temps and independent contractors. This "disposable" work force is the most important trend in business today, and it is fundamentally changing the relationship between Americans and their jobs. For companies large and small, the phenomenon provides a way to remain globally competitive while avoiding the vagaries of market cycles and the growing burdens imposed by employment rules, antidiscrimination laws, health-care costs and pension plans. But for workers, it can mean an end to the security and sense of significance that came from being a loyal employee. One by one, the tangible and intangible bonds that once defined work in America are giving way.

Every day, 1.5 million temps are dispatched from agencies like Kelly Services and Manpower -- nearly three times as many as 10 years ago. But they are only the most visible part of America's enormous new temporary work force. An additional 34 million people start their day as other types of "contingent" workers. Some are part-timers with some benefits. Others work by the hour, the day or the duration of a project, receiving only a paycheck without benefits of any kind. The rules of their employment vary widely and so do the attempts to label them. They are called short-timers, per-diem workers, leased employees, extra workers, supplementals, contractors -- or in IBM's ironic computer-generated parlance, "the peripherals." They are what you might expect: secretaries, security guards, salesclerks, assembly-line workers, analysts and CAD/CAM designers. But these days they are also what you'd never expect: doctors, high school principals, lawyers, bank officers, X-ray technicians, biochemists, engineers, managers -- even chief executives.

The number of people employed full time by FORTUNE 500 companies has shrunk from 19% of the work force two decades ago to less than 10% today. Almost overnight, companies are shedding a system of mutual obligations and expectations built up since the Great Depression, a tradition of labor that said performance was rewarded, loyalty was valued and workers were a vital part of the enterprises they served. In this chilly new world of global competition, they are often viewed merely as expenses. Long-term commitments of all kinds are anathema to the modern corporation. For the growing ranks of contingent workers, that means no more pensions, health insurance or paid vacations. No more promises or promotions or costly training programs. No more lawsuits for wrongful termination or other such hassles for the boss. Says Secretary of Labor Robert Reich: "These workers are outside the traditional system of worker-management relationships. As the contingent work force grows -- as many people find themselves working part time for many different employers -- the social contract is beginning to fray."

As the underpinnings of mutual commitment crumble, time-honored notions of fairness are cast aside for millions of workers. Working temp or part time often means being treated as a second-class citizen by both employers and permanent staff. Says Michelle Lane, a former temp in Los Angeles: "You're just a fixture, a borrowed thing that doesn't belong there." Being a short- timer also can mean doing hazardous work without essential training, or putting up with sexual and racial harassment. Placement officers report client requests for "blond bombshells" or people without accents. Says an agency counselor: "One client called and asked us not to send any black people, and we didn't. We do whatever the clients want, whether it's right or not."

Workers have little choice but to cope with such treatment since most new job openings are the labor equivalent of uncommitted relationships. More than 90% of the 365,000 jobs created by U.S. companies last month were part-time positions taken by people who want to work full time. "The fill-ins are always desperate for full-time jobs," says one corporate personnel officer. "They always ask." Richard Belous, chief economist for the National Planning Association in Washington, has studied the proliferation of tenuous jobs. "If there was a national fear index," he says, "it would be directly related to the growth of contingent work."

Already, one in every three U.S. workers has joined these shadow brigades carrying out America's business. Their ranks are growing so quickly that they are expected to outnumber permanent full-time workers by the end of this decade. Companies keep chipping away at costs, stripping away benefits or substituting contingent employees for full-time workers. This year alone, U.S. employers are expected to use such tactics to cut the nation's $2.6 billion payroll costs as much as $800 million. And there is no evidence to suggest that such corporate behavior will change with improvement in the economy.

Once contingent workers appear in a company, they multiply rapidly, taking the places of permanent staff. Says Manpower chairman Mitchell Fromstein: "The U.S. is going from just-in-time manufacturing to just-in-time employment. The employer tells us, 'I want them delivered exactly when I want them, as many as I need, and when I don't need them, I don't want them here.' " Fromstein has built his business by meeting these demands. "Can I get people to work under these circumstances? Yeah. We're the ATMs of the job market."

In order to succeed in this new type of work, says Carvel Taylor, a Chicago industrial consultant, "you need to have an entrepreneurial spirit, definable skills and an ability to articulate and market them, but that is exactly what the bulk of the population holed up inside bureaucratic organizations doesn't have, and why they are scared to death." Already the temping phenomenon is producing two vastly different classes of untethered workers: the mercenary work force at the top of the skills ladder, who thrive; and the rest, many of whom, unable to attract fat contract fees, must struggle to survive.

The flexible life of a consultant or contract worker does indeed work well for a relatively small class of people like doctors, engineers, accountants and financial planners, who can expect to do well by providing highly compensated services to a variety of employers. David Hill, 65, a former chief information systems officer for General Motors, has joined with 17 other onetime auto-industry executives (median salary before leaving their jobs: $300,000) to form a top-of-the-line international consulting group. "In the future," says Hill, "loyalty and devotion are going to be not to a Hughes or Boeing or even an industry, but to a particular profession or skill. It takes a high level of education to succeed in such a free-flowing environment. We are going to be moving from job to job in the same way that migrant workers used to move from crop to crop."

Many professionals like the freedom of such a life. John Andrews, 42, a Los Angeles antitrust attorney, remembers working seven weeks without a day off as a young lawyer. He prefers temping at law firms. Says he: "There's no security anymore. Partnerships fold up overnight. Besides, I never had a rat- race mentality, and being a lawyer is the ultimate rat-race job. I like to travel. My car is paid for. I don't own a house. I'm not into mowing grass."

But most American workers do better with the comfort and security of a stable job. Sheldon Joseph was a Chicago advertising executive until he was laid off in 1989. Now he temps for $10 an hour in a community job-training program. Says the 56-year-old Joseph: "I was used to working in the corporate environment and giving my total loyalty to the company. I feel like Rip van Winkle. You wake up and the world is all changed. The message from industry is, 'We don't want your loyalty. We want your work.' What happened to the dream?"

Employers defend their new labor practices as plain and simple survival tactics. American companies are evolving from huge, mass-production manufacturers that once dominated markets to a new species of hub-and-network enterprises built for flexibility in a brutally competitive world. The buzz phrase at many companies is "accordion management" -- the ability to expand or contract one's work force virtually at will to suit business conditions.

Boardroom discussions now focus on what are called "core competencies" -- those operations at the heart of a business -- and on how to shed the rest of the functions to subcontractors or nonstaff workers. Managers divide their employees into a permanent cadre of "core workers," which keeps on shrinking, and the contingent workers, who can be brought in at a moment's notice. Most large employers are not even certain at any given time how many of these helpers are working for them -- nor do they usually care. Says a manager: "We don't count them. They're not here long enough to matter." Some analysts wonder whether America's celebrated rise in productivity per worker (2.8% last year) is all it seems to be, since so many of those invisible hands are not being counted. So profound is the change that the word core has evolved a new meaning, as in "she's core," meaning that she is important and distinctive because she is not part of the contingent work force.

No institution is immune to the contingent solution. Imagine the surprise of a Los Angeles woman, seriously injured in an auto accident, when she recently asked a radiology technician at the hospital about a procedure. "Don't ask me," he snapped. "I'm just a temp." In Appleton, Wisconsin, the Aid Association for Lutherans is using temps to keep track of $3.6 million in relief funds for victims of Hurricane Andrew. The State of Maine uses temps as bailiffs and financial investigators. IBM, once the citadel of American job security, has traded 10% of its staff for "peripherals" so far. Says IBM administrative manager Lillian Davis, in words that would have been unimaginable from a FORTUNE 500 executive 20 years ago: "Now that we have stepped over that line, we have decided to use these people wherever we can."

Indeed, managers these days can hire virtually any kind of temp they want. Need an extra lawyer or paralegal for a week or so? Try Lawsmiths in San Francisco or Project Professionals in Santa Monica, California. Need a loan officer? Bank Temps in Denver can help. Engineers? Sysdyne outside Minneapolis, Minnesota. CAD/CAM operators? You don't even need to buy the equipment: in Oakland, California, Western Temporary Services has its own CAD/ CAM business, serving such clients as the U.S. Navy, the Air Force, Chevron, Exxon and United Technologies. Doctors and nurses? A firm called Interim in Fort Lauderdale, Florida, can provide them anywhere in the country. Need to rent a tough boss to clean up a bad situation? Call IMCOR, a Connecticut-based firm that boasts a roster of senior executives expert at turnarounds. Says IMCOR chairman John Thompson: "Services like ours are going to continue to flourish when businesses change so rapidly that it's in no one's interest to make commitments. Moving on to the next place where you're needed is going to be the way it is. We will all be free-lancers."

Behind this profound change in the workplace are the impersonal market forces of the new global economy. Americans must now compete for jobs with the growing legions of skilled workers in developing economies from Asia to Eastern Europe. U.S. executives have taken to talking of global "market prices" for employees, as if they were investing in cattle futures. "We understand it's just business, but it's still awfully demeaning," says Deb Donaldson, a part-time retail sales clerk in Moline, Illinois. Manpower's Fromstein dismisses such complaints of exploitation, pointing out that his own profit margins are razor thin (1.3%). Says he: "We are not exploiting people. We are not setting the fees. The market is. We are matching people with demands. What would our workers be doing without us? Unemployment lines? Welfare? Suicide?"

Employers are also responding to factors closer to home. They are embracing such cutbacks not simply to slash up to 40% of payroll costs, though that might be inspiration enough. They are also freeing themselves from inconvenient labor and equal-employment requirements. Says Ronald Cohen, a senior partner of Cohen & Co., a regional accounting firm based in Cleveland, Ohio: "You don't need to worry about the incredible compliance problems and potential litigation if you fire someone." Using disposable workers also means that companies rarely have to train them. Moreover, getting rid of such workers is easy when they don't measure up. Says Robert Uhlaner, senior vice president of Quantum Consulting in Berkeley, California: "You can try them out. The best thing about it is that you never have to face firing people -- because you never really hire them in the first place."

In the long run, however, this scramble to shed full-time staff may be as harmful to American industry as it is to the American work force -- since a well-trained work force is the greatest asset of a nation's industries. Analysts, including Labor Secretary Reich, have pointed out that in a borderless world, capital and production are portable; thus, the key resources of companies as well as nations are the skills and ideas of its people. The reduction in corporate programs for training and developing employees -- one of the long-term effects of the temping of America -- leads to a disinvestment in the nation's human capital. By discouraging commitment and initiative, managers risk poisoning the well of their most important asset.

President Clinton has called for more "good jobs at good pay" for workers. But even as he gears up his plan to retrain American workers, companies are abandoning their traditional role of nurturing new talent. Richard Belous argues that government training programs may have to help repair the damage. Schools must also do a better job.

The best solution, however, may be to find ways to reduce some of the forces that are pushing companies to rely more heavily on disposable workers. Creating a system of universal health insurance might be a start: properly designed, it could reduce one of the costs of taking on full-time employees as well as make life easier for contingency workers. If employers are required to provide extensive benefits to workers, though, such a plan may backfire, triggering new job eliminations.

There is no going back to old-fashioned lifetime employment. Companies need flexibility. Thus the long-term social costs of all the well-intentioned work- force rules that have accrued over the past few decades may have to be reconsidered.

For now, most citizens will have to scramble to adapt to the new age of the disposable worker. Says Robert Schaen, a former comptroller of Chicago-based Ameritech who now runs his own children's publishing business: "The days of the mammoth corporations are coming to an end. People are going to have to create their own lives, their own careers and their own successes. Some people may go kicking and screaming into the new world, but there is only one message there: You're now in business for yourself."

With reporting by John F. Dickerson, Jane Van Tassel/New York and William McWhirter/Chicago