Friday, January 6, 2017

Alternative Work Arrangements and the Real Health Of Employment in America

While the mainstream media, the Federal Reserve and Washington would have us believe this about the U.S. unemployment rate... fact, recent research by Lawrence Katz and Alan Krueger from Harvard and Princeton Universities respectively shows us the real health of the American employment picture and the quality of life of American workers.

Since 2005, the Bureau of Labor Statistics has not been able to conduct its Contingent Work Survey or CWS, the main instrument used to track alternative (i.e. non-traditional) work relationships in the U.S.  To complete their analysis, the authors contracted with the RAND Institute to create the a survey that would mimic the BLS's CWS.  As such, they created the RAND-Princeton Contingent Workers Survey (RPCWS) and used it to measure how the employment environment has changed over the years from 2005 to 2015.

The questionnaire used by the authors was completed by 3850 individuals for a response rate of 63.9 percent.  The questionnaire focuses on the individual's current work situation, their employer, how many jobs they had including part-time, evening or weekend work and how many hours they worked for each employer.  The questionnaire also asked specific questions about four types of alternative or non-standard work arrangements including:

1.) temporary help agency work

2.) on-call work

3.) independent contract work

4.) work provided by contract firms.

If you are interested in more detail about the survey, here is a link to the questionnaire.

Let's look at some of the study's key findings.  Here is a table showing how the percentage of those employed in all four types of alternative work arrangements has changed over the period between 1995 and 2005 and 2005 and 2015:

As you can see, in 2005, 10.7 percent of workers were employed in alternative work arrangements compared to 17.2 percent in 2015 (or 15.8 percent using the alternative weighted result).  This is a 60.7 percent increase over the decade.  The share of workers in the three categories other than independent contractors rose from 4.0 percent in 2005 to 7.3 percent in 2015.  This increase in alternative work over the past decade is key to understanding the real health of the employment picture in the United States.  According to the Bureau of Labor Statistics Current Population Survey, between 2005 and 2015, total employment rose by 9.1 million from 140.4 million in February 2005 to 149.4 million in November 2015 as shown here:

With the increase in the share of workers in alternative work arrangements rising from 10.7 percent to 15.8 percent, the number of workers employed in alternative arrangements increased from 15.0 million in February 2005 to 23.6 million in November 2015, an increase of 8.6 million using the above data.  This implies that, of the increase of 9.1 million jobs in total between 2005 and 2015, there was a measly increase of only 0.5 million traditional jobs over the decade with the remainder being alternative work arrangements. 

Who are these Americans that find themselves at the mercy of alternative work arrangements?  There is a strong correlation between age and alternative work as follows:

aged 16 to 24 - 6.4 percent alternative work
aged 25 to 54 - 14.3 percent alternative work
aged 55 to 74 - 23.9 percent alternative work

The sharpest in the incidence of alternative work from 2005 to 2015 was among those aged 55 to 74 whereas there was no change in the percentage of workers between the ages of 16 to 24 who were employed in alternative work arrangements over the decade.

There is also a strong gender component; between 2005 and 2015, the percentage of women who were employed in alternative work arrangements rose from 8.9 percent to 17.0 percent, a 91 percent increase.  In the case of men, the percentage rose from 12.3 percent to 14.7 percent over the decade, a 19.5 percent increase.  This means that women are now more likely to be employed in an alternative work arrangement than their male counterparts.     
It is also interesting to see that many of these Americans who are employed in alternative work arrangements would prefer to see their situation change.  Of the temporary help agency workers with temporary jobs, 76.9 percent would prefer a job that is employed and of the on-call workers, 44.7 percent would prefer a job with regularly scheduled hours.

While the headline unemployment rate would suggest that all is healthy in the U.S. job market, the study by Katz and Krueger suggests that there has been a significant shift in the workforce composition, particularly over the Great Recession period.  With the lion's share of the employment improvements since the Great Recession being related to the increase in alternative work arrangements including temporary and on-call work, it certainly appears that the employment picture in the United States may have changed permanently and not for the better.  What is even more concerning to all Americans is the fact that workers in alternative work arrangements earn considerably less per week than their full-time, regularly employed counterparts, an issue that will have wide-ranging ramifications in the future.  

1 comment:

  1. Well said and well done. It is important to note that not all jobs are created equal. Creating "real jobs" in a mature market or economy is not an easy task and poses difficult challenges. Globalization has elevated the importance of creating jobs and a balanced economy that supports a strong middle class.

    We must differentiate the difference between creating a valuable and worthwhile product that benefits society and breaking a window then praising the jobs replacing it yields. The article below delves into what constitutes a "real job" and its value.