Human Capital: The Temp vs. Full-time Employee

January 19, 2010 by  

Throughout the discussion of unemployment over the past months, I have been watching for a information on a segment of the working population that does not have a single employer. No one counts un- or underemployment of this segment and I have been wondering about how big a trend this is.

In the last week, I found two very interesting sources. They couldn’t answer the unemployment question but they did tell me that this is a bigger segment than I realized. One from Bloomberg BusinessWeek called The Disposable Worker and the other from the Boston Globe on The End of the Office…and the Future of Work.

The Globe says that nearly a third of the work force is “independent contractors.” BW quotes the Iowa Policy Project for an estimate that 26% of the US workforce has jobs in 2005 that are nonstandard, including “independent contractors, temps, part-timers, and freelancers.”

The people in this “contractor” workforce vary from people working below minimum wage to highly paid management and technical consultants. This trend is being fueled by the knowledge economy and the technologies that spawned it. It is ever more possible and (often) advisable to break work up across geographies, organizations and teams. That means this trend will not go away.

So businesspeople everywhere need to think about what this means to their own organizations and our economy in general. I see four big sets of issues:

  1. First of all, in many ways, this can be very liberating for a worker. Independent work gives folks more personal flexibility and, at least in theory, allows them to seek work that they love to do. In practice, this is a much more precarious than full-time employment (just how precarious is unclear because, as I said, there isn’t really data on this segment of the workforce).
  2. And the truth is that a satisfied workforce is not really the driver for corporations. In most cases, they are driven by the desire to get the most work done at the least cost. They are not thinking about the satisfaction of the contractor.
  3. This lack of alignment creates a risk for the employer. At what point does a disillusioned contractor create risk for a company due to lower quality or lower customer service?
  4. Finally, the fabric of our economy is challenged by this trend. We have already seen a trend away from corporations as the sole provider of retirement and health care security. At what point does an unstable economy create a risk for corporations? We are already testing that question in today’s jobless recovery.

The Globe article suggests that there may be a need for a new kind of institution to provide stability and identity to workers, suggesting a model more like the guilds of the Middle Ages than the unions of the Industrial Era. This would be a worker-led phenomenon.

But I think that employers should also be thinking about these issues. The future of your company depends on intangible capital. IC is a system that depends on getting the right combination of human, relationship and structural capital. The system cannot work at it optimum level without all three.

How can you make sure that your human capital is going to support your future growth and prosperity? Not, I would submit, by ignoring the role and needs of your “independent” workers.

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