Larger Temporary Workforce Could Be New Normal
Ben Baden

Since the end of the recession, 54 percent of new jobs created have been temp work

The fastest-growing sector of the labor market since the end of the recession says a lot about the type of sluggish recovery the economy is experiencing.

Since June 2009, the temporary help services industry, which is comprised of staffing companies and temporary agencies, has added 557,000 jobs, or 54 percent of all jobs created across all sectors of the economy, according to the Bureau of Labor Statistics. Roughly one in every 50 employed Americans held a temporary or contingent position as of the end of October.

Coming out a recession, employers typically hire temporary employees first, then begin bringing on full-time staff. This time around was no different. In September 2009, the staffing industry began adding jobs. Six months later, in March 2010, the private sector followed suit. But since then, job growth has been anemic, and the transition to permanent payrolls has been painfully slow. Private employers have only added about 2.6 million jobs, and the unemployment rate still rests at 9 percent. Cautious employers seem determined to add mostly temporary employees -- or no employees at all -- to their payrolls.

"If you look at the bigger picture...we're moving toward a new reality in the way we work," says Kathy Kane, a senior vice president at staffing firm Adecco in New York. "A lot of those companies are sitting on a lot of cash, but they're uncertain with economic stability. They're looking at contingent and temporary work as more of a risk-management strategy right now. They're trying to put their toe in the water versus jumping back in with both feet."

Employers view the workforce as more flexible than in the past. It's expensive to lay off full-time employees during a slowdown then hire new ones when business recovers. So rather than take on a new batch of full-time employees, companies have opted to hire on a contingent basis. "Companies are migrating their workforce from 100 percent core down to 80 or 90 percent core, and then leaving 10 to 20 percent of their workforce as what I would call 'perpetual contractors' or 'definite temps' with no expectation to ever move those people back to their core workforce," says David Lewis, executive director of franchising at Oklahoma City-based staffing firm Express Employment Professionals.

In the past, the bulk of hiring in the temporary services industry was commercial hiring, in relatively low-paying industries like construction and manufacturing. But a fundamental shift is taking place, labor market experts say, because temporary jobs are popping up across all sectors of the economy. Even employers in high-skilled, well-paying industries such as engineering, information technology, accounting, and healthcare are taking on more contract workers.

"What we generally estimate, in terms of revenues or sales for the staffing industry as a whole, more than half of it now comes from professional, technical, and other high-skill, high-wage occupations," says Steven Berchem, vice president at the American Staffing Association (ASA) in Alexandria, Va. "So in other words, less than half of it comes from commercial staffing, which would be industrial and office clerical."

This shift to a larger contingent workforce is expected to continue.

In a June survey issued by the consulting firm McKinsey , 58 percent of employers they plan to hire more "part-time, temporary, or contract workers" over the next five years. At the end of October, less than 2 percent of the overall workforce was employed in the temporary services industry. But over the next few years, Lewis expects that slice of the workforce to grow to 5 percent and beyond. "It's going to take years, not decades, to get there," he says.

For the 14 million unemployed, temp work may provide a new path to a permanent job. In this slow recovery, many employers are choosing to hire new employees on a part-time basis before extending a permanent offer -- whether it's entry-level positions for workers who are fresh out of college or higher-level positions for workers who have been in the labor force for many years. "More and more staffing clients are saying they're turning to staffing firms as a way to find permanent help or permanent workers, so it's a way for both the employee and a business to evaluate each other to see if it's a good fit," says Berchem.

Barbara Saunders worked in the marketing department of a Fortune 500 company for six years and was laid off in 2008. To make up for lost income, the now 52-year-old marketing specialist took on some smaller consulting jobs, until last year when she decided it was time to look for a more permanent position. "I wasn't receiving the compensation I used to get," she says. In July, staffing firm Adecco connected Saunders with a then-temporary position at a smaller company. After a few months on the job, she was offered a full-time position as director of marketing, which she started at the beginning of November. "The older you are, it might be a little harder to get back into you want, so therefore sometimes you have to accept something else," she says. "I'm happy with what I did."

Long-term job stability may no longer be a reality for many workers, but that's not necessarily a bad thing. With a series of different assignments comes more flexibility, Berchem says, and many employees, especially from younger generations, prefer that. In a past ASA survey, 90 percent of respondents said they were satisfied with their staffing firm and various aspects of their jobs, and 88 percent said they would refer a friend or relative to work as a temporary or contract employee.

During his 16-year professional career, Eyon Karnoff has bounced back and forth between contract work and full-time employment. "I've been full-time for almost five of the 16 years at different stints, and each time I go back to consulting," Karnoff says. The 39-year-old IT management consultant is currently employed through staffing firm Randstad. He's been in his current role for about three months, and says it could last up to 16 months if all goes well. Because he has a specialized skillset, he says companies only need his services for a few months at a time. He says he generally prefers contract work because of the flexibility. In addition, he says he often takes home more pay consulting than he would if he was in a permanent position. "Until the right [full-time] opportunity comes along, I'm happy consulting," he says.