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Temporary Employment Industry Working Overtime : Jobs: Rapid growth attributed to corporate cost-cutting. Breakdown of traditional bonds cited.

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TIMES STAFF WRITER

Who is Mitchell Fromstein? And why should President Clinton care?

Consider this: During the time it takes to read this story, Fromstein will be busy hiring dozens of people. By the close of business today, roughly 300 more people will be working for Fromstein than worked for him yesterday. Tomorrow, he will get up and do it all over again.

In fact, since Clinton took office last year, Fromstein’s hiring binge has accounted for more than 2% of all of the new jobs in the United States. As best anyone can tell, that’s more than any other single employer can claim, even the reigning heavyweights of the Fortune 500.

A frumpy, blunt former public relations and advertising man, Fromstein lacks the corporate celebrity status of Lee Iacocca or Bill Gates. But in his own unassuming way, he has become as dominant a figure on the American economic landscape as any CEO in the country.

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Here’s another clue: While you probably haven’t heard of Fromstein, you may have worked for him.

Fromstein is chairman and chief executive of Manpower Inc., the McDonald’s of the American labor market. Manpower, a giant temporary services company based in Milwaukee, almost overnight has become the largest private employer in the United States. Make that the world.

The sheer numbers behind the Manpower story are stunning--indeed, ominous--for what they say about the current state of the U.S. workplace. Manpower employed 640,000 Americans last year on a temporary basis--more than 1 million worldwide--far outdistancing traditional behemoths such as General Motors, IBM and AT & T. Today, its only rival is the federal government, which is shrinking in size.

Manpower’s growth has been so rapid--its payroll went up by 80,000 people in 1993 alone--that policy-makers in Washington are only beginning to grasp its enormous influence and the impact that the broader temporary job phenomenon is having on the American workplace.

“You may not like what you see, but the facts are that we are now the conduit to the work force,” Fromstein said. “They can talk all they want in Washington about how to create jobs, about developing apprenticeship programs like they have in Germany. But down here, this is the reality, this is the job market.”

Manpower and the nation’s 7,000 other temporary service firms are riding the crest of one of the most powerful and troubling trends in the U.S. economy. Their success is directly attributable to a growing eagerness on the part of American corporations to cut costs by shedding permanent workers. In many cases, they are replaced with temporary or “contingent” employees who earn less and receive fewer benefits.

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Temps and part-time workers, including a huge class of “independent contractors,” hold another attraction for employers: They can be made to disappear when sales slide or when new mandates--such as required health benefits or parental leave--are imposed on businesses by Washington.

“The real question is what is driving this growth?” said Lawrence Mishel, an economist with the Economic Policy Institute, a liberal Washington think tank. “I think it is being driven by the incentives for employers to get rid of full-time workers to avoid benefits and health and safety laws.”

Many executives have denied Mishel’s suggestion that they are deliberately substituting temps for permanent employees. Fromstein and other temp industry executives said their role is more benign: Temp services help corporations meet cyclical or seasonal demands, allow companies to maintain a more “flexible” work force and give managers an opportunity to try out workers who might be offered permanent positions later. Roughly one-third of Manpower’s workers move on to full-time employment within a year, a practice that the company does not try to discourage.

Other temp industry officials offered similar arguments. “We offer a bridge to full-time employment and a safety net of benefits,” said Bruce Steinberg, spokesman for the National Assn. of Temporary Services.

Yet even Fromstein agreed that many corporations that jumped on the “downsizing” bandwagon and laid off permanent employees when the economy was in the doldrums two or three years ago are now staffing up again--but this time with temps. At least 100,000 people are working for Manpower because they were thrown out of work by corporate streamlining, plant closings or other structural problems during the recession, he said.

“In the downsizing process of 1991-1992, many companies over-cut--it’s not a precise process--and now those same companies are understaffed,” Fromstein said. “But downsizing is painful and costly, and socially embarrassing for executives. And so, at the first blush of a recovery, their next move is not going to be to run out and hire (permanent workers) again.”

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The temporary employment phenomenon reflects the gradual breakdown of traditional bonds between employers and employees over the last decade. For decades, many large corporations and their workers adhered to an unwritten but implicit understanding: In return for hard work and loyalty, employees could count on secure jobs with good benefits. But wave after wave of buyouts, restructurings and layoffs in the late 1980s and early 1990s have brought that era to an end. Now, Manpower and other temp services are there to pick up the pieces.

In fact, in a country where political leaders and academic experts rail against the dearth of high-wage, high-quality jobs, Manpower is a veritable McJobs Central. Only 5,000 of its U.S. employees have full-time positions with Manpower. The rest are true temps who work an average of 12 to 14 weeks a year.

Most are assigned to corporations that contract with Manpower for large blocs of employees--often hundreds at a time--to perform tasks that were once assigned to permanent, full-time workers. Across the country--at banks, insurance companies, computer firms, manufacturing plants--Manpower temps are working side by side with a shrinking group of permanent workers.

They are part of a trend that some critics characterize as the “hollowing out” of the American corporation. Increasingly, firms are using independent contractors and outside labor to perform all but a few essential tasks. Many American companies routinely rely on outsiders to guard buildings, clean offices, run cafeterias, book travel for executives, handle data and word processing, and even work on assembly lines.

As the trend advances, the temp industry is becoming more upscale: Manpower and its competitors can supply corporations with temporary administrators, engineers and computer experts to perform management functions and execute highly specialized projects.

Another growing practice--employee leasing--takes the trend to its logical extreme. Instead of retaining their own permanent work forces, some corporations arrange to “lease” the workers they need--sometimes the same people they once employed directly--from leasing firms that are able to reduce wage and benefit expenses by achieving economies of scale.

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“It represents a real change in the way the labor market works in the United States,” said Gary Burtless, a labor analyst at the Brookings Institution think tank here. “We have had temporary jobs and temporary services in this country for a long time, but never anything like this.”

It also represents a significant change of heart on the part of corporate bosses. “Years ago, American companies thought the goodwill of the work force had some value for them,” said Brookings economist Barry Bosworth. “But they have gotten beyond that and now they see temporary workers as a very effective way of avoiding costs and of sorting out the workers they want versus the workers they don’t want. No one is going to confess that, but that is what is going on.”

The shift toward contingent workers has become such a powerful force that few economists or observers are confident that Washington could do much to slow it down. Labor Secretary Robert B. Reich recently created a task force to study the trend and to examine whether labor laws need to be revised to close loopholes that may leave temporary and part-time workers unprotected.

The task force plans to make recommendations this fall on whether the Administration should propose legislation to Congress to modify laws covering wage and hour rules, and health and safety standards.

“The growth in the contingent work force has led to gaps in the coverage of basic labor laws for many Americans,” warned Karen Nussbaum, director of the Women’s Bureau of the Labor Department and head of the task force. “So we want to look at how the relationship between employer and employee has changed, and how the definition of employee has changed, to see whether the laws are missing contingent work.”

Clearly, the Administration is worried that the trend raises fundamental questions about the nature of work in the United States and poses new challenges for a President who took office promising jobs and growth.

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The phenomenal growth of temporary and contingent jobs since the end of the last recession is one of the principal reasons why the recovery has been so slow and why income inequality has not been reduced despite an overall increase in employment. Harvard economist Richard Freeman argued that the quality of jobs in the United States has declined so precipitously that today the bottom 10% of male wage-earners in America make only half as much as their counterparts in Italy.

About 15% of all jobs created in the United States since the beginning of the recovery have been at temporary help services, even though they account for only 2% of U.S. employment overall, according to the Bureau of Labor Statistics. And temp agencies account for only a fraction of the part-time labor force, which now totals more than 22 million.

The growth of part-time work in the United States has not, of course, been all bad. Much part-time work is still performed, as in the past, by working mothers, college students and senior citizens looking for extra income and flexible hours; 17.3 million Americans now work part time on a voluntary basis, according to the bureau. Those numbers have ballooned over the past generation as more women have entered the work force.

Labor Department officials acknowledged that the government does not have extensive data on part-time work. It is unable to generate precise figures on the narrower, more troubling categories of contingent and temporary work, including independent contracting. In response, the bureau plans to conduct its first nationwide survey on contingent labor in January.

Even in the absence of hard data, it is clear that the number of people who are working part time because they lost full-time jobs or because they cannot find permanent positions is growing fast. The government says that at least 4.9 million Americans are working part time because they have no choice. That figure has declined slightly as the economy has improved over the last year but many employers appear reluctant to switch from temps to permanent workers again. Some observers are convinced that most of them never will go back.

Although the temporary jobs phenomenon is driven by economic forces far more powerful than government policy, some economists warned that the Clinton Administration’s economic and social agenda unintentionally could accelerate the trend.

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On the one hand, economists noted, Clinton has approved or proposed an array of new mandates on corporate employers: the Americans With Disabilities Act, the Family and Medical Leave Act and--the most sweeping of them all--the Clinton health care reform initiative.

Typically, the White House and Congress have agreed to exempt or subsidize small businesses from these mandates. That places the burden almost entirely on larger employers, many of which have launched restructuring programs in an effort to compete more effectively with foreign competition and smaller domestic rivals.

Conservatives and liberals alike warn that the special treatment afforded smaller firms gives large employers even greater incentives to “outsource” work to subcontractors or temp services. In many cases, those subcontractors are small enough to be exempt from federal mandates, enabling them to reduce labor costs. The Congressional Budget Office’s analysis of the Clinton health care plan warned that such “labor sorting” would be a major consequence of its enactment.

For conservatives, such considerations suggest that the Clinton agenda should be stopped dead in its tracks. “Temporary work has grown because of health care costs and the Clinton plan will only make that worse,” argued William Niskanen, an economist at the conservative Cato Institute.

But for liberals, those concerns simply suggest a need to reopen the debate about exempting or lightening federal mandates for small business.

“You need to work 1,200 hours a year to qualify for coverage under the Family and Medical Leave Act and there are a lot of other laws that don’t apply to firms with fewer than 50 workers,” complained Nussbaum. “I think we need to have a discussion in this country about what we are doing and about extending coverage for small firms for many of these mandates.”

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