Variety Spices Work as Internet Drives Change
A tip-off to the state of the American work force this Labor Day is that employee hiring is now a growing industry called human capital management and smart labor unions are training members to get better jobs at nonunion companies.
Those are just two examples of the changing patterns of work that are behind the economy’s surging productivity, with major implications for investment.
Temporary work has become a permanent reality. Some 39 million workers, 30% of the U.S. labor force, are in alternative work patterns ranging from independent contracting to part-time employment. Easily 25 million follow those alternative schedules by choice.
Yet regular full-time employment is at its highest level in years, at 70% of the work force.
Workers are uncertain and impatient: Employees now stay an average of 3.5 years in the same job compared with 20 years back in the 1950s.
Small businesses have trouble filling positions in the strong economy. Workers have choices, but so do companies. Many are using the Internet to outsource operations such as parts supply, accounting, even personnel.
The hiring and handling of employees is now a developing industry composed of traditional executive search and temporary employment firms such as Korn Ferry International and Manpower Inc. and online newcomers such as Opus360, Niku Corp. and TMP Worldwide, owner of Monster.com, the Web site that boasts 9 million resumes.
“The market for labor and procurement services--the human capital management industry--will grow [from $95 billion in annual revenue today] to $300 billion by 2004,” says analyst Judith Scott of Robert W. Baird & Co., a Milwaukee investment firm.
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Some labor unions are adapting to a world of independent contractors and nonunion technology companies. The Communications Workers of America now offers training in Internet skills to associate members, who work for Microsoft Corp., Cisco Systems and other companies.
The associate members pay lower dues but do not get collective bargaining representation because they work as contractors or for nonunion firms. By providing training, the union gains a presence in the new technologies and the chance to organize temporary and contract workers. “It represents a changed union agenda,” says Lawrence Cohen, executive vice president of the 600,000-member CWA, which recently struck to gain organizing rights in the wireless and broadband divisions of Verizon Communications.
The Internet is driving change. As companies use the Internet to work ever more closely with suppliers and customers, they are bypassing traditional wholesalers, agents and other intermediaries and achieving extraordinary cost reductions.
“Information technologies have begun to alter significantly how we do business and create economic value,” Federal Reserve Chairman Alan Greenspan said in a recent speech.
But the cost savings have not come from reducing employment. On the contrary, the spread of information technologies has increased business and inspired a tremendous demand for workers. “Companies pay more than $100 an hour for contract workers with Internet skills,” reports James Jonassen, a Los Angeles entrepreneur who runs an online database of skilled personnel for Opus360.
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Not only techies are in demand. “Sales managers can command $175,000 a year in this market,” says Robert Rollo, who heads a Los Angeles executive search service for TMP Worldwide.
More business means more jobs. “Tight labor markets are drawing retirees and stay-at-home moms into the active labor force,” reports Diane Swonk, chief economist of Chicago-based Bank One. The slight rise in unemployment reported on Friday hasn’t sent many back into retirement either. “We have lower unemployment now than in the 1960s, when we didn’t count women as seeking work,” Swonk adds.
Yet reported inflation has remained low because productivity gains and cost efficiencies have offset wage rises. Also, traditional measurements of wage and salary inflation often miss high pay for contract work because it is classed as a business expense or small-company income.
Government labor policies are out of date, argues professor Thomas Kochan of the Sloan School of Management at the Massachusetts Institute of Technology. “The policies still see the work force as one of male breadwinners working full time for large companies,” Kochan says.
Reforms are needed in laws and regulations to allow workers to take pensions and health benefit coverage from one company to another. Kochan sees labor unions and professional organizations administering pensions and benefits in the future for workers who have no fixed place of employment.
Not all temporary workers are highly paid contractors, of course. A recent study by the General Accounting Office points out that 5.2 million part-time workers--and 6 million full-timers--make less than $15,000 a year, with few benefits.
Those workers need a rise in the minimum wage, extension of health coverage and, most of all, training so they can move up the ladder in this innovative economy. Labor unions, which got a boost last week as the National Labor Relations Board encouraged organizing of temporary workers, can help with such training.
And companies in the new business of human capital management will do more employee training. Today’s tight labor markets are likely to continue through the decade as aging workers retire with fewer young workers stepping into their shoes.
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The search for skilled employees is already changing personnel practices. “Companies are becoming as systematic about seeking out and training their people as they have always been about streamlining parts supply operations,” says analyst Scott.
Consulting is on the rise, with traditional suppliers of temporary help, notably Manpower, changing their focus to offer employee management services. So far, investors have favored only a few entries in the field--Korn Ferry, Heidrick & Struggles and TMP--while blowing hot and cold on the smaller online companies.
But prospects for the business seem favorable long-term as American workers adapt to changing circumstances, the job they do most skillfully of all.
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James Flanigan can be reached at jim.flanigan@latimes.com.
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An Economy in Full
Despite perceptions that more and more work is being done by temporary, part-time and other contingent workers, statistics show that regular full-time employment has been rising in a strong economy, diminishing the need for contingent employment.
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Sources: General Accounting Office, Bureau of Labor Statistics
