The cost of “efficiencies” may be very high

For much of the last century, to most workers in New York and in the U.S. as a whole, the perception of employment has implied a full-time job, with 40-hours of work and some level of benefits. In some respects, the American middle-class and the concept of the “American Dream” was created by standardized employment practices of many businesses in the last century.

And workers with reliable incomes allowed more businesses to operate and to pay their employees. This led to much of the prosperity witnessed in this country during that period. 

But times have changed. Fewer and fewer workers consider lifetime employment with a single company remotely realistic. Businesses have shed millions of permanent employees, touting the “efficiency” of a leaner, and very likely, temporary workforce.

Businesses were encouraged to concentrate on “core efficiencies.” They got rid of much of the HR, IT and many other internal employees. They contracted with vendors to handle with these jobs. Of course, they only way a third-party vendor can offer these workers back to their original companies more cheaply is by lowering the salaries they pay.

This has a two-fold effect. Workers have less income to spend and are more likely to feel insecure in their position, meaning they may become very cautious when spending. The second effect is less obvious, because it may be hidden for years by the few remaining “legacy” employees.

The second affect of a non-permanent workforce is the lack of knowledge only gained from the experience of performing a job for years. And as layers of management become less connected with the actual work of the business, it becomes more difficult for it to determine or recognize what are the core competencies of the business.

This can cripple a company and create a downward spiral that leaves the fate of the business in jeopardy. It also means there is great opportunity for abuse of employment and labor laws and to engage in discrimination, as employers play fast and loose with definitions like independent contractor and temporary workers.

Source: nytimes.com, “Rising Economic Insecurity Tied to Decades-Long Trend in Employment Practices,” Noam Scheiber, July 12, 2015

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