The end of the job

A world of freelancers and contract workers may be good for business, but bad for the economy

by Chris Sorensen

The end of the job

Beau Lark/Corbis

It’s just a few cents more than a large specialty coffee from Starbucks, but it turns out that $5 is still enough money to make otherwise sane-looking people do some rather odd things. The website Fiverr.com, launched in 2010 on the heels of the recession that cost nearly seven million North Americans their jobs, is built around the concept of allowing people to buy and sell services for just $5. The advertised offerings range from useful (“I will professionally review your website or blog for $5”) to the frivolous (“I will sing Happy Birthday or congratulate someone in my bubble bath for $5).

Meanwhile, on the contract-job posting site Guru.com, there is a more serious offer for someone to create ESL lesson plans. On Freelancer.com, a new bridal services company is looking for someone to design its logo, while a dental clinic is seeking someone to produce a flyer to attract new customers—just two of more than 1.3 million current postings on the site.

The sites are all part of what may be one of the most dramatic shifts in the labour market of our time: the transition to a freelance economy where work is farmed out on a piecemeal, as-needed basis (often for relatively little money). The shift started out slowly in the 1990s as Silicon Valley companies discovered how to use the Internet to outsource dull computer-coding jobs, but has been picking up speed in recent years, particularly in the wake of the Great Recession, which left companies of all stripes battered and reluctant to hire new full-time employees. Microsoft, for example, used online testers in 2009 to find bugs in its software, while a year earlier Pfizer started allowing its employees to outsource bits and pieces of their jobs—making spreadsheets and PowerPoint presentations—to freelance firms.

Today, as many as one in eight Canadians hold temporary jobs and, unlike in past downturns where laid-off workers were eventually rehired by firms, there’s no signs the trend is about to slow down.

For workers, the changing employment landscape requires major, life-altering adjustments. Those who are entrepreneurial with a stomach for risk will find opportunities. But many others risk being dragged under by a new corporate reality where they can be hired and fired at a moment’s notice. Kelly Chan is one of those people. The 51-year-old Markham, Ont., woman lost her factory job at Honeywell earlier this year after the plant closed. After nearly three decades at the same company, she is now in a manufacturing sector that views full-time employees as a liability. “I’ve been working on and off for five months,” she says of the temporary positions she’s managed to string together since she was let go. “I’m a single mother with two kids.” Where once families lived paycheque to paycheque, they now face the prospect of trying to live job to job.

The rise of the contract worker may also be having a more wide-scale impact than previously realized. A growing gap between rich and poor in countries like Canada has been blamed, in part, on a growing number of poor quality jobs. There’s also mounting evidence to suggest that the rise of the throwaway worker has made recent recessions more painful and longer-lasting. Temp jobs? More like a temporary economy.

Canada’s recent job numbers have been a wake-up call for economists. While Canada managed to add 18,000 net new jobs in December, the gains were not nearly enough to offset 72,600 positions lost in October and November, the first back-to-back monthly losses since 2009. In addition, most of the new jobs were less desirable part-time positions, or resulted from people who declared themselves self-employed, according to Statistics Canada.

The trend reflects ongoing skittishness by employers about the health of the economy, particularly given the ongoing crisis in Europe and the sluggish recovery south of the border. In such uncertain times, businesses tend to favour flexibility over securing the right staff. Case in point: nervous Canadian retailers surprised analysts by rapidly shedding jobs in the run-up to the Christmas shopping season this year.

“There’s no doubt that having more temporary workers gives employers more flexibility so they can move much quicker,” says Wayne Lewchuk, a professor in the School of Labour Studies at McMaster University. “And they’re more willing to let go of temporary employees because they don’t have a commitment to them. They have nothing invested in these people.”

It’s not just in customer-facing industries like retail, where companies are wary of being tied down with too many full-time workers. “We’re seeing this across the board, in IT, supply chain, HR and finance,” says Arnel Pasildo, a senior client relationship manager at Toronto recruiting firm Head2Head. Since temp agencies tend to do most of the vetting, there’s little need for HR departments to sift through piles of resumés. There’s also less need for expensive training and there are huge cost savings in the back office, since contract workers don’t require companies to make payroll deductions for tax purposes.

Through several recessions, companies have learned that it’s possible to squeak by with fewer employees. They also figured out that gaps can be filled by hiring temporary workers for big projects when they come along. “That may be a chief catalyst for why we’re seeing an increase in contract hires,” says Sylvia MacArthur, the president of executive search firm Madison MacArthur. “While companies may have, through downsizing, been able to push productivity and manage their way through, they don’t have the resources and internal manpower to launch new initiatives. They’re stretched so thin.”

A study last year by Statistics Canada showed that temporary employment, which also includes seasonal and casual work, grew rapidly between 1997 and 2005 from 11.3 per cent of all paid jobs to 13.2 per cent, generally exceeding the growth of permanent employment. But the real story was in contract positions, which continued to increase even as overall temporary hiring slowed in 2006 and the recession hit a few years later. By 2009, they comprised 52 per cent of all temporary positions in Canada. More than one-quarter of them are professionals.

Historically, workers facing a bleak economy would have been more likely to be laid off temporarily and then called back once business picked up. This was particularly true of unionized factory jobs. But these days companies are more likely to close factories and other businesses instead of waiting for demand to return. And there’s evidence to suggest job losses have been more brutal in recent recessions as a result. A recent report in the Wall Street Journal noted that during the recession of the 1970s the output of goods and services in the U.S. fell by five per cent and employment by 2.5 per cent. Between 2007 and 2009, by contrast, GDP was down 4.5 per cent while the number of workers fell by a stomach-churning 8.3 per cent.

And it’s not clear when any of those jobs are coming back. A survey of 2,000 U.S. companies by the consulting firm McKinsey & Co. found that 65 per cent of U.S. corporations made operational changes to improve productivity and reduce employment in the past three years. And nearly half of them said they planned to use more part-time, temporary and contingent workers going forward.

It all amounts to a sea change in corporate attitudes about what constitutes a job in the first place. Lewchuk says the postwar years were defined by what he calls the “IBM model of employment,” which stressed that a productive workforce was one that was well-trained and loyal to the company. In return for that loyalty, the employer provided decent wages, benefits and even a community to be a part of. Today, he says, the world has moved to more of an Apple Inc. model, which is: “‘We’ll take you on for the short term, it might be great ride, but we have no intention of employing you until you have a pension.’”

The advantage of the Apple model is that it’s creating a segment of the workforce that is, by necessity, more entrepreneurial in nature. Richard Hewitt, 63, is an example of this new breed of employee. A quality-assurance IT professional, he says he left his last full-time job two decades ago, just as the IT sector was moving to more of a contract-only employment model. He believes he’s now better off financially, although he admits that it’s not for the faint of heart. “You can make good money contracting,” says Hewitt, who lives in Burlington, Ont. “The downside is there are gaps between contracts and there are no benefits, medical and dental, and there’s no pension.” And employers don’t have to think twice about letting you go. Last year, Hewitt’s eight-month contract with a big insurance company was abruptly cancelled after three months. “They can get rid of you with two weeks notice, which they did,” he says.

The concern is that all of this impermanence risks creating an economy built not on bedrock, but shifting sand. Although Canada generated an average of 17,000 new jobs a month in the third quarter of 2011, down from 33,000 in the first, an Employment Quality Index created by CIBC Economics showed that the quality of those jobs—which takes into account things like compensation, part-time versus full-time, self-employment versus paid employment—is also falling, down 1.5 per cent over the past seven months. That’s roughly where it was on the eve of the recession, wrote economist Benjamin Tal. Those numbers dovetail with what Ken Lewenza, president of the Canadian Auto Workers Union, sees every day on the front lines in industries ranging from automotive to health care.“This is definitely a race to the bottom,” Lewenza says, adding that Ottawa needs to do a better job of measuring the quality of employment in Canada, not just the quantity.

Companies see contract employment as the answer to uncertain times, but Lewchuk says it may be a case of the medicine being worse than the disease. People who don’t earn as much money spend less, which isn’t good for the economy. “If people stop buying, then companies stop producing and lay off more workers,” he says. “You get yourself into a quicker and deeper hole. Meanwhile, on the other side of a recession, when you start bringing people back, you’re doing it at lower wages and they don’t have the kind of purchasing oomph necessary to get the economic engine started again.”

There are other implications. Lewchuk co-authored a recent study of 3,000 Canadians that concluded that, over a long period, the stress associated with a precarious employment status can become a health hazard to workers and their families. “I think people have shorter lives because of it,” he says. And, as Occupy protesters sought to demonstrate, the widening gap between rich and poor—which a recent OECD report said was partly the result of a rise in a declining number of hours worked by the less affluent and a rise in self-employment in countries like Canada—is straining the social fabric of society.

The way out of this trap isn’t straightforward. No company is going to voluntarily take on extra full-time employees if competitiveness will be reduced. However, Lewchuck says the pendulum may eventually swing back if employers discover that a transient workforce is not as desirable as one with company-specific skills and knowledge. He cites studies that show that, contrary to popular opinion, unionized workforces tend to be more productive than their non-unionized counterparts because they attract higher quality employees. Firms may also see permanent, full-time workers as a competitive tool that helps them woo new customers. Several big U.S. corporations have begun to bring call-centre jobs back from overseas after realizing that customers value talking to someone in their home country when they have a problem. But until such changes take root, people like Chan will be forced to piece together a livelihood from whatever scraps are put on the table. “I still need the money to support myself,” she says.




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The end of the job

  1. I have to say, excellent article. Very thoughtful and well written.

    Even though efficiency and the ability to adapt in the face of global competitive pressures is important, ultimately all this money that is made is part of a social contract.

    If society is made too suffer on the whole, these tactics will eventually backfire.

    Thank you for pointing this out so eloquently.

  2. I don’t believe we will ever return to the comfortable work model of decades ago, nor do I believe it was actually all that comfortable.  Moreover, as a communications professional who left a lucrative but stressful job more than a decade ago, I can tell you that if you are in any way entrepreneurial and good at what you do, you can make a really nice living working independently.  And we all know that there’s no actual stability in regular “jobs” anymore anyway — you can always be laid off, fired, based on whatever reasons — financial, personal, etc.  

    I have a far more diverse practice than any job I had; if I’m busy I can pad down the hall in my jammies at 5 am and deliver work to client’s computers just as they mosey in to work.  I’ve had tight times, lost my biggest client through government closure a couple of years ago, but I survived as easily as if I lost a fulltime job.  And today, it was minus 30 when I got up, and I have a cold – don’t think I missed warming up the car and careening thorugh dark and icy streets at 7:30 am. 

    I pay my own CPP and buy RRSPs for myself, and I take nice vacations too.  And my last two jobs, where I was employed by provincial crowns, were obtained by agreeing to work as a temporary, with the promise that if things worked out, they would make the job permanent — and those jobs were in the mid-Nineties, so this kind of hiring isn’t actually new.

    When I go into workplaces of clients for meetings, the stress and anxiety is palpable.  I don’t have that stress level anymore; I go swimming each morning and work around that; I have a dog I walk every afternoon, and I work around that.  I actually think the world would be a happier place if people learned skills and plied them from home. 

    • Can you not also set up your own “business” and write off your expenses….the things you do to make money….advertising, telephone, part of your rent for any office.

      • Yes, I operate a business (not a “business”) and I expense the appropriate expenditures (home office, hardware, software, licences, entertaining, etc).  And I hire on other contract suppliers as needed for jobs — graphic designers, event planners, whatever is needed.  CRA provides ample information to understand what is expensible and in what proportion.  There’s a whole world of us out here, working busily away from our homes and partnering together to meet client needs.  We’re the ones you see SMILING because we’re not all stressed out and angry at our bosses and coworkers.

    • I can tell you that if you are in any way entrepreneurial and good at
      what you do, you can make a really nice living working independently.

      ***

      Nobody should begrudge you your success, but the overall truth of this statement is debateable.

      • I’m not hugely successful in the eyes of most, but I’m more contented than I used to be, and perhaps moreso than many people I know. Success is how you define it, and I decided years ago that for me, it wasn’t big money.  

      • I know several people who work independently.  Some are nurses who choose to work casual…they don’t have benefits but their take-home pay is substantially higher.  They pay into their own retirement funds and have their own private blue-cross plans.  I also know people who act as private contractors for human-resources.  All of these people are happy because they find they are not immersed in the politics and stress that encompass the workplace. 

        • I don’t doubt it but that’s not a rebuttal.

          • My point is that working independently can be a win-win situation for the worker and the business.  It is all in how you look at it.  Job security can be illusion.  Have you ever heard of “soft tenure”……tenure (job security) as long as the funding holds out.

          • The sole point being addressed is located in my first reply, above the asterisks.  Everything you and Mr. Patchouli have said afterwards is no doubt correct, but my concern was the generalization stated there.

      • I would certainly debate it. Not because it cannot be done (as it clearly is, and will continue to be), but there are plenty of individuals that don’t have the established networks (very important and probably a common thread to many who are now working more freelance), don’t have the (communications) skills or capabilities, and don’t even have the emotional fortitude to operate when they don’t feel that future income has some measure of predictability. 

        Nevertheless, what I do hope, is that we can become more comfortable with the situation as Patchouli is because that does seem to be the direction in which we’re headed. Those that can adapt to it will thrive and others will likely become quite frustrated.

        • Good post — and I chose to operate a business doing what I did previously in the workplace exactly because I had an established network of clients and contacts.  If I had been braver and more of a risk-taker, I might have started a business in something completely different; however I am content, and my business seems to turn corners every few years — ie I used to do a lot more advertising work, but this year, most of the work lined up is more academic than popular.

  3. Eventually people will have had enough of this sillyness.

    I mean sure the average reader of Maclean’s will be fine in this environment beacuse they can spell, read, and think.

    Take it to a slightly lower demographic, say the toronto sun, and you see that this system is unsustainable. The average Canadian, is hopeless and defenceless as a contractor over the long term, to say nothing about the disfunction of the neighbourhoods and communities that people who are  subject to these working conditions.

    This is a problem created by globalization, whereby the Chinese have been able to keep thier wages artificially low through currency manipulation, and our labour laws and regulations price our workers out of the market.

    If I were part of big labour, my focus would be on organizing chineese labour. I would fund initiatives across china trying to unionize their labour pool. Increased costs in China and in other industrial centres would turn the tide in north america and break the strangle hold that corporations have on us.

    Anybody who believes we are out of fiat money to pay our workers has bigger issues than a lack of jobs.

    • But unionization in China – even if the Chinese allowed you to spend money to subvert their economic strategy – would be ineffective, because they have the muscle and nerve necessary to crush strikes with force. Competing with China on labour costs is a losing proposition, and a poor strategy. For one, it would mean actively promoting industries whose value-added will decrease as more of the developing world becomes able to produce steel, cars, and other manufactures. Additionally, they’re effectively subsidizing our consumption – I say let them.

      Our problem is that the last high-tech revolution – information technology – did not produce labour-intensive spinoffs industries that are able to employ less educated workers. So the gains of the last 30 years have largely flowed to educated people, and to a much greater degree (thanks to deregulation), to finance. In the US the median wage today is (adjusting for inflation) the same as it was in the late 60′s. Folks that could find good wages at the Ford plant back then are today living as baristas, Walmart greeters or janitors. 

  4. The use of so called independent contracters or sometimes its refered to as freelancers by business  is simply a way to avoid complying with labor standards. If  I am considered an independent contractor as far as the company I do work for than their are no labor standards what so ever.  I could be forced to work seven days a week with no overtime. No minimum wage  laws that apply here. No breaks no lunches no holiday days no vacation no health care no profit sharing nothing as far as all the things that any company may be required to provide if employees are considered part of the company.

    • Actually, an independent contractor cannot be “forced” to do anything.  Everything is up for negotation between the worker and the company.  They owe you nothing and you owe them nothing.  If you don’t like the terms they are offering, you don’t accept them.  You contact a company in Alberta and see what they are offering (including travel, accomodation, etc.)
      Consultants are very common in the west.  I don’t think they are getting underpaid.  We are short of labor so people are willing to pay top dollar and expenses.  If you are willing to do this kind of work for awhile and save your money, you can come out of it okay.  Also, if you contact an accountant and set up a business there are the opportunitites for tax breaks.

      • I am Dennis the Menance am replying to The Healthcare insider. I believe that their is a little bit of a misunderstanding here. When I talk about  independent contractors or  freelancers I do not mean someone that comes to a company to do advanced programing on a computer system for thirty days and than leaves and go’s to another company and does the same at another company or someone that comes to company to provide advanced web design services for thirty days and than leaves and go’s to another company and does the same or someone with  advanced engineering services or legal services or some other very specialized service of sort stays at a company  a short time usually a month or two sometimes three months and than leaves. I am talking about a company that hires a person under the guise of a  independent contractor when that person should be considered a regular  employee of the company because they work their everyday and perform the same duties and tasks as other persons working their who are considered employees of the company. But because of loopholes in labor laws in some places some companies are able to continue to classify these persons as independent contracters indefinitely never having to hire them as their own employees and never having to offer the same pay and benifits as the persons working their who are considered regular employees of that company that do exactly the same work as the persons considered independent contractors

        • That does happen, in fact, I’ve been in that situation.  If a contractor is really working as an employee (ie regular hours, ongoing job not specialized), they can appeal that status and CRA will rule on it and I think much of the time, they deem the contractor as an employee, at which point the employer has no choice but to pay back benefts and follow the rules. 

          When I was a contractor in a contract that was intended to become a fulltime permanent job, the employer extended benefits to me.  In two situations, I went on to accept a full time permanent job — and found I then became just another disrespected employee and left within a year or so. 

          My experience — not generalizing, GFMD, is that organizations tend to respect the expert contractors in any field to whom they pay a higher rate than the employees.  That continues to ring true in my situation today, and I work very hard to ensure I am never a mere employee again in my career. 

  5. A lot of people fail to see the true reason why we are losing jobs. Very few people want to admit this but we are the masters of our own destiny. It is so easy to blame the Chinese, or the Americans, or big corporations. Everyone but the person in the mirror.

    Are we forced to purchase from Walmart? Must we support big business by purchasing their products or services? I believe that we all are individually responsible for our deteriorating employment situation but it too easy to blame someone else.

    How many consumers choose to pay a premium for a Canadian made product knowing full well that they can save significantly by getting something similar at Walmart? It turns out that very few of us have that type of commitment.

    We talk the talk but don’t walk the walk.

    The solution to job creation is right in our individual wallets. Don’t demand a job in Canada but send your money off-shore and blame Canadian business for shedding jobs.

    For a new political solution for Ontario’s job woes please have a look at a new provincial party that is taking shape at http://www.parkdaleparty.com.

    At The Parkdale Party we are developing intelligent solutions to job creation and an economically sustainable future.

  6. try investigating Honda of Canada … they are using all workers… contract and full time

  7. You know whom we have to thank for this?  Labour unions.

    Faced with the choice of hiring people who are almost impossible to fire later vs. hiring part-time without union rules, guess which one companies will pick.  Business is Darwinian – the companies that hire/fire as they need to will eventually dominate.

    For workers who are effective and hard-working, this is great.  They’ll make more.  

    For workers who have been relying on a union to keep their fat paychecks, this is very bad.  They’ll be unemployable until they learn to make themselves valuable assets to a company by virtue of their hard work and talents rather than relying on red tape to protect them.

    • I don’t think the labor unions are really blame so much as the collective delusion we have that our jobs are ever really secure.  It is like those banks in the US….they were thought to be too big to fail.  Same with the autosector and the post office…who would have thought people would be taking wage roll backs in those industries which are North American institutions.  People get it their heads that they deserve a certain amount of money and benefits when in fact, it really fluctuates depending on the state of the economy.  In Alberta, a Tim Horton`s nightshift worker might make $15.00 per hr in a boom…my guess is they aren`t making that in other provinces.  It only means at that point in time, they can`t find anyone who will do the job for less.  As for being unable to get rid of unionized workers, if the money isn`t there, the jobs go…it is just the young ones who get picked off first.

      • You are both off although the guy above you is way more off base than you.  There are really only two principles at play:

        1. Employers want to pay as little as possible for workers who work as hard as they can make them in conditions which favour the employer as much as humanly possible.

        2. Sometimes unions can make number 1, above, more difficult by keeping wages higher or redressing some of the natural inequality between worker and employer. 

        • I absolutely agree with #1 but what I am saying is that a person can work to become their own employer and you seem to disagree and feel this isn’t possible.  Why?

          • Never have I said it wasn’t possible. I have some reservations about the ease which certain posters seem to feel it can be accomplished, and is beneficial.

          • Hey, so I’m one of the “certain posters?”  I said if you are entrepreneurial, and everyone isn’t, and good at what you do: ie educated and experienced to the point of expertise, then you can make a “nice living.”  You have interpreted that to mean “easy.”  No it’s not easy; but neither is spending 10 hours a day with a pack of ambitious political drips going to meetings ad nauseum.  I said I preferred a humble living from home and thought that others could enjoy it too. 

          • Your statement contains dissimilarities from what you said originally.  At first you said “at all” entreprenurial, and now you have created a new definition of “good at what you do”.  If you meant different things when you originally said them, you should have used the different words, or cleared up the misunderstanding immediately.  (Furthermore, even under your new definition, I remain unconvinced that everyone who is educated and has expertise at their job can be a successful independent contractor).

            At any rate, I wish you all future success in your work as  a communications professional.

    • You should get educated in UNION politics before you make these comments. I have been a union contract worker for over 27 yrs. Unions are there to help and equalize the company workforce, some nondeserving employees get attention yes, but it is not the case most of the time. A union employee is well trained and is given the adequate compensation so that they can retire in comfort instead of working until they are 100 yrs of age and die at work. The benefits of organized labour far outweigh the few inconviniences they pose. I figure you need to do a bit of research before you talk.

      • There was a time when unions were as you describe them.

        That time ended decades ago. Currently unions force companies to pay outlandish salaries for barely skilled labour. In doing so they weaken those companies, causing many of the jobs to be moved overseas. They do this to perpetuate their own power, for which reason they also donate to political candidates and causes. They also force workers to pay union dues regardless of whether the worker wants to be a member, wants to support its politically corrupt causes, or wants to pay for the lavish lifestyles enjoyed by union executives. Many are involved in organized crime. Many employ violence and threats to influence the outcome of strike votes, union-forming votes, or political votes. They oppose any attempt to maintain secret ballots at such votes in order to maintain their bully tactics.

        They are a blight.

        • Perhaps unions are a problem, but given that union density in the US has fallen below the levels of the 1930s (with unionization most prominent in the public sector, not manufacturing), does it really make sense to blame much of our economic woes on unions?

          • I think it does, even though Darwinian business has lessened their influence. But I think they are particularly the reason for this phenomenon where companies would prefer to hire temps and consultants than bring someone in full time. If full-time people could be let go at will, then there would be little incentive to hire temps instead. But the full-time folks would still be viewed, at least, as members of the company rather than outsiders brought in for a specific job.

        • I am not sure where some of your generalizations are coming from but let’s look at one of the professions in the country that belongs to a union:  registered nurses….they are highly educated; the union does not have criminal ties; and there are no threats of violence toward members.
          The reason for unions is that they ensure equal treatment for all members…there should be no favoritism or bullying by the employer based on personal likes or dislikes.  On the downside, there is no initiative given for a member to work harder as there is no recognition for same.  Also, the union tends to protect poor and incompetent workers which is bad for morale.  With regard to salaries….the nurses have taken roll backs and wage freezes when the economy has required it.  I think there is something people probably don’t know….if you are represented by a union in a province like Alberta, you cannot take your employer to court (you give up that right).

  8. You want an example of how contract jobs are not good for the economy? I am living proof.

    • Could you provide more information about that? 

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