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.