I was reading on ThomasNet News about the debate over productivity. Some people say that increased productivity – that is, getting more from each employee in the same amount of time – kills job growth.
Others, perhaps using a more sophisticated thought process, claim that higher productivity increases the value of the product, lowers costs, increases demand and therefore creates jobs.
I think the staffing industry is literally right in the middle of this debate, which is good. I also think the answer lies in the nature of business itself. Which is a problem when you consider that business itself is built on productivity, or at least the formula for productivity.
You gain as much as you can for as little as possible. And never, ever give anything away. It has always been thus, since America was founded.
The U.S. Department of Labor states that in 2010, average productivity among workers nationwide increased nearly four percent.
That’s not surprising, as everyone knows about all the carnage during the 2007 – 2009 recession. With ultimately more than eight million fewer workers, there was simply no choice — perform the same job with fewer employees. And that’s exactly what happened.
In its economic report on U.S. fourth-quarter productivity, MarketWatch said that “In the fourth quarter of 2010…the U.S. economy generated the same output as it did three years ago.“
For the staffing industry, this is great. In fact, there’s a surge in demand for temporary workers – not just in general labor, but in areas like health care and technology. One reason recently cited by Reuters is that companies are looking for “flexibility.”
Here’s more good news for the staffing industry. Imagine that you’re the CEO of a large company before the recession. You feel that productivity is generally pretty good. You have the usual corporate programs and incentives in place to encourage increased value per worker, but overall your output is pretty healthy.
Then the recession hits. You’re forced to “reduce inputs” (e.g., lay off a good portion of your employees). It’s difficult at first. Maybe you’re forced to invent new processes that allow fewer workers to accomplish more. But after a while you realize, hey – we can operate just fine with fewer resources.
So what prevents you from setting this level of productivity as the new standard? Nothing.
In fact, if you’re a good businessperson, that’s likely what you’ll do. There’s no reason to hire your employees back, because you’ve discovered that you can operate at the same level without them. Through invention by necessity, you’ve also discovered that you have more options going forward than you thought.
You’ll only begin hiring again after you’ve decided on a revised business model that takes this into account. This model will likely feature “flexibility” — temporary workers for general labor and, increasingly, professional services.
Granted, there doesn’t seem to be much historical data that tracks the contingent workforce. According to MarketWatch, we’re not sure about that: “There’s not enough current data to form a clear picture of the state of the contingent force today, economists say.”
If I’m part of the contingent workforce, I’m feeling a little uncomfortable right about now.
MarketWatch also says that “When workers produce more in the same amount of time, companies can increase their pay and still make the same amount of profit or higher.”
Sure. But as the CEO, or anyone whose job description includes looking at the bottom line, why would you increase pay in this or any other circumstance? For staffing clients, “flexibility” means ample opportunities to cut costs.
For the contingent workforce, “flexibility” can mean fewer benefits and much less job security.
Is this the future? If so, it’s bad news for the contingent workforce and, ultimately, for staffing.
It’s possible that the traditional equation of labor-based value has changed. What happens when “inputs” are as much technological as they are human? What happens when mechanical engineers or IT professionals become a major part of the market for temporary resources?
For that matter, in a world of instant online access, what happens when demand is increasingly cyclical, and doesn’t necessarily hinge on product value? And most importantly – if niceties like health care benefits and full-time salaried positions decline, who picks up the tab?
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You ask a lot of good questions here Loren. Before tackling the issue of contingent workers and economic security though, it bears reminding that no job is ‘permanent’.
Weavers in 19th century England thought they had permanent jobs and enjoyed all kinds of legal protections that supposedly made that so until of course it wasn’t so and they became destitute. Meanwhile, an impoverished emigrant grandchild of theirs, Andrew Carnegie, enjoyed none of their legal protections became one of the richest men in the world.
RIMM, the make of Blackberry, perhaps thought they had a permanent revenue stream as well. Same for Nokia.
Your write, “If I’m part of the contingent workforce, I’m feeling a little uncomfortable right about now.”
That might be true but a greater truth would be, “If I’m feeling a little uncomfortable, that’s good.”
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That is absolutely right – no one should feel too comfortable in any position, any more than they should feel comfortable with, for example, direct government assistance. That’s called entitlement, and in a healthy marketplace it doesn’t exist except as an illusion. The questions – and the discomfort – arise in the aftermath of economic downturns and market disruption events. As productivity goes up, employers will always do whatever they can to keep hiring and health care benefit expenses low. Will the temporary-employment or temporary-contract models, at the extreme end of the scale, eventually replace the old model of “permanent” full-time hires? And even if the staffing industry fills that role to a lesser degree, how does it bridge the sizeable gap between employee income and health care costs?