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Part-Timers Make Headline News Here's the Real HR Story

November 1, 1997
Related Topics: Contingent Staffing, Labor Relations, Featured Article
On August 4, 185,000 United Parcel Service (UPS) employees walked off the job in a dispute over higher wages, better pay for part-time workers, pension benefits and more full-time jobs. The strike, which was orchestrated by the Teamsters, lasted 15 days, crippling the country's package-delivery system and costing UPS more than $700 million in lost revenue. By the time it ended, Atlanta-based UPS had reluctantly agreed to convert 10,000 part-time jobs to full-time at double the hourly rate of pay.

The strike was remarkable because for the first time in nearly 20 years, the American public sided with a union, even though its walkout caused major inconveniences for the millions of people who rely on UPS for their shipping needs. In fact, according to a CNN/USA Today Gallup poll, Americans supported workers by a landslide two-to-one margin over management.

Why the change? And why now? The economy is booming; unemployment is at a 24-year low, and union membership has been in a steady decline since the late 1970s. Why would Americans in a robust job market support a labor strike at a company that they not only rely on, but where, ironically, part-time workers were compensated better than they are at most companies?

The answer is twofold. First, countless Americans have a UPS driver they've come to know and like. They were sympathetic to the strikers' cause because, unlike in other labor disputes, they knew the strikers. But more important, many business watchdogs believe Americans supported the strike because the Teamsters union was able to tap into a wellspring of anger and anxiety that exists in the U.S. workplace.

"Ironically, since the strike ended we've been flooded with job applications because the media reported how much we paid our workers," explains Lea Soupata, vice president of human resources for UPS, only days after the strike ended.

"The [U.S.] population feels there's a lot of worker exploitation going on, not only at the contingent level but also among exempt employees who are routinely expected to work more than 40 hours a week," explains Barney Olmsted, co-director of New Ways to Work, a San Francisco-based organization that focuses on flexible employment. The feelings of exploitation are fueled by concerns over declining wages, the perception that "good" jobs (read: full-time with benefits) are disappearing, and anxiety over the nearly extinct employment contract. At a time when the stock market is soaring, many workers just don't understand why they have yet to share in the blessings of the new economy. In essence, the UPS strikers became their representatives.

UPS, a former winner of the Personnel Journal Optimas Award (now Workforce Magazine Optimas Award) in the Vision category (1993) for a unique community internship program for managers, was already doing a lot of things right with its contingent worker staffing strategy. However, as the strike made painfully clear, employment conditions are ripe for workers to make their frustrations and demands known to companies. The lesson for all human resources professionals isn't that they must discontinue their use of contingent workers (of which part-time workers are a subset)—flexible staffing arrangements do make sense—but that they must be fair in how they treat those workers.

Despite the good job market, worker anxiety runs deep.
In a sense, it's sad that a company like UPS was held up as a "typical" example of an organization that exploits workers—particularly part-timers. Yes, 57 percent of the firm's workforce works part time, but the overnight shipping business requires an abundance of manual laborers for short bursts of time. Yes, the majority of part-timers were paid significantly less than the company's full-time workers, but UPS claims it's because the required skill level is lower for those jobs. And yes, many of those workers remained on part-time status for years despite desperately wanting full-time work.

But the fact remains that the company's part-timers were actually paid well above what the average part-timer makes, and many of those employees did receive benefits such as tuition assistance. "Ironically, since the strike ended we've been flooded with job applications because the media reported how much we paid our workers," explained Lea Soupata, vice president of HR for UPS, only days after the strike ended.

Many believe UPS was targeted by the Teamsters not so much because it was a good example of poor employee treatment, but because a strike at UPS would bring national visibility to the issue of worker anxiety. "The union [leaders weren't] stupid," says David Ulrich, professor of business at the University of Michigan at Ann Arbor. "They picked the right target because they knew they could shut down the firm. They then did an excellent job of managing the press of the strike."

The question asked by the Teamsters resonated with a great number of Americans: Why, after a six-year economic expansion that has created record corporate profits, aren't more Americans getting a bigger piece of the pie?

The Teamsters' assertion that workers are being taken advantage of is supported by a number of studies. According to a recent economic report in Business Week, productivity has grown by 7 percent since 1990, while wages and benefits have grown by only 1 percent in the same time period. In fact, ever since 1973, wages have fallen behind price hikes during recessions and failed to make up the loss in recoveries. Thus, paychecks have bought less at each new peak of a business cycle than at the previous high point. Furthermore, even though earnings for the lower-paid 60 percent of the workforce, the so-called bottom tier, are rising faster in 1997 than for the top 40 percent, it will take at least four more years of 1 percent real annual wage growth to restore workers' income just to 1989 levels.

These new reports build on information Workforce (then Personnel Journal) presented in an article four years ago: "Contingent Work Force Spurs HR Planning" (July 1993) that already noted growing tensions between regular and contingent workers. In the article, Richard Belous, chief economist with the National Planning Association in Washington, D.C., (the organization that in 1989 came out with the first large-scale study of contingent workers in the United States) indicated that there was a stigma attached to the use of contingent workers and few organizations that purchase contingent work wanted to talk publicly about it or acknowledge that this was the direction the workforce was heading. In the article, Belous said, "Many corporations still view the strategy as shameful... as if they were providing something less than a real job—a McJob, as it were."

That sentiment has shifted 180 degrees for many employers. They no longer see that using contingent workers is shameful; they see it as mandatory. But some organizations may be abusing this strategy with serious consequences.

"Some HR people have gotten lulled into a sense of complacency [about their employment practices] because of growing profits and a boom economy," explains Rand Wilson, spokesperson for the International Brotherhood of Teamsters union. "They've failed to recognize who has paid the cost of those profits and who's responsible for the wealth that has been created. This strike serves as a wake-up call." Rand believes workers should be sharing more of the profits.

Using contingents breeds discontent.
The feelings of exploitation are particularly acute among the growing ranks of contingent workers, which now comprise 30 percent of the workforce. "Organizations overdid downsizing and they also are overdoing the ratio between core and contingent workers," Olmsted says.

To be fair, though, the burden for this scenario isn't solely on the employer. According to a study on flexible work called "Nonstandard Work, Substandard Jobs" released in September by the Economic Policy Institute (EPI), in Washington, D.C., 75 percent of employees voluntarily work in nonstandard work arrangements that include part-time, temporary, on-call and contract positions, because they want more flexibility or balance in their lives. But the study also indicates companies may be taking advantage of their workers' desire for flexible work.

"The growth in nonstandard work is not inherently bad if these jobs are just as good as regular full-time jobs in terms of wages, benefits, job security and other characteristics," explains Edie Rasell, an EPI economist and a co-author of the report. "We find, however, that typically all types of nonstandard jobs are inferior to regular full-time work. Nonstandard jobs pay less than regular full-time jobs to workers with similar characteristics, are less likely to provide health insurance or a pension, and are more likely to be of limited duration." When you consider how rapidly nonstandard work arrangements are growing (the number of part-time workers has climbed by 5 percent since 1993, and the number of temps has jumped 27 percent) you begin to sense the detrimental financial and psychological impact of nonstandard work, regardless of whether or not these arrangements are by choice.

The increasing use of contingents fuels the anxiety that has been simmering for years due to the erosion of the employment contract. "There are plenty of people who see the growth of the contingent workforce as a trend away from a strong commitment to core employees," says Sanford Jacoby, professor of management at UCLA and author of "Modern Manors: Welfare Capitalism Since the New Deal," (Princeton University Press 1997). "Companies have told employees the old days are over, that there's no such thing as lifetime employment, yet they haven't adequately defined the new psychological contract."

Even workers who've gotten the message that the employment contract has changed and who are taking responsibility for expanding their careers appear to be anxious. "The new employment contract says that to keep growing, employees have to keep moving," says John Zweig, divisional employment manager for Apple Computer Inc., in Cupertino, California. "But it's stressful to keep making these job changes no matter how well-paid you may be."

Add all these factors together and it's relatively easy to see why the U.S. public cheered on the striking UPS employees. But what does this anxiety mean for HR professionals? For one thing, it could signify the dawning of a new era of empowered and emboldened workers.

Workers direct anxiety toward their employers.
While the UPS strike served to highlight the alarming sense of workers' anxiety, it may also prompt workers to take action as a result of that anxiety. With unemployment at record-breaking lows and skills-short companies begging for workers, the strike may give employees the added push they've needed to demand a little bit more in their paychecks, better job security or more generous benefits. "Dilbert's Revenge" is what The Wall Street Journal recently called this emerging trend.

"The UPS strike is much more than a shift in mood," explains John A. Challenger, executive vice president of Challenger, Gray & Christmas Inc., a Chicago-based outplacement consulting firm. "Since the widespread downsizing in the late 1980s, workers have been reluctant to ask for something better from employers, fearing their jobs would be in jeopardy if they did. The UPS strike signals that reluctance has come to an end."

Highly skilled workers already are enjoying a heyday of career-growth opportunities and are using the tight labor market to force employers into granting salary increases, promotions, stock options and other perks. Those who don't get what they want simply pack their bags and walk down the street to another company. In fact, this kind of job hopping is becoming routine among employees with coveted skills.

Even temps are finding the tight labor market beneficial in their push for higher wages and better working conditions. "In this job market, the employee holds the cards," explains Lynn Taylor, vice president and director of research at Robert Half International, a staffing firm based in Menlo Park, California. "There's greater incentive for employers to pay attention to their needs."

While part-timers and other contingent workers typically don't have the same clout with employers, unions may step in to help them with their demands for better wages and more full-time job opportunities. After decades of declining membership, organized labor is enjoying a growing vitality as seen in the recent minimum wage hike and the increasing visibility of unions on Capitol Hill.

In Silicon Valley, in particular, union officials are encouraging contract workers to take advantage of their bargaining power now, while the labor force is tight, to secure better wages and job stability in the event of an economic downturn. According to research conducted by the San Jose-based South Bay AFL-CIO Labor Council, contingent workers, including temporary, contract, part-time and self-employed people, make up between 27 percent and 40 percent of Silicon Valley's workers.

Union organizers there plan to win public support by drawing attention to the inequities experienced by high-tech contract workers who don't receive health or retirement benefits, let alone the stock options that have turned many of their full-time colleagues into millionaires. "We're doing a fair amount of organizing on the basis that as goes the Silicon Valley, so goes America," says Amy Dean, chief executive director of the South Bay AFL-CIO Labor Council.

Employees without union representation who can't get the concessions they want from employers have yet another weapon at their disposal—the U.S. legal system. Already, part-timers have won a significant triumph inside one of this country's most prominent companies. In July, a Federal Appeals Court ruled that Redmond, Washington-based Microsoft Corp. had wrongly excluded free-lancers hired before 1990s from its stock-option plan, an opinion that could cost the company millions of dollars.

"Courts are starting to lean toward the favor of temporary employees," explains Chuck Straub, former HR director of the Space Systems Division of Boeing Co. in Huntington Beach, California. Straub had been in charge of the staffing strategy, including the hiring of contingent workers for the firm, until only a few months ago. Straub anticipates that if companies don't make their contingent employment practices more equitable, an increasing number of lawsuits like the one that hit Microsoft will ensue.

He also believes that intervention by the state or federal government is probable. "There's a real danger that a law will be written that says companies must make temporary workers permanent after a certain length of time," he explains. In fact, the Clinton administration has already started looking into the perceived inequities between contingent and full-time employees.

Another way contingent employees can make their demands known—or at least, their frustrations felt—is through the time-tested technique known as low productivity or a work slowdown. As explained in Towers Perrin's 1997 "Workplace Index," a measure of employee attitudes across the country: "Over and over, our results confirm that the more employees believe their company treats them fairly, considers their interests and shares its financial success with them, the more likely they are to go that proverbial 'extra mile.' Perhaps even more significant, the opposite is true as well... and that, in turn, can adversely affect productivity and performance."

Prevent worker demands from running amok by treating employees fairly.
Given that workers are now in a position to demand more from their employers, it behooves companies to take a hard look at their employment practices. If there's a single lesson to be learned from the recent UPS strike, it's that employees, regardless of their status, want and expect their employers to treat them fairly.

"For me, the interesting lesson for HR is that people still expect a lot from their employers and they want companies to take care of them," explains UCLA's Jacoby. "This is ironic given the individualistic society we live in." But this translates into a large untapped reservoir of loyalty that companies can take advantage of simply by treating workers equitably, honestly and fairly.

Unfortunately, companies appear to have a long way to go in this endeavor, particularly when it comes to contingent workers. According to the EPI's report, nonstandard workers are much more likely to receive low wages than their full-time colleagues. On average, women in nonstandard work arrangements earn 20 percent less than women doing the same work full time, and men earn 24 percent less. Furthermore, approximately one-fourth of all nonstandard workers don't earn enough money to lift a family of four out of poverty. (Granted, some kinds of nonstandard workers are highly paid, including high-tech independent contractors, but these are the exception, not the rule.)

Additionally, nonstandard workers are much less likely to receive a pension or benefits. Just 23 percent of women and 16 percent of men doing nonstandard work receive either benefit. Much of the disparity between full-time employees and their nonstandard counterparts can be attributed to the fact that nonstandard workers typically are assigned substandard work.

If employers want to continue using contingent workers to keep the workplace flexible enough to adapt to changing business conditions—and it appears they do—they must start treating those workers equitably and offering them the same opportunities that are available to full-time employees.

If there's a single lesson from the recent UPS strike, it's that employees expect employers to treat them fairly.

"Many companies like nonstandard work arrangements, and the majority of workers in those positions are there by choice," says EPI's Rasell. "This is good. If companies want to use nonstandard workers for flexibility, there's no reason why they shouldn't, because workers also like the flexibility. These arrangements are only bad if companies are using nonstandard workers as a way to save money and cut labor costs." This is when resentment builds and employees are most likely to lash out at their employers.

Kelly Murphy, founder and principal of The Avalon Group, a consulting firm based in Lake Oswego, Oregon, that helps companies efficiently use temporary labor, agrees with Rasell. "As the market tightens up, you have to look at more flexibility and fairness for part-timers because a lot of people—and companies—want this."

Murphy suggests HR professionals take a more active role in developing strategies relating to the use of contingents. This could include the following practices:

  • Setting limits for the length of time a temporary worker stays with the company
  • Developing guidelines for managers on how to hire and supervise contract employees
  • Regularly evaluating a part-timer's responsibilities to make sure part time is still the best arrangement
  • Evaluating—and narrowing—the gap between full-time wages and contingent work
  • Overseeing all hiring within the company.

This last point is the most critical of all.

"Typically, line managers who are trying to get around a hiring freeze or head-count limitations will bring in a temporary worker and report the cost as a department expense, not as labor," Murphy says. "HR doesn't even know that person has been hired."

Then the manager may start treating the temp as a regular employee, telling that person how valuable he or she is, giving regular feedback and treating the temp as a team member. Inevitably the budget gets tight again, the manager must cut costs and the person is abruptly told the temporary assignment is over. Murphy says this isn't just unfair for the temp who was led to believe that he or she was a valuable employee, but it's also not fair to the other full-time employees who start wondering when the ax will fall on them. "There are too many HR consequences for HR to not be directly involved in the hiring of contingent workers," she says, including legal, productivity, communication and morale issues.

Sallie Larsen, vice president of HR and communications for the Systems Integration Group at TRW Inc., in Fairfax, Virginia, agrees HR must take a more active role in setting guidelines for the use of contingent workers, especially because the number of contingents is likely to continue to increase. "Here at TRW, HR knows about everyone who's hired, regardless of his or her status."

Soupata from UPS adds that communication is critical to treating contingent employees more fairly. "Companies have a responsibility today to educate employees about the issues surrounding their work arrangements," she says. "HR has the responsibility for ensuring a match between employee and company expectations." When those expectations change and employees aren't notified is when employees start feeling like they aren't being treated fairly. "As we discovered, you can never communicate enough," she says.

In the end, the UPS strike serves as yet another glaring reminder of the kind of power employees have to make or break a business. What makes the UPS situation different is that it showed today's employers how angry employees are and that if companies don't start treating all employees—and particularly contingent workers—more equitably, workers will find a way to force the issue. Of course, HR professionals already know this. Now it's up to HR to spread the word—and the warning.

Workforce, November 1997, Vol. 76, No. 11, pp. 40-50.

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