Contractors Are The Hidden Face Of Unemployment Statistics

A few years ago, one of the things the SEIU's Andy Stern talked about was moving away from employer-based health insurance and allowing contract worke

A few years ago, one of the things the SEIU's Andy Stern talked about was moving away from employer-based health insurance and allowing contract workers to purchase insurance through their union. I thought that was a pretty good idea. It would be one way to help people like this:

Over the past decade, U.S. businesses increasingly have relied on contract workers as a way to keep a lid on health care and retirement benefit costs and to give them more flexibility to adjust payrolls as conditions change. Now, with the American economy flashing code red, companies from Wall Street to Silicon Valley are casting off temporary workers and freelancers left and right, typically without any severance pay.

While the ability to shed contingent workers helps protect corporate profits, economists say it's a net negative for the economy. That's because while companies may save on labor costs, they aren't likely to use those savings to boost investment with the economy so weak, preferring instead to rebuild their balance sheets.

Meanwhile, the people who lose their jobs will be forced to cut spending drastically, particularly because many of them earn below-average pay and thus have little savings to fall back on. The overall result is a decrease in demand, further depressing the economy. Says Dimitri B. Papadimitriou, president of the Levy Economics Institute of Bard College in Annandale-on-Hudson, N.Y.: "Clearly there is a macroeconomic impact. It begs the question of what our social safety net is all about."

[...] Here in the U.S., the cutbacks of temporary workers mean the labor market is in much worse shape than the headline 8.5 percent jobless figure for March would suggest. Throw in part-timers who would like to work more and unemployed workers who have given up their job search, and you come up with a jobless rate closer to 15.6 percent, according to one measure buried in the Bureau of Labor Statistics' monthly Employment Situation report.

"The numbers are astounding," says Beth Shulman, an analyst with the Russell Sage Foundation, a New York-based social science research group. "These workers, often at the lower end of the pay scale, are losing hours, income, and benefits. That only worsens the recession."

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