Minnesota employers are hiring more temporary workers than ever before, in a dramatic shift that partly reflects their desire to stay flexible amid the slow economic recovery.
Even as the state has regained nearly all the jobs lost in the downturn, employers have become significantly more reluctant to make permanent offers. The reasons include concern about impending changes in federal health care law, as well as a trend toward outsourcing some functions to staffing firms.
“Generally by this far into the recovery, we would start to see the use of temporary employment start to plateau or even fall slightly, but that has not been the case,” said Tim Doherty, owner of Doherty Employment Group based in Edina.
The number of temporary jobs in Minnesota ballooned in June to 68,199, an all-time record, and temp hiring has been rising 14 times faster than overall hiring since the recession, according to data released this week by the Minnesota Department of Employment and Economic Development. The trend is national, with temporary positions growing by 40 percent in the United States over the past four years, compared with 4 percent growth in overall hiring.
CareerBuilder said in its midyear forecast that 31 percent of employers plan to hire temporary or contract workers, up from 21 percent a year ago.
“We have a lot of companies that still have hiring freezes, but they can justify bringing in temporary help or contract help,” said Jeanine Janos, a regional manager for Jeane Thorne Inc., a Minneapolis staffing firm.
Historically, a spike in temp jobs is a good sign for the economy, because economists view contract work as a leading indicator for hiring in general. The idea is that as demand for labor picks up, temps are the first to get the call.
“Back before the Great Recession, back when we had a really tight labor market, it was a good indicator of potential future demand,” said Tom Stinson, an economist at the University of Minnesota.
It may be less of a good sign now, Stinson said, because it partly reflects uncertainty over Obamacare.
One provision of the health care law requires companies with the equivalent of 50 full-time employees to either provide all their workers with health insurance or pay a penalty.
This is on employers’ minds, said Doherty, Janos and Stinson. If managers can keep their head count below 50, they can avoid the new regulation, which the Obama administration this month announced will be delayed by a year.
“All we may be seeing there is reaction to the potential impacts of the Affordable Care Act,” Stinson said.
But the trend toward contract work — not only in low-paying jobs but also in accounting and human resources — is larger than the recent spike.
The whole professional and business services sector, which includes legal, janitorial and human resources, is ripe for outsourcing, said Steve Hine, a labor market economist at the state, and that trend won’t stop.
“It is the way businesses operate now,” Hine said. “Rather than hiring an accountant, you go to an accounting service.”
Temp jobs often get a bad rap, but they’re becoming an important way for businesses to manage costs and risk, and they’re not a bad way for people to get into the workforce, said Anne Edmunds, a regional vice president for Manpower Inc. She said 40 percent of temporary workers at Manpower end up getting hired at the firm where they work as Manpower employees.
“Ten years from now, I think the workforce strategies will definitely be around the usage of a more flexible workforce,” Edmunds said. “I just think we need to think about work a little bit differently than we have in the past. You have to be your own agent, and be able to be flexible and move around.”
This shift is evident in manufacturing, which Edmunds said is one of Manpower’s two fastest-growing sectors. Direct employment in manufacturing has declined by 1,400 jobs in Minnesota over the past 12 months, indicating more jobs in factories are being filled by staffing agencies.
For people looking for jobs, getting on board first as a part-time or contract worker and then trying to win a full-time job can work, said Tom Bodin, managing partner at OI Partners in Minneapolis. But unemployed people should be aware that there are no guarantees.
“A part-time or contract assignment can possibly detract from a regular job search and create false hope about a full-time job,” he said. “So be careful about stopping or putting your search on hold.”
And a permanent shift toward temporary work is probably not good for workers. The median temp vacancy pays about $1.40 per hour less than the median job overall, according to state data, and contract jobs often don’t offer reliable health insurance, 401(k)s and other benefits.
“I would be concerned about people having to cobble together a standard of living on a sequence of temp help jobs,” said Hine, the labor market economist. “I don’t think it would be a positive development for our workforce to see a great reliance on temp help as a way of staffing your business.”