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  • The Downward Pull of Contract Work on Wages

    October 02, 2013


    By Chris Owens

    Executive Director, National Employment Law Project

    Four years into the recovery, the legacy of the Great Recession persists:  a jobs deficit of more than eight million, unprecedented long-term unemployment, and wage losses across all occupations, with the greatest decline in jobs that pay the lowest wages.  Yet, as devastating as the downturn has been, its most profound impact may be the way it has cemented and intensified trends of the preceding three decades.  

    Between 1979 and 2007, the economy’s share of good jobs with living wages and employer-provided benefits fell, even as the average age and education level of the workforce rose.  For the bottom fifth of wage-earners, real hourly wages grew only slightly, and all of that growth occurred between 1995 and 2000; for most of the 28-year period, wages fell for workers at the bottom.   And the share of the workforce represented by unions, at 23.3 percent in 1983, was only 12.5 percent in 2012 (with fewer than seven percent of private sector workers unionized).  

    Multiple factors – globalization, technology, deregulation and the erosion of labor standards – are driving these trends, but a significant cause that has received less attention is growth in contracted employment. In every sector and across all occupations, as corporations have restructured (“vertically disintegrated”) and governments have privatized, work once performed in-house has been outsourced either to contract companies providing specialized services, such as janitorial services, or to temp agencies offering everything from a small menu of services to a soup-to-nuts banquet for staffing needs.  

    The employees of these agencies are not misclassified as independent contractors,  a ruse embraced by unscrupulous employers in order to avoid paying workers proper wages, offering benefits and otherwise complying with labor law obligations.  In fact, the contract firm or temp agency is the direct employer, and is most likely covered by the Fair Labor Standards Act. But many of these firms and agencies are under-capitalized and sometimes squeezed by the corporate giants with whom they contract. And while they often pay more than the minimum wage, few pay living wages and many skirt the law when it comes to overtime. As a result, contracted work can be considerably less remunerative than similar positions on the payroll of the larger firm that is contracting for the work. 

    Contracted employment is neither new nor inherently abusive.  Many organizations realize valuable efficiencies by contracting out non-core activities, like payroll processing.  But when the principal purpose or effect of using contracted services is to shave labor costs and/or to avoid complying with workplace regulatory standards, then achieving those objectives often comes at the expense of fair pay and workplace rights of contracted workers.   

    In some instances, the client company retains sufficient control — directly or indirectly — over the employment conditions of contracted workers to meet the legal test for “joint employer” status. That makes the client company potentially liable for unpaid wages or other violations by the contract firm. 

    But as new and evolving constellations of business structures and employment relationships emerge, with multiple layers of contracting and varying forms of staffing arrangements, accountability lines have become murky. As a result, questions about which companies or agencies are causing or contributing to lousy working conditions and how to hold them responsible are much more complicated.   

    The situation of warehouse workers who unload and reload products for Walmart is a case in point.  Depending on the warehouse, individuals working side-by-side doing identical jobs in the same location could be employed by any of the following: Walmart ; the company that owns or manages the warehouse; the logistics company  that contracts with the warehouse manager to provide staffing; or a temp agency that supplies workers to the logistics company to meet its staffing demands.   

    Walmart’s level of control within the warehouses that comprise its vast distribution network is not always the same.  It directly owns and staffs many warehouses, but then contracts for other operations, exerting various types and levels of control within individual facilities.  Even where Walmart’s exercise of onsite control is not evident, its absolute dominance of the retail sector enables the company to drive a hard bargain with contractors, often leaving them with little choice but to cut wages and corners to meet the company’s demands. When this occurs, workers toiling for a direct or secondary Walmart contractor may be unaware of who actually calls the shots. 

    And even when Walmart (or any other corporate giant) effectively controls working conditions throughout the supply and distribution chains, the relationship between its actions and working conditions on the ground may seem too far removed for the corporation to incur liability under existing labor and employment laws. 

    Walmart is not an isolated example nor are the problems associated with its multi-tiered arrangements unique.  But, quantitative data on contracted employment is limited and affects our ability to understand fully these  new employer-employee relationships and develop appropriate policy solutions.  

    In response, NELP has launched a major initiative to document the prevalence and consequences of contracted employment and craft solutions that will promote corporate accountability for workplace wrongs and remove barriers to workers’ ability to organize for job improvements. Our review is continuing and our findings incomplete, but they confirm not only the growth of contracted work, but also its contribution to eroding job quality and rising income insecurity, especially for low wage workers. 

    Preliminary estimates are that at least 40 percent of workers in low wage occupations, such as janitorial and cleaning services, industrial laundries and dry cleaning, security, construction, telemarketing and trucking are contract employees. In another large occupational category that includes warehouse workers, contracted and temp employees together are estimated at more than 35 percent of all workers in the category.   

    With contracted work so firmly etched into America’s economic landscape, we must develop policy models that enable these workers to achieve living wages and workplace fairness.  Since the recovery began, job growth has been concentrated in low-wage sectors, and between now and the end of the decade, six of the ten jobs likely to grow the most will be low paid.  

    As more and more workers are consigned to low wage futures, we simply can no longer afford to ignore the causes and consequences of declining job quality.  The overriding objective of American economic and labor market policy should be to ensure that all of America’s workers will be able to provide for today and prepare for tomorrow. Strengthening laws like the FLSA to give contract workers accessible, effective remedies against wage and other workplace violations and providing an unfettered right to organize for better jobs and working conditions are important steps in advancing that objective. 


    Chris Owens Profile Image
    Christine Owens is Executive Director of the National Employment Law Project, a national advocacy organization for employment rights of low-wage workers. She worked previously with the national AFL-CIO as Director of Public Policy and as a senior policy analyst specializing in workplace equity issues. She was also the founder and director of the Workers Options Resource Center, which coordinated a broad-based coalition of national and community organizations to win the federal minimum wage increase in 1996.

  • Cheap Food and Child Farm Labor

    October 02, 2013


    By Celeste Monforton

    Project Director, Beyond OSHA

    U.S. consumers today expect to eat on the cheap.  Many grocery chains offer lettuce, peppers, tomatoes, grapes and other produce for less than $1 or $2 a pound.  The benefit to consumers comes at a cost to the workers who pick and process those goods.  

    Migrant farm workers in the U.S. earn subsistence wages – typically a piece rate –   that often forces them to have their children assist in the fields.  Farm worker parents have few childcare options and may feel their children are safer accompanying them in the fields than staying home alone.  It’s not unusual for farm worker children as young as six or eight years old to begin working the crops.  During peak seasons, children may labor for 10 hours a day in working conditions that most native-born Americans avoid.  Temperatures in the fields can exceed 100 degrees, pesticides pose poisoning risks, and heavy equipment and vehicles are a special threat to youngsters who are too small to be seen.  

    Young workers are not just employed in crop work.  They have other agricultural jobs, from tending to livestock and operating hay bailers, to felling trees and working in grain silos.  All of these tasks can be especially dangerous for youngsters who don’t have the training or the maturity to manage the risk.  Not long ago, two teens lost legs each lost a leg while operating a grain auger in Oklahoma.  Two other youngsters were asphyxiated in grain at a silo in Illinois.  One of the boys was only 14 years old.  

    Jobs in U.S. agriculture have one of the highest fatality rates.  Put that together with a fatality rate for all young workers that is double the rate for all U.S. workers and you have a deadly combination for young workers employed in agriculture.

    This is especially disturbing as we recognize the 75th anniversary of the Fair Labor Standards Act (FLSA). The 1938 law mandated special protections for children under age 16, such as prohibiting them from being employed in coal mines, textile mills and other factories.  Special exceptions, however, were carved out for agricultural employers, so children working on farms have less protection than those working in other industries.  

    As authorized by the FLSA, the U.S. Department of Labor (DOL) stipulates dozens of work activities that are too dangerous for individuals of certain ages.  Workers under age 18, for example, are prohibited from operating cardboard balers in grocery stores, and from driving a forklift.  In 2010, DOL issued a new set of rules governing hazardous tasks for workers under age 18 who are employed in non-agricultural jobs, such as prohibitions on using wood chippers.  The safety rules governing young workers employed in agricultural jobs, however, have not been updated for 43 years.  

    All that was poised to change in 2010 when DOL drafted a proposed rule to address serious hazards faced by farm workers under age 16.  The Department submitted the proposal to the White House’s “regulatory czar” for review.  Agricultural interests inside and outside the Administration raised objections to the proposal, and it was stalled from release for nearly a year.  A campaign by children’s rights, worker safety, and public health advocates----along with more news stories of young workers dying on U.S. farms----compelled the release of the proposed rule.  It would have prohibited workers aged 15 and younger from working inside a grain silo or manure pit; serving as pesticide handlers; and operating a tractor without special vocational training, among other things.

    But the ensuing public comment period led to a vocal misinformation campaign by the farming lobby about the proposed protections.  Opponents of the rules claimed DOL was interfering in the wholesome activities of rural America.  Members of Congress jumped on the bandwagon, calling for the Obama administration to withdraw the proposed new rules.  Advocates’ efforts to direct attention to the injuries and deaths suffered by young workers were overwhelmed by opponents’ claims that the Obama Administration was destroying the family farm and 4-H programs.  (There were exemptions for both in DOL’s proposal.)

    The heat was too much for the Administration.  In April 2012 – on Worker Memorial Day, no less, the day that remembers and honors workers who have been killed on the job – the Labor Department withdrew the proposed rule.  The announcement was punctuated with the statement “to be clear, this regulation will not be pursued for the duration of the Obama administration.”  The consolation offered was a promise to work with rural stakeholders to develop an educational program for youngsters to promote safety in agricultural work.  

    But child labor advocates are still waiting even for the consolation prize. 

    “There has been little or no information forthcoming from DOL on education about the existing regulations or about current enforcement efforts,” noted Mary E. Miller, a registered nurse and a national expert on safety for young workers.  “Meanwhile children and adolescent youth continue to be placed at risk in agricultural work environments.”

    The FLSA has allowed millions of children to avoid dangerous work and grow up safe and healthy, but its exemptions leave young agricultural workers at risk.  With the Obama administration having withdrawn its proposed rule changes, action to improve safety protection for child farm laborers will have to come from a future administration.


    Celeste Monforton
    Celeste Monforton is a Professorial Lecturer at the George Washington University Department of Environmental and Occupational Health and director of Beyond OSHA, a project to help workers make better use of their rights in the workplace. She has worked as a policy advisor and chief of staff to the Assistant Secretary at the Mine Safety and Health Administration and also as a legislative analyst at the Occupational Safety and Health Administration. She is also an active volunteer with United Support and Memorial for Workplace Fatalities, an advocacy group for family members of workers killed on the job.

  • Better Wages for Those Who Feed Us

    October 02, 2013


    By Saru Jayaraman,
    Co-Founder and Co-Director, Restaurant Opportunities Centers United
    and
    Maria Myotte,
    Communications Coordinator, Restaurant Opportunities Centers United

    The fight to establish a minimum wage was based on the notion that all workers deserve a modicum of security and stability – a crucial component of any equitable economy and the foundation of the Fair Labor Standards Act, when it was passed 75 years ago. Today, however, tipped workers – that is, mostly restaurant workers – have been effectively excluded from this security and stability, because surviving off the generosity of diners from shift to shift is an especially unpredictable way to make a living and support a family. 

    The restaurant industry is one of the largest and fastest-growing sectors of the U.S. economy and, at the same time, the nation's lowest-paying employer.  According to the U.S. Department of Labor, seven of the 11 lowest-paying jobs in America – including the two absolute lowest-paying – dishwashing and fast food cooks and preparers – are restaurant jobs. 

    While celebrating record-high sales and profits, the National Restaurant Association continues to lobby Congress to keep the federal minimum wage at $7.25 an hour – and successfully lobbied Congress to keep the tipped minimum wage frozen at $2.13 an hour for the last 22 years. 

    There are more than 10 million people currently employed by the restaurant industry, five million of them are women, including two million mothers and one million single mothers with children under the age of 18. In fact, the majority of people depending on tips – 70 percent – are women. If you are a restaurant server, you are three times more likely to live in poverty than the rest of the U.S. workforce and twice as likely to qualify for food stamps. 

    It is a terrible incongruity, but restaurant workers – the people who put food on the tables of thousands of restaurant-going Americans every day – cannot afford to feed themselves. 

    And despite the recession, many of us are still going out to eat. More than 50 percent of Americans eat out at a restaurant at least once per week, and 20 percent eat out two or more times per week, pushing the restaurant industry’s continued growth. The National Restaurant Association (the trade association of choice for Fortune 500 restaurant brands) would have you believe that raising wages would decimate jobs and destroy small business owners. 

    This simply isn’t true. There are several restaurants taking the lead in providing livable wages and benefits to their employees. They are succeeding because they have invested in their workforce. 

    Ben Hall and Jason Murphy, co-owners of the popular and profitable Russell St. Deli in Detroit, are great examples. In a city that recently declared bankruptcy, Ben and Jason are committed to creating good jobs and putting money back into the local economy. They pay their employees well above the minimum wage, offer paid sick days and health care benefits, and are the largest buyer of locally-grown produce in Detroit. 

    It is by raising the bar by which they do business – and not doing the bare minimum required by law – that they have been able to grow at 11 percent annually. They are currently in the midst of opening a new restaurant and creating more good jobs in a city that needs them. Fortunately, they are just one of a growing number of examples. 

    Some of the leading voices that have taken the high road to profitability are banding together in an alternative restaurant association, Restaurants Advancing Industry Standards in Employment (RAISE), to provide support and leadership for restaurant owners that share their commitment to fair wages. Most people support raising the minimum wage. And research shows that even if employers passed the cost of increasing the minimum wage entirely onto their customers, the cost of food would increase, at most, by a dime a day. 

    Despite growing consumer support and restaurants increasingly leading by example, long-term improvements to the largest low-wage job provider in the US will require a political moment on par with that of the original Fair Labor Standards Act. Good news is on the horizon; the Fair Minimum Wage Act of 2013, currently proposed in Congress, would not only increase the minimum wage for tipped workers, but would also re-link the tipped minimum wage to be 70 percent of the overall minimum wage. This raise is 22 years overdue for tipped workers.

    This year we commemorate the Fair Labor Standards Act, and there is, hopefully, increasing momentum to raise the minimum wage. One pivotal question is whether after 22 years, tipped workers will be left out again. 

    Our hope is that anyone who supports the minimum wage will agree that, to honor the true spirit of the Fair Labor Standards Act, workers in one of the largest and fastest growing segments of the U.S. economy should not continue to be left behind. 


    Saru JayaramanSaru Jayaraman is a co-founder and co-director of Restaurant Opportunities Centers United, Inc. (ROC United), which organizes restaurant workers to wage workplace justice campaigns, conduct research and policy work, partner with responsible restaurants, and launch cooperatively owned restaurants called COLORS. She previously co-founded a national young women’s organization called Women and Youth Supporting Each Other.
    Maria MyotteMaria Myotte is the National Communications Coordinator for Restaurant Opportunities Centers (ROC) United. Before ROC, she worked within the environmental organizing and good food movement in Colorado.

  • Protecting Temporary Workers

    March 14, 2012

    A Public Welfare Foundation grantee in Massachusetts helps shield workers from wage theft, dangerous conditions and other hazards.

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  • Trying to Turn Prisoners Around

    November 07, 2011

    In an unprecedented move, California has started to shift approximately 30,000 prisoners from state prisons to county facilities.

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  • Bargaining for Workers’ Rights

    March 29, 2011

    Negotiated agreements covering wages and conditions can affect workers beyond a specific workplace.

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  • Prison-based Gerrymandering

    February 12, 2010

    The Public Welfare Foundation's latest e-newsletter examines whether prisoners should be counted where they are imprisoned or where they resided before being incarcerated.

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  • An Antidote to Swine Flu, Paid Sick Days

    August 18, 2009

    In the face of a possible pandemic, the Public Welfare Foundation’s latest e-newsletter suggests that paid sick days could boost public health.

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