Is Labor Applying the Brakes?

Temporary Worker Place Pie Chart
National Association of Temporary and Staffing Services

F.A. Hayek, the Austrian economist and Nobel Laureate, believed that one of the greatest sources of danger to the free market was the growing trend of governments to delegate powers to administrative agencies. Were he still alive, Hayek would need to reemphasize that danger—that nearly unaccountable administrative agencies are continuing to pose problems for a free society.

The National Labor Relations Board (NLRB) is a primary example of administrative interests that oppose privatization and other cost saving, quality enhancing advances. Instead of striving to meet the challenges of the free market, the NLRB is considering a measure that could strike a blow against some workers under the National Labor Relations Act.

The issue pertains to whether the government can insist that temporary workers work under a union’s collective bargaining contract that is not of their choosing. Big labor is a catalyst for changing the current rules for organizing temporary workers into its ranks. Union leaders want to ease the legal hurdles and organizing hazards which they now encounter so they can gain exclusive representation of temporary workers.

Organized labor argues that most employers use flexible work arrangements to avoid benefits or to escape their legal obligation as employers. They say that the staffing firm and the customer are, in effect, operating a single business enterprise. Thus, when the customer is unionized, temporary workers supplied by the staffing firm should be folded into the customer’s bargaining unit and covered by the collective bargaining agreement, despite employer and employee opposition.

Many unions wish to put the brakes on outsourcing with temporary workers unless those workers are dues-paying members.

Many unions wish to put the brakes on outsourcing with temporary workers unless those workers are dues-paying members. Should the NLRB rule in favor of union organization of temporary workers, they may successfully remove the economic gains that are made by using contracted labor. The flexible and dynamic labor pool available through outsourcing will be sacrificed for a few unionized employees, and the nature of temporary, contracted-labor will change indefinitely.

The Board’s ultimate decision will be based on three cases’ oral arguments. Although the facts of these cases all differ, the issues generally involve whether employees—hired as temporaries from an employment agency, such as Manpower—should be placed in a single or multi-employer bargaining unit for purposes of an employee election or for purposes of collective bargaining.

If the union arguments succeed, at least two things would follow: 1) union membership would be swelled by the instant addition of nonunion employees (with accompanying mandatory union dues); and 2) the practice of outsourcing for labor services might be substantially curbed. This amounts to easy organizing and job preservation—issues that have plagued union leaders for years.

The union movement sees the temporary staffing industry as the "mother lode," ready to be tapped to replenish its declining fortunes at the expense of individual workers who have chosen not to join a union. The National Association of Temporary and Staffing Services (NATSS), an industrial trade group, has publicly reported that more than 90% of U.S. companies use staffing services, and the use of temporary help and staffing services is growing in popularity—in 1995 temporary help employment increased 9.6% with an employee payroll of $27.9 billion. Some 25 years ago, less than 250,000 American workers were temporary, compared to the 1995 level of 2.1 million workers, an increase of almost 1,000%.

Michigan employers frequently use alternative staffing arrangements to meet business needs. A survey of Michigan businesses by NATSS revealed that the 1995 temporary help annual payroll exceeded $956 million—compared with $347 million in 1987—an increase of almost 300% in 9 years. Average daily worker employment has doubled for the same period—from 35,230 temporary workers to 70,890.

Companies use contingent workers, including temporary employees, primarily because they provide labor flexibility to meet changes in demand. But there are other reasons to supplement a client’s work force in short-term work situations: employee absences, temporary skill shortages, seasonal workloads, and special assignments and projects.

Flexible work arrangements give job providers a way to more competitively and effectively manage labor needs, and give employees flexibility to meet personal obligations, time for skills training or education, or the opportunity to earn a supplemental income. Perhaps most importantly, to some workers temporary work acts as a bridge to full-time employment, allowing the employee a chance to get a "foot in the door."

Contract labor and temporary work arrangements have grown in popularity precisely because there has been a tangible need for the flexibility they offer. Using government agencies to move people into collective agreements not of their choosing is neither democratic nor fair.