Robert Solow on the Casualization of Labor

He writes,

The proportion of part-time workers has been rising: both those who prefer it that way and those who would rather have a full-time job. So is the number of temporary workers, whether employed through agencies or on their own. So are the numbers of workers on fixed-term contracts and independent contractors, many of whom are doing the same work as they once did as regular employees. These are all good-faith members of the labor force; they are employed but without what used to be thought of as a regular job.

Pointer from Mark Thoma.

My guess is that the most important policy variable influencing this is the requirement that full-time employment come with health insurance. “Casualization” is the market’s way of working around this requirement, which has become increasingly onerous as medical treatments have become more intensive in their use of physical capital (devices of all sorts) and human capital (medical specialists).

21 thoughts on “Robert Solow on the Casualization of Labor

  1. The country where I grew up and currently live, Peru, has this “debate” very front-and-center to our political discourse.

    Around 58% of the Peruvian GDP is “informal”, so labour law is debated very openly with pro-cons of how many people will leave or enter the formal market. Young people tend not to be “on the payroll” (the legal payroll) so they don’t have benefits until they are valued enough to get benefits –most of my friends are only now doing so, as 26-27 year old university graduates.

  2. Has anyone checked to see if the same trend holds in Canada? No major health care regulation change in the same period, but otherwise broadly similar economies…

    • He isn’t really just referring directly to Obamacare.

      Saying you aren’t “required” to save a large amount of taxes by offering subsidized health coverage is both true and utterly irrelevant.

      • “You aren’t REQUIRED to save large amounts of labor compensation like your competitors are doing.”

        See, that’s just not how money works. And as I love to say say, we wouldn’t see much impact from Obamacare in the aggregate yet. It hasn’t done anything yet because it hasn’t started doing the real damage. Although I won’t be able to say that forever.

  3. The insecurity of not having a “regular job,” even if one is working, probably makes people more receptive to the promises of the Democrats to mobilize government to “protect” people from such insecurity. No doubt something that the architects of Obamacare had in mind.

  4. You just can not resist claiming that firms were required to provide health insurance.

    The trend he is talking has been happening for years.

    But Obamacare is the first regulation requiring health insurance and there are several ways firms can escape it.

    Business providing health insurance was the market response to the fact that they could buy insurance with pre-tax dollars– a significant benefit for both the firm and the employee. It was strictly a market development, especially since one of the main reasons firms did it was to be competitive in the labor market.

    But before this year no firm was required to provide health insurance.
    You have this claim in your mind and no matter how many times you are shown to be wrong you just keep on making the same claim.

    I use to think libertarian was a good philosophy until I started seeing what untruths you had to believe to be a member in good standing. I bet your wild claims drives away more people than it attracts.

    • Spencer: “But before this year no firm was required to provide health insurance.”

      Employers of 50+ full-time equivalent workers were required to provide insurance starting in 2015 or pay a $2000 penalty per uninsured, full-time worker.

      What else are you wrong about?

    • Dude, you have no idea what you are talking about. And btw, I never remember you being interested.

      I guess I should have made the comment above chiding the guy above for misunderstanding Arnold and it might have headed you off. But then again, cya.

      • My “firm” IMMEDIATELY started a full court press making sure people were nominally and effectively part-time. If your theory is that nobody knows wtf they are doing, I’ll listen.

        • And I remember when you fancied yourself a gadfly before matriculating to concern troll, so don’t sell that noise here. But we’ll be happy to discuss points.

    • A tax incentive is purely market. How droll.

      And by the way, accusing Arnold Kling of ideological punditry. Think of how silly that is.

      This is why I’m not even mad.

  5. Lots of moving parts here:

    1. No need for benefits, especially if hired as 1099 contractors or W2 employees through an agency. (In the latter case, the agency typically has some “benefits”, but they’re paid directly out of the contract)
    2. Easy to fire, especially for bigger companies (where lots of the more expensive labor laws kick in). The harder we make it to fire employees, the more you’ll see temps or 1099s.
    3. Many companies hire employees as contractors for a “probationary” period even if they intend to hire them full-time.
    4. Easier to hire “gray market” workers (undocumented or visa-issue workers) as contractors or through an agency. This is very common in agriculture, but increasingly common in tech as well.

  6. The reasons given by Robarista are correct, but there is often a price, the cut taken by the agency.
    In Europe where they have strict labor laws it is very common way to avoid those laws. Basically it is done to avoid some government regulation attached to full time workers, whether health care, prohibition on firing or administrative compliance.

  7. One if the causes of Obamacare is that as insurance becomes more and more of a bad deal and more and more of a wealth transfer, the more and more firms have incentive to cut (full time + insured). It is hard to cut insurance to full time without dropping insurance altogether. So Obamacare came along in correlation with the trend in attempts to halt the trend. It won’t.

  8. I know, for a fact, that the employer I retired from 10 years ago did this, and there were two strong reasons, and some lawsuits since have only made them stronger.

    1. All benefits, in their case including fancy retirement plans and stock options, which they simply didn’t want to give to everybody. Healthcare insurance is I suppose part of the issue, but not the main driving one.

    2. And endless struggle to stay lean in staffing. They have gotten even more aggressive since, even resorting to layoffs while still making huge sums of money.

    Full time long term employees made (make?) sense in businesses where the markets and needs are stable over time, where the rates of capex and the like are stable, and so on. In businesses that are at all dynamic, the ability to radically change staffing on short notice at low cost is key.

    Consider a large aircraft mfg with facilities in my state – one sees in the press every so often that they’ve given the state and union required layoff notice, that they’ve done this or that costly thing to prepare. And they sometimes face a strike. Same business uses more and more outsourced machine shops. Why? Well you can fire them by simply sending the purchase order somewhere else. They can’t pull union moves on you. You don’t have to give them layoff notices.

    Healthcare is a part of this, but not the dominating part.

    Think of Coase’s “The Firm” but run the equations backwards….

  9. Was working as adjunct faculty and as a tutor for Maricopa Community Colleges when the Obamacare mandate was passed. The board cut all of their part time staff back to 25-30 hours which means my tutoring hours were cut. College safety cut a lot of their staff hours as well. The college then hired additional tutors and safety staff to make up for the lost hours.

    When it was announced that the mandate wouldn’t be enforced, the college kept the limits in place to be ready for the day when enforcement would begin.

    The cutback in hours affected about 1000 people college wide.

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