There is widespread concern that laws and policies designed for the
standard (e.g., full-time) employment model are inadequate in the face
of nonstandard employment. Nonstandard employment includes
"contingent employment," employment not anticipated to be of
more than a year's duration, as well as the "alternative
employment arrangements" of independent contracting, on-call work,
temporary help agencies, and workers provided by contract firms. This
article addresses the heterogeneity across nonstandard work and workers
and develops a segmentation typology to highlight the different needs
and expectations of nonstandard workers. The typology is used to examine
the relative roles of public policy and social capital--the network of
social relationships--in addressing the challenges of nonstandard
employment. Public policy initiatives in the nonstandard employment
arena must be tailored to employee and job characteristics.
There is growing concern that the policies and institutions that
govern work have not kept pace with the realities of today's
workplace, causing a "fundamental mismatch" between the two
(Kochan, 2000). A particularly significant, frequently contentious, and
often referenced manifestation of this mismatch is the rise in
nonstandard employment arrangements (Carre & Joshi, 2001).
Nonstandard employment includes both "alternative" and
"contingent" employment relationships. In its supplement to
the Current Population Survey (CPS), the U.S. Bureau of Labor Statistics
(BLS) divides alternative employment arrangements into independent
contractors, on-call workers, temporary help agency workers, and workers
provided by contract firms (Cohany, 1998). BLS defines contingent
employment broadly as all work that does not involve explicit or
implicit contracts for long-term employment. The next section provides a
detailed discussion and estimates of employees in each type of
nonstandard employment arrangement.
There have been two significant foci in academic research dealing
with these burgeoning nonstandard employment forms. One stream of
research documents the unfavorable disparities in outcomes for employees
in nonstandard versus standard employment arrangements (Nollen, 1996;
Parker, 1994). These include the lack of an explicit or even implicit
promise of continued employment, lower pay and benefits, and the unequal
protection accorded the two groups under the law. An understandable
outgrowth of this work is the call from scholars and practitioners
urging the creation of public policies to better protect workers in
nonstandard employment relationships (e.g., duRivage, et al., 1998).
A second stream of research has focused on documenting the
composition of workers in nonstandard employment relationships, and,
more recently, on the differences among these workers in terms of
demographics, skills and abilities, and attitudes toward their
non-regular status (Cohany, 1998; Hipple, 1998; Pink, 2001).
Regrettably, there has been little attention to combining these two
streams. Calls for public policy have been limited to a narrow emphasis
on protection of worker rights and ignore the disparities among
employees engaged in nonstandard work. Papers that do address
differences across nonstandard employees seldom go beyond listing these.
Consequently, important questions remain unaddressed: What are the most
significant aspects of differences among employees from a policy
intervention perspective? How do the varying needs and expectations
among employees translate into targeted policy initiatives? Are there
competing or complementary approaches to public policy that may be
deployed for greatest eff iciency and effectiveness?
This article addresses these issues and is organized as follows:
First, we discuss the trend toward nonstandard employment with a review
of the benefits and drawbacks of such relationships for employees,
employers, and for the broader social community. Next, we discuss the
calls for public policy in this arena, categorizing the most common
arguments proffered for such intervention. This is followed by a
discussion of social capital theory, a private-initiative-based
complement to public policy--introduced in the sociological literature
and gaining prominence in managerial thought (e.g., Nahapiet &
Ghoshal, 1998; Pennings, et al., 1998). A typology of nonstandard
employment is presented to define distinct segments of nonstandard
workers, to quantify segment sizes, and to derive appropriate policy and
social capital initiatives. Implications and directions for future
research conclude the article. (1)
Brief Review of Nonstandard Employment Relationships: Rationale and
Concerns
A striking aspect of today's economy is the number, scope, and
growth of nonstandard work arrangements, specifically, alternative and
contingent employment. Nonstandard employment is estimated to be as high
as 33 percent of all employment (Belous, 1989; Houseman & Polivka,
2000) and includes alternative and contingent work arrangements. (2)
Alternative employment arrangements comprise independent contractors,
on-call workers, temporary help agency workers, and workers provided by
contract firms (Cohany, 1998). Independent contractors are defined as
people who work for themselves. On-call workers are workers who are
mobilized and used as needed. Temporary help agency workers are
employees who are paid by a temporary help agency. Contract workers are
employees who are paid by one company but carry out assignments for
another. According to February 2001 current population survey data (most
recent BLS data available), 12.5 million workers, or about one in 10
employees, fall into one of these four categories. This includes 8.6
million independent contractors, 2.1 million on-call workers, 1.2
million temporary help agency workers, and 633,000 workers provided by
contract firms.
Another conceptualization of nonstandard employment is contingent
work, defined as work without the expectation of continuity. Within this
broad definition, finer distinctions have been attempted. For example,
BLS data provide three successively broader estimates of contingency.
Estimate 3, which measures contingency as the percentage of workers
having worked or expecting to work in their current job for one year or
less, puts the number of contingent workers at 5.4 million or 4 percent
of employment. Several authors suggest, however, that the BLS data
seriously underestimates the incidence of contingent employment,
primarily because of definitional problems in enumerating contingency
(Barker & Christensen, 1998). Available data reveal significant
demographic differences. Contingent employees are more likely to be
women than men, blacks and Hispanics than whites, and younger workers
than older workers (Cohany, 1998). The likelihood of holding a
contingent job is highest for workers in the construction and ser vice
industries.
The breadth of activities performed by workers in nonstandard
employment relationships seems to have changed most significantly during
the 1990s. Nonstandard workers are no longer limited to low-skill,
clerical positions and are just as likely among the professional and
technical occupations (Hipple, 1998). The prevalence of nonstandard jobs
among postsecondary teachers, workers with advanced degrees, and
physicians as well as office clerks, data entry workers, and
teachers' aides--occupations with varying skill levels--refutes the
stereotype that these workers are primarily low-skilled (Ripple, 1998;
Pink, 2001).
Rationale for Nonstandard Employment
The assumed principal benefit of a nonstandard workforce is the
greater flexibility that it affords the organization. Because the firm
has no long--term commitments to nonstandard workers, they can be
deployed as market conditions warrant, providing considerable
flexibility in the size of the employee pool (Belous, 1989)2 In highly
cyclical or seasonal industries such as retailing, nonstandard workforce
allows the firm to smooth out its staffing profile. (Caudron, 1994).
The nonstandard workforce can be hired as needed for specific
skills or specialized know-how (Ettorre, 1994), without investing the
time and resources required to develop employee skills for what may be a
short-term project or a project deemed to be risky because technological
advances may make the investment obsolete.
By hiring nonstandard workers for specific assignments, firms can
avoid perceived wage inequity and its attendant problems (Frank, 1985).
Frank (1985) offers the example of a high-paid consultant who receives
continual assignments from a firm. Even when the workload justified it,
the firm was reluctant to hire the consultant as a regular employee
because other employees were apt to make pay comparisons when the
consultant became an insider. The attendant equity perceptions
associated with conversion of the consultant to full-time employee would
have costly readjustments to the pay scale of all employees.
Finally, nonstandard employment arrangements may be conducive to
greater strategic focus. A firm may retain standard, full-time employees
only in those areas that it deems its core competencies (Prahalad,
1993). By using a nonstandard workforce in all other functions, it may
achieve better returns because its resources are invested in its areas
of distinctive competence (Huber, 1993).
Benefits from nonstandard employment do not accrue solely to the
employer. Employees may themselves seek such relationships for greater
flexibility in adjusting work schedules to personal lives, or provide
better work-home balance. Other nonstandard workers may appreciate the
choice inherent in accepting a series of short-term projects, instead of
being tied up in a long-term position with one firm. A final benefit of
nonstandard employment is that employees may build up a more impressive
portfolio of work experiences than may be possible by working for a
single employer. This is especially the case with knowledge workers who
may be particularly keen to enhance their market value by accumulating
diverse and challenging work experiences (McGovern & Russell, 2001).
Concerns About Nonstandard Employment
Despite these benefits, there has been greater focus on the
"dark side" of nonstandard employment relationships. Potential
negative effects have been identified that impact the individuals in
such an employment relationship, the "standard" permanent
employees in the organization, the employing firm, and society at large.
With respect to the individual, the concerns are both economic and
psychological. Because nonstandard employment is characterized by lower
pay and benefits than regular employment or offers fewer hours of work,
such work contributes to an underclass of workers unable to enjoy the
full, economic benefits of their labor (Nollen, 1996). The lack of a
secure employment relationship with a company creates a feeling of
alienation and loss of meaning in the workplace, which is a very
influential aspect of human experience (Parker, 1994).
There are also concerns about potential conflicts between employees
in an organization, with standard and nonstandard employees viewing each
other with suspicion and perhaps resentment. A lack of harmony borne of
such feelings is unlikely to be productivity-enhancing and
value-creating. Such divisions can give rise to divide-and-conquer
approaches, the playing-off of one constituency against the other. As
Henry Ford did in the earlier part of this century, Dennard (1996) calls
attention to the union claim that employers have created a
"just-in-time work force to match their just-in-time
inventories."
Nonstandard employment has other potential downsides for firms.
Kochan, et al. (1994) show that there are greater issues with workplace
safety among firms that rely on nonstandard employees than among those
with standard employment arrangements. A broader concern is the nature
of the employee's relationship with the firm. As firms weaken the
ties of long-term employment and loyalty, it will be harder for them to
inspire in their employees "the initiative, responsibility, and
intensity of effort" required for success in today's economy
(Stewart, 1997; Whitman, 1999). Individual loyalty to the organization
is highly dependent on the organization's loyalty to the individual
(Eisenberger, et al., 2001).
There are also serious concerns about the impact of nonstandard
employment on the quality of life in a society. Nonstandard employment
perpetuates income inequities, drives deeper the wedge between good and
bad jobs, or extends the distance between the haves and have-nots. As
Kalleberg, et al. (1997) note, "nonstandard jobs pay less than
regular full-time jobs to workers with similar characteristics, and are
less likely to provide health insurance or a pension." Income
disparities are significant in the United States: in 2000, the latest
year for which such data are available, the lowest quintile of U.S.
households received 3.6 percent of aggregate household income whereas
the top quintile received 49.7 percent (DeNavas-Walt, et al., 2001).
Another way to represent this disparity is to contrast the household
income in 2000 at the 10th percentile of $10,600 with the income at the
90th percentile of $111,602, a factor of 10.5 times (U.S. Census Bureau,
2001). Nonstandard employment may contribute to a growing disparity in
income over time to the extent that organizations have less incentive to
invest in the skill acquisition of workers not perceived as permanently
connected to the organization. Employer-provided training being one of
the most efficient, cost-effective forms of human capital acquisition,
any reduced motivation for such implies significant reductions in
potential human capital stock over time.
Growing disparity in income, attributed in part to growing numbers
of nonstandard workers, has led some in Congress to term this trend a
threat to the well-being of workers, and, in fact, to "the entire
free enterprise system" (Metzenbaum, 1994). Business ethicists also
argue that economic actors have a responsibility to consider the effects
of their activities on the distribution of wealth in a society (Amar,
1995; Kohls & Christensen, 2002). There is little to suggest that
employers typically weigh such considerations in their decisions
involving the adoption of nonstandard employment.
Public Policy and Social Capital: Two Approaches for Addressing
Concerns About Nonstandard Employment
Two different approaches have been advocated to address concerns
about nonstandard employment. The first and more traditional approach
calls for public policy action. The second approach, social capital,
advocates private initiative to address social concerns. This approach
stems from the sociological literature and is taking ground in
management thought. Given the literature's greater familiarity with
the first approach, we offer a brief review of the case for public
policy. Given its recent emergence as a theoretical paradigm in the
management literature, social capital's underpinnings receive a
more comprehensive review here.
The Case for Public Policy Intervention in Nonstandard Employment
The logic for public policy action through legislative or judicial
action or enforcement or by regulatory authorities to redress perceived
problems with nonstandard work derives from several core arguments
(Bendapudi, et al., 2001).
A first argument is that of a collective goods problem: Society
benefits as participants engage in positive collective behavior, but any
one individual participant might not comply (forgoing his or her cost of
compliance), even while benefiting from the compliance of others
(Poulson, 1983). Indeed, experiments in collective goods allocations
have shown that most individuals "free ride" if doing so is
individually rational (Ledyard, 1995). Applying this logic, if firms
collectively alter nonstandard work practices to address specific
concerns, the working conditions for affected employees can be improved.
If only some firms act to improve conditions, they may suffer from a
competitive standpoint, at least in the short-run. Absent widespread
private motivation for improvement, public policy is required in such
settings to bring about desirable outcomes through mandated
participation, which will not emerge without intervention. The provision
of national defense, public education, police and fire protection, soci
al security, and other collective goods through mandated tax policy
serve as examples.
A second argument is based on an externalities viewpoint (Dybvig
& Spatt, 1983). Pollution is often considered a classic example--an
example of a negative externality. A firm produces goods that it sells
in a marketplace. The price at which the product sells is determined
partially by the cost of producing the product; however, unaccounted for
in the production costs of the firm is the cost of pollution to a nearby
stream into which the waste from the production process is discarded. If
these costs were accounted for in the firm's production costs,
production costs would be higher, the selling price of the goods to the
consumer would have to be higher, the quantity demanded of the goods at
the higher price would be lower, the quantity produced of the goods
would be lower, and there would be less pollution. Applied to
nonstandard employment, the argument made is that this employment
practice has negative externalities on some individuals and on society
in the form of income disparity and reduced human capital formation,
that these externalities are not appropriately accounted for in firm
decision-making, and that public policy intervention is needed. The
policy role would be to raise the costs associated with use of these
nonstandard employment arrangements sufficiently (via the equivalent of
effluent charges in the pollution case) or to restrict their usage (the
equivalent of emission standards in the pollution case), such that the
resulting level of nonstandard employment arrangements approximates a
socially acceptable optimum. Of course, such an argument presupposes the
ability of public policy to reach such an optimum more closely and more
efficiently than can the unfettered marketplace left to its own actions
under existing law.
A third argument rests on analysis of the relative power of parties
to the employment relationship. The argument is one of countervailing
powers, that if all parties to the exchange have sufficient economic and
political clout, then outcomes (negotiated or otherwise) will be
reasonably balanced and broadly reflect efficient and equitable
standards. Several authors point to a lack of countervailing power in
the case of nonstandard employment arrangements, suggesting that while
firms have adopted both standard and nonstandard employment and are
reaping the associated benefits of flexibility, the social welfare
system has not kept pace operating within the framework of the standard
post World War II employment model (see duRivage, et al., 1998; Kochan,
2000). Hence, public policy action is required, the argument goes, to
realign labor market institutions with labor market and social
realities.
A fourth argument rests on the disparate impact of nonstandard
employment on vulnerable groups--an equity argument that is often
collapsed into the third argument outlined previously. Polivka (1996)
finds that women, blacks, and Hispanics hold a higher percentage of
noncontingent than contingent jobs. Younger workers, those between the
ages of 16 and 24, held 30.5 percent of contingent jobs but only 13.9
percent of noncontingent jobs. Workers lacking a high school diploma
held 14.6 percent of contingent jobs but only 10.5 percent of
noncontingent jobs. Cohany (1998) reports similar patterns of
demographic disparities in other forms of nonstandard work. Proponents
of this viewpoint examine the over-representation of women, minorities,
the young, or the old in nonstandard work and argue that public policy
intervention is needed to redress this imbalance and speak for those who
are unable to voice their own concerns forcefully. For instance, the
Economic Policy Institute and Women's Research and Education Instit
ute (1997) put forth this argument for protecting vulnerable groups in
these "substandard jobs."
A fifth argument for public policy includes elements of the first
and the third arguments, but in an international context and on a
perceived threat in the globalization of work. Technological advances
have made true globalization of work possible, bringing an unprecedented
degree of flexibility to employment relationships (McWilliams, et al.,
2001). Countries around the world are embracing nonstandard employment
practices to be competitive; however, an application of international
labor standards reveals striking differences in both the statutory
language and the practical application of legal protections for
nonstandard employees across countries. In an exhaustive comparison of
the legal protections afforded nonstandard employees in the United
States versus their European and Japanese counterparts, Sukert (2000)
argues that U.S. nonstandard employees are but "marionettes of
globalization" and that they and Japanese employees trail the
Europeans in many important benefits. Edwards, et al. (1992) suggest
that to be competitive in global markets, companies need to engender
nonstandard employee engagement and commitment for the long term by
providing greater protections, not just save money in the short term by
denying these protections. Consequently, it is argued that public policy
officials must understand, and manage, the challenges of dealing with
nonstandard employment to keep the U.S. globally competitive.
The Case for Social Capital Deployment or Private Initiative in
Nonstandard Employment
Social capital is a term coined in sociology to describe those
characteristics of social organizations such as networks, norms, and
social trust that facilitate coordination and cooperation for mutual
benefit, thereby making some communities better equipped to deal with
issues than communities without similar ties (Coleman, 1988; Putnam,
1995). The "capital" in the term refers to the fact that
participants make investments in social relationships, and the
investment has growth and payoff potential, much like physical or human
capital. The "social" aspect of the term refers to the fact
that this capital does not reside in a single individual (as opposed to,
say, human capital) but is vested in the network of relationships within
a communit