Panel addresses pros and cons of contracting out

Francine Moccio, director of the ILR School's Institute for Women and Work and panel co-moderator, addresses the audience at the New Paradigm discussion on contracting out Dec. 10 in Washington, D.C. Other panelists shown are, from left, moderator Betty Friedan, discussant Lowell Turner, associate professor in the ILR School, and Edward Montgomery, chief economist with the U.S. Department of Labor. Lloyd Wolf

By Briana Barocas

On Dec. 10, Cornell's Institute for Women and Work and the Ford Foundation sponsored a New Paradigm symposium titled "Contracting Out: Danger Signal for Working Women and Men?"

The symposium, the third in a series at the Carnegie Endowment Center for International Peace in Washington, D.C., was moderated by women's movement pioneer Betty Friedan and analyzed the growing trend among both professionals and blue-collar workers to accept contracted-out work, rather than traditional employment, and the implications of this trend for working families.

Co-moderator Francine Moccio, director of the Institute for Women and Work, which is a division of Cornell's School of Industrial and Labor Relations, discussed the pros and cons of contracting out and its impact on job and retirement security, health coverage and labor protection. Friedan, a distinguished faculty member of the ILR School, questioned whether loss of job security and benefits was worth the flexibility that contracting out offered.

Other symposium panelists were: Susan Houseman, senior economist at the Upjohn Institute for Employment Research; Christine L. Owens, assistant director at the Public Policy Department, AFL-CIO; Gail Blanke, president and CEO of LifeDesigns and author of In My Wildest Dreams: Living the Life You Long For; Edward B. Montgomery, chief economist at the U.S. Department of Labor; and discussant Lowell Turner, associate professor at the ILR School.

Houseman described contracting out as a current efficiency strategy among companies. She noted that the practice is increasing and is probably underreported. Statistics show about 10 percent of the U.S. work force is now made up of contracted-out workers. Although they are mostly male and white, women are a fast-growing segment of this new work force. Houseman discussed the allegation that "companies may contract out to avoid labor standards, wages, benefits, health and safety" and noted that protective policies for the new work force remain elusive because there's no universal standard for classifying independent contract workers.

Owens pointed to a two-tier wage system for contracted-out workers. While most have higher earnings than regular full-time workers, "there are a whole bunch of people at the bottom who are earning low wages." She also noted that there's an incentive for employers to misclassify employees as independent contractors, because in doing so the employers can avoid paying costly benefits and payroll taxes. Often the misclassified employees are unaware of their peculiar status until they apply for unemployment insurance or attempt to organize and are denied those rights. The practice, which Owens said is widespread and affects occupations as diverse as truck driving, computing and migrant farming, can be costly in terms of lost tax revenues to states.

Blanke put a positive spin on contracting out. She told attendees that she is "living the new paradigm" and asserted that contracting out works because it allows women entrepreneurs to take their passion and innovate. "Combining passion with work leads to profits," she said. Contracted-out work also has given women opportunities to combine family responsibilities with work. Blanke's company, LifeDesigns, employs almost entirely contracted-out workers.

Montgomery observed that the differing views of the panel's members showed why it has been difficult to develop an across-the-board national policy on contracting out. According to Montgomery, 84 percent of the U.S. independent contractors surveyed like their arrangements, but up to 70 percent of the independent contractors in health care aren't happy with the arrangement.

Turner suggested looking to the European Union for guidance on legislating contracted-out work, rather than reinventing the wheel. In Europe, according to Turner, contracted-out workers fall under the category of atypical workers, who have the same rights as salaried workers.

More than 150 people attended the New Paradigm symposium, including Cornell-in-Washington students, Cornell alumni and representatives from corporations, government, labor and women's groups. Attendees commented on problems that can ensue when companies shift to using independent contractors. On the list were: lack of loyalty to the firm and the potential loss of institutional memory, labor protections, social security, pensions and health care benefits. These issues will be examined further at the next New Paradigm symposium, also in Washington, D.C., on Jan. 28, titled "Contingent Work: Pseudo-flexibility at the Price of Job Security?"