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Alternative Work Arrangements (AWAs) are contract forms commonly associated with less attachment, lower wages, and fewer worker benefits. Even though AWAs are theoretically cheaper for firms, they continue to account for only 10% of employment. The researcher explores why AWAs are not more widely used, given their purported economic benefit for firms. Legal rules suggest that while AWAs have lower fixed costs of employment, they may be less productive than standard employment and likely attract lower-type workers. In this instance, AWAs are used as a mechanism for firms to reduce fixed labor costs in response to a shock. Testing this prediction, the researcher provides the first evidence that competition shocks, specifically trade shocks, causally increase the use of AWAs across a number of contract forms. Using micro-level data, the researcher shows that competition shocks appear to increase the probability of manufacturing workers being hired by temporary-help agencies, and decrease the probability of manufacturing workers becoming independent contractors. This suggests workers may have shifted towards AWAs in non-manufacturing industries. The researcher also shows that AWAs are associated with lower wages and fewer benefits after conditioning on industry and occupation, and are associated with higher rates of inequality.

Research Gaps

• One fruitful area of research would be to investigate the role of recent regulation as well as the recession in determining Alternative Work Arrangements (AWAs) rate. Another fruitful area of research would be to further investigate the role of investments in automation Additionally, there is a substantial need for more data on contract form, and that one of the focuses of new research should be identifying contract shares in the “missing years” of the Current Population Surveys' (CPS) Contingent Worker Supplement. Finally, a better understanding of the counterfactuals with AWAs is necessary. (page 36)

Citation

Deibler, D. (2018). Columbia University. Competition and Contracting: The Effect of Competition Shocks on Alternative Work Arrangements in the U.S. Labor Market 1995-2005. Chief Evaluation Office, U.S. Department of Labor.

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This study was part of the Department of Labor Scholars Program, and was produced outside of CEO’s standard research development process.