How 35 percent of U.S. employees are left on the margins

You’ve heard of gig workers, freelancers, and temporary employees. But do you know about marginal workers? Accounting for about one in six U.S. jobs, it’s a huge category of people, who are going nowhere fast in the workplace — and don’t really have much say about that. “Marginal workers are employees who have no career prospects at their organizations,” says MIT Professor Emeritus Paul Osterman, author of a new book on the subject. “They are employees of the organization for whom they work, but the organization does not intend to keep them, and these workers are much less attached to any career ladder.” As such, marginal workers are part of a larger trend in U.S. employment. According to Osterman’s analysis, 35 percent of U.S. workers are either marginal employees, freelancers, contractors, or gig employees finding work on online platforms like ridesharing services. “That’s a big number,” says Osterman, who is the Nanyang Technological University Professor Emeritus at the MIT Sloan School of Management, where he is also a professor emeritus of work and organization studies. “That’s over 55 million people in the American work force.”Osterman scrutinizes this employment landscape in his new book, “Disposable Workers: The Transformation of Employment,” published this month by Harvard University Press. In it, he examines the different categories of “disposable” workers in the U.S., while making the case that they are all part of a still-growing movement by firms to control labor costs, leaving many workers in precarious positions. “I wanted to present a unified way of thinking about these trends,” Osterman says.Cutting costsOsterman is a longtime labor economist and author of several previous books, whose work has often focused on job quality and labor-market fairness. He was motivated to write “Disposable Workers,” he says, because of how significantly marginal workers have been overlooked. Indeed, the category and term “marginal workers” comes from Osterman. In researching the book, Osterman conducted an original survey of over 6,000 workers, which helped shed light on the concept of marginal workers. They can fit a range of professions: staff attorneys at a law firm, adjunct faculty, and many kinds of part-time employees with few opportunities for advancement.Overall, Osterman finds that about 17 percent of U.S. employees are marginal workers. Roughly 12 percent are contract workers, who are often employed by staffing agencies but then assigned to work at varying locations. Another 5 percent are organizational freelancers, working for firms without being part of the permanent staff. This includes gig workers, who account for a little more than 1 percent of the workforce and draw work from online platforms such as rideshare services. (Beyond this, there are also freelancers who work individually for multiple clients.) The common denominator among these categories is that each has evolved as a result of firms trying to cut back on labor expenses while trying to gain flexibility and more managerial discretion. The result is fewer workers with promotion prospects, health benefits, and employment stability.“I’m putting the discussion of freelancing, contracting, and marginal workers into a coherent story that shows they’re all of a piece, they’re all part of the same thing, in terms of how employers are thinking about it,” Osterman says. Long term versus short termHow employers think about it, to be clear, revolves primarily around employee costs. By deploying employees in a variety of marginal, freelance, and contract roles, and making some of those positions part-time, businesses have constructed a system in which fewer employees have rising wages or additional benefits, and the portion of firm revenues plowed back into paying for workers can shrink. “This is not a book that argues that there’s dishonesty or that anyone’s evil, but at the end of the day, firms only care about one thing, which is to maximize profits, period, end of story,” Osterman says. He adds: “I’m very careful to say it’s a good thing that firms create jobs and develop new products — all good.” Still, he notes, for people who prioritize the plight of workers, the expansion of a disposable work force is a significant issue. To be sure, many scholars have found that short-term labor cost reductions can be counterproductive. Many firms have appeared to benefit from having a more stable, committed, motivated work force, which seems to result in greater productivity. What Osterman finds is that firms are likely aware of this tradeoff, and still willing to have a less-committed, less-expensive staff.“The firms are obviously making a decision that the costs outweigh the value of commitment,” Osterman says. He also notes that the evidence on the matter is not entirely clear-cut. “There’s a debate on both sides of that question,” Osterman says. “I can’t prove that firms are being smart or stupid. But I can just tell you what they’re doing. And what they’re doing is making the decision that they benefit from having a large fraction of their workforce be disposable.”Making the issue matter“Disposable Workers” has drawn praise from other scholars. David Weil, a professor in the Heller School for Social Policy and Management and the Department of Economics at Brandeis University, has called it “a carefully researched and engaging book documenting the degradation of employment in recent decades.” Indeed, as “Disposable Workers” makes clear, the workplace has been challenging for many employees for a while now. Add artificial intelligence into this setting, and the outlook would seem to get even tougher for employees. Indeed, Osterman thinks AI could increase the use of disposable workers, if only for indirect reasons.“I think this trend is going to be exacerbated by AI, because AI introduces a lot of uncertainty to firms about what their staffing needs are, and if firms are uncertain, they’re going to want disposable workers,” Osterman says. However, he emphasizes, “Disposable Workers” is not a book about AI. In any case, if jobs in the U.S. have become more precarious, what can be done to reverse that trend? One answer might be more expansive worker protections stemming from union negotiations. But these days, Osterman notes, only about 6 percent of U.S. employees are in a union, so that will only go so far.Still, Osterman points out that nonunion organizations can help the situations of workers, such as the advocacy groups that lobbied for a $15/hour minimum wage in many places several years ago. Then too, he observes, sometimes customer pressure gets firms, even large multinationals, to improve working conditions, either for the firm’s own workers, or along its supply chain. “There is no magic solution,” Osterman says. “There is a set of tools.”A key reason he wrote “Disposable Workers” is to bring attention to the topic in the first place, and the full extent to which the U.S. now has a workforce without much security or prospects of upward mobility. Without recognition of that point, no effort to change things will unfold, Osterman believes.“The bigger policy point is: This issue has to become salient,” Osterman says. “If it does, then public and political pressure will come to bear on firms. If it doesn’t, then it won’t.”