America's Disposable Workforce Is Growing, Carrying Hidden Costs
A significant portion of the American workforce, 35%, is now considered "disposable," meaning they are contract, freelance, or marginal workers, according to MIT Sloan professor emeritus Paul Osterman.
The number of "disposable workers" in the United States is growing, a trend driven by companies seeking flexibility and cost reductions, according to new research by Paul Osterman, professor emeritus of Human Resources and Management at the MIT Sloan School of Management. His analysis indicates that 35% of the American workforce falls into this category, encompassing freelancers, contractors, and "marginal workers" whom companies do not intend to retain long-term.
Osterman identifies several reasons for this shift. Primarily, companies aim to avoid the financial obligations associated with traditional employment, such as benefits and long-term commitments. This allows businesses to reduce costs by pitting staffing firms against each other to lower wages and service fees. Furthermore, management desires greater operational flexibility, enabling them to adjust staffing levels quickly without the constraints of a permanent workforce.
However, this rise in disposable labor comes with significant downsides that extend beyond individual paychecks. While freelancers may report higher satisfaction due to schedule flexibility, contractors and marginal workers tend to be less satisfied and less committed to their employers. This disengagement can negatively impact organizational performance. The consequences also affect the public; studies have shown higher infection rates in hospitals using contract cleaning staff and increased workplace injury rates in environments with a high concentration of disposable workers.
Osterman also notes that the increasing reliance on disposable workers may be exacerbated by advancements in artificial intelligence. The uncertainty surrounding future workforce needs due to AI further incentivizes companies to use flexible labor that can be easily scaled down. He argues for the necessity of implementing regulations and guardrails to ensure that the pursuit of flexibility does not come at the expense of workers and public well-being.