Companies are turning full-time jobs into low-paying gigs

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In the war over remote work, companies are turning full-time jobs into low-paying gigs

Over the past three years, the American workplace has undergone all kinds of changes as a result of the work-from-home revolution. Perhaps the most widely discussed has been the way the remote age has prompted workers to emotionally detach from their jobs. Some bemoaned it as quiet quitting; others celebrated it as a much-needed correction to the toxic demands of hustle culture. Either way, it's clear that people aren't feeling as connected and devoted to their jobs as they did when they were seeing their coworkers in person every day.

But employees, it turns out, aren't the only ones distancing themselves from the office: Employers are quiet quitting on the whole idea of traditional full-time employment. In a survey conducted by the Atlanta Fed last year, businesses said remote work had led them to stock up on part-time employees, temps, independent contractors, and outsourced positions both at home and abroad. If workers are going to be remote, the thinking seems to go, why not get the cheapest remote workers available? Fewer full-time jobs means fewer costly benefits: healthcare, pensions, on-the-job training, a steady paycheck. In the age of WFH, companies are gig-ifying the American office.

"It's the Uberization of the workforce," says Nicholas Bloom, a professor at Stanford University who was one of the economists behind the Atlanta Fed survey. "The more remote you are, the more Uberized the job is, and the more you're just being paid for the day or for the week."

For companies, offering full-time employment has always been expensive and risky. But there was one reason bosses were reluctant to outsource jobs: They couldn't imagine trusting people to get their work done out of sight. They supervised by way of butts-in-seats surveillance — checking that people were at their desks, typing away and making calls and furrowing their eyebrows in a way that suggested they were working hard. That ruled out contractors, because contractors work remotely. And it ruled out many part-timers, because no one wanted to commute 45 minutes into an office just to work a four-hour day.

But after the pandemic hit, bosses were astonished to discover that their teams were perfectly capable of doing their jobs from home. They learned to supervise their workers by checking their output, not their hours logged at a desk. That, in turn, made them more comfortable with the idea of hiring far-flung contractors, or part-timers who could put in a few hours a day from home. And in a remote environment, even full-time employees started to feel more distant — less like the cliché that they were "family," and more like faceless avatars on Slack.

"If somebody's coming into your site five days a week, week in, week out, it feels like they're your employee," says Bloom. "You want to give them healthcare, a pension, train them up, have them as a long-term part of the firm. But as soon as they're not on site, managers are thinking it's not so obvious they want to pay all those additional costs. Employees aren't mixing, they aren't talking over lunch about kids. They may be less loyal to the company. I do hear this from companies — the more remote someone is, the more transactional it feels."

Other surveys confirm the shift away from full-time employment. McKinsey estimates that independent workers — a category that includes gig, contract, freelance, and temporary workers — now make up 36% of the workforce. That's up from 27% in 2016. On Gusto, a payroll platform for small businesses, the average company retains one contractor for every five employees — a ratio that has jumped 63% since 2019. And services that make it easier for employers to hire and manage independent workers have been among the biggest winners of the pandemic. At Deel, which helps companies hire abroad, annual recurring revenue has hit $295 million — up from only $4 million in January 2021.

Whether all this is a good thing or a bad thing depends on one critical question: Are employees being forced into independent work because they can't find full-time jobs, or are they opting for gig work because they prefer it? Both McKinsey's and Gusto's data indicate it's mostly the latter. When McKinsey asked people to identify the main reason they're working in contracting, freelance, or temporary jobs, 25% cited the freedom and flexibility their arrangements offer, and another 25% said they enjoy the work. Everybody has their own reason for stepping away from the full-time grind. Digital nomads don't want to be tied down by a single job. Sixty-somethings want to work a lighter schedule as they near retirement. New parents are resisting corporate America's return-to-office dictates. Gen Zers, having lost their sole incomes in the mass layoffs that accompanied the COVID shutdowns, see a different kind of job security in having a diversified portfolio of side hustles.

Good or bad, the push to hire more part-time and contract workers will provide an overall boost to the economy. After all, for those who otherwise wouldn't have or couldn't have worked at all, a job — even if it doesn't come with all the perks of being a full-time employee — is better than no job at all. "It's probably going to increase labor supply by maybe 1% to 2%, which is actually a huge number," Bloom says. "That's a huge benefit to everyone, because it increases growth, keeps down prices, reduces interest rates — all good stuff."

Still, there's one detail in McKinsey's survey that is worrying. In 2016, 14% of respondents said they took contract, freelance, or temporary work mainly "out of necessity to support basic family needs." In 2022, that share jumped to 26%. Sure, that's still a minority. But it indicates that a growing share of people are being forced into gig arrangements they don't want. And if the trend continues, more and more people could end up in jobs that offer no benefits and few career-development opportunities.

The shift away from full-time employment could also wind up hurting employers in the long run. As companies invest less in their workers, they'll get less out of those workers, who in return will invest less in their companies. That's one reason so many bosses are ordering people back to the office. Without a shared workplace culture, they worry about their ability to engage and motivate employees.

Jessica Schultz, who founded a consultancy called Amplify Group last year, has been grappling with the tension between full-time employment versus gig work. One of the services Amplify offers is serving as a "fractional" chief revenue officer for early-stage companies that can't yet afford to bring one on full time. And her own staff, which is fully remote, consists primarily of part-time contractors, several of whom live in developing countries. That saves her on overhead and gives her the flexibility to change course quickly while her business is still growing. But she's also seeing the downsides of outsourced work.

"I could go to a contractor and say, 'Hey, I need this done by Friday,' but I risk the possibility of them saying, 'I'm not going to get it done by then because I have other work,'" Schultz says. "You have less control over a contractor. They're not as loyal to me. So I think we're all just trying to figure out what the right mix of that is for our respective businesses." Schultz, in fact, is currently in the process of converting two of her contractors into full-time employees.

So it's not as if full-time jobs are going extinct. But as the rise of remote work accelerates the shift toward gig roles, millions of workers could find themselves without the job security and benefits that traditionally come only with a W-2 form. And that could be a huge problem for everyone, given America's insistence on tying basic benefits to full-time employment. More than half of Americans under 65, for example, rely on employer-based health insurance. It's one thing for employers to quiet quit their employees. It's another thing for them to leave those employees without healthcare or 401(k)s.

"We need to think about how we give people access to social supports that used to be solely provided through an employer," says Liz Wilke, a principal economist at Gusto. "What is the middle path that maintains all of the benefits this set of workers brings to the workforce — flexibility, agility, really strong incentives for consistent and regular upskilling — while still providing them the kinds of social support we think people who work should have? That conversation should happen, especially if this trend continues — which I think, based on our data, it will."

One could argue that's a pretty solid case that it doesn't actually work.

We both know that's a gross oversimplification of the relevant factors. Having a wealthy and stable home to grow up in is a significant predictor of success. Knowing how to socialize adequately contributes significantly as well. One's health is a big factor, someone who has health issues (mental or physical) is almost certain to struggle compared to someone who doesn't.

Reducing it entirely to factors that can be described as personal responsibility means ignoring most of the picture for the most obvious part of the foreground.