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Published January 10, 2018 in Politico

The Real Future of Work

Trump administrations plan for cutting federal compensation

Forget automation. The workplace is already cracking up in profound ways, and Washington is sorely behind on dealing with it.


By Danny Vinik

In 2013, Diana Borland and 129 of her colleagues filed into an auditorium at the University of Pittsburgh Medical Center. Borland had worked there for the past 13 years as a medical transcriptionist, typing up doctors’ audio recordings into written reports. The hospital occasionally held meetings in the auditorium, so it seemed like any other morning.

The news she heard came as a shock: A UPMC representative stood in front of the group and told them their jobs were being outsourced to a contractor in Massachusetts. The representative told them it wouldn’t be a big change, since the contractor, Nuance Communications, would rehire them all for the exact same position and the same hourly pay. There would just be a different name on their paychecks.

Borland soon learned that this wasn’t quite true. Nuance would pay her the same hourly rate—but for only the first three months. After that, she’d be paid according to her production, 6 cents for each line she transcribed. If she and her co-workers passed up the new offer, they couldn’t collect unemployment insurance, so Borland took the deal. But after the three-month transition period, her pay fell off a cliff. As a UPMC employee, she had earned $19 per hour, enough to support a solidly middle-class life. Her first paycheck at the per-line rate worked out to just $6.36 per hour—below the minimum wage.

“I thought they made a mistake,” she said. “But when I asked the company, they said, ‘That’s your paycheck.’”

Borland quit not long after. At the time, she was 48, with four kids ranging in age from 9 to 24. She referred to herself as retired and didn’t hold a job for the next two years. Her husband, a medical technician, told her that “you need to be well for your kids and me.” But early retirement didn’t work out. The family struggled financially. Two years ago, when the rival Allegheny General Hospital recruited her for a transcriptionist position, she took the job. To this day, she remains furious about UPMC’s treatment of her and her colleagues.

“The bottom line was UPMC was going to do what they were going to do,” she said. “They don’t care about what anybody thinks or how it affects any family.” UPMC, reached by email, said the outsourcing was a way to save the transcriptionists’ jobs as the demand for transcriptionists fell.

It worked out for her former employer: In the four years since the outsourcing, UPMC’s net income has more than doubled.

What happened to Borland and her co-workers may not be as dramatic as being replaced by a robot, or having your job exported to a customer service center in Bangalore. But it is part of a shift that may be even more historic and important—and has been largely ignored by lawmakers in Washington. Over the past two decades, the U.S. labor market has undergone a quiet transformation, as companies increasingly forgo full-time employees and fill positions with independent contractors, on-call workers or temps—what economists have called “alternative work arrangements” or the “contingent workforce.” Most Americans still work in traditional jobs, but these new arrangements are growing—and the pace appears to be picking up. From 2005 to 2015, according to the best available estimate, the number of people in alternative work arrangements grew by 9 million and now represents roughly 16 percent of all U.S. workers, while the number of traditional employees declined by 400,000. A perhaps more striking way to put it is that during those 10 years, all net job growth in the American economy has been in contingent jobs.

Around Washington, politicians often talk about this shift in terms of the so-called gig economy. But those startling numbers have little to do with the rise of Uber, TaskRabbit and other “disruptive” new-economy startups. Such firms actually make up a small share of the contingent workforce. The shift that came for Borland is part of something much deeper and longer, touching everything from janitors and housekeepers to lawyers and professors.

“This problem is not new,” said Senator Sherrod Brown of Ohio, one of the few lawmakers who has proposed a comprehensive plan on federal labor law reform. “But it’s being talked about as if it’s new.”

The repercussions go far beyond the wages and hours of individuals. In America, more than any other developed country, jobs are the basis for a whole suite of social guarantees meant to ensure a stable life. Workplace protections like the minimum wage and overtime, as well as key benefits like health insurance and pensions, are built on the basic assumption of a full-time job with an employer. As that relationship crumbles, millions of hardworking Americans find themselves ejected from that implicit pact. For many employees, their new status as “independent contractor” gives them no guarantee of earning the minimum wage or health insurance. For Borland, a new full-time job left her in the same chair but without a livable income.

In Washington, especially on Capitol Hill, there’s not much talk about this shift in the labor market, much less movement toward solutions. Lawmakers attend conference after conference on the “Future of Work” at which Republicans praise new companies like Uber and TaskRabbit for giving workers more flexibility in their jobs, and Democrats argue that those companies are simply finding new ways to skirt federal labor law. They all warn about automation and worry that robots could replace humans in the workplace. But there’s actually not much evidence that the future of work is going to be jobless. Instead, it’s likely to look like a new labor market in which millions of Americans have lost their job security and most of the benefits that accompanied work in the 20th century, with nothing to replace them.

The scale of the change, for many economists, clearly suggests that it’s time for Congress to rethink the social contract around work, updating it for the new relationship between employers and workers in the 21st century. Letting it slide further risks hamstringing the country with an outdated system that hurts both middle-class workers and, experts fear, the economy that depends on them. The shift is already well underway. What’s far less clear is whether Washington is paying any attention.

Illustration credit: Chris Gash