Is Bad Economic News Good for Temps?
We've been hearing about the credit meltdown and the bursting housing bubble for a while, but Fed Chief Bernanke was talking yesterday about a worsening economic outlook and even the President is finally copping to the notion that the economy "faces challenges". So what does this mean for folks who, for one reason or another, decide to work as "temps" (which, as I mentioned in my last post, is basically everybody)?
I'm not an economist or a policy wonk; I'm just a humble doctor of philosophy who has been working in the temporary staffing industry one way or the other for going on 20 years, but this is how I see it. Rising unemployment rates are rarely good for anyone, and if we glance back to 2001/2002, when a lot of people came to us looking for work, things weren't exactly hunky-dory. Be that as it may, there may be some upside for temps, at least in the short term, to an economic downturn.
Here's how it works, at least in theory. As the economy slows, companies start worrying about spending money. Hiring "permanent" staff becomes a dodgy proposition because you're adding an indefinite cost to your budget at a time when indefiniteness is more scary than reassuring. Still, you've got stuff to do and chances are you need to hire people to do it. So you turn to freelancers and temp agencies to find people who will work on projects and then leave when the projects are complete, thus making your costs more definite and predictable. In other words, towards the beginning of a downturn, temporary staff, thanks to its "flexibility," starts to look pretty appealing.
The bad news is when the downturn morphs into a death spiral. At the outset of a recession -- to avoid the "D" word -- companies still have plans and harbor a cautious optimism about the future. They continue to execute their plans, though they now rely on contract labor rather than salaried staff to do so. If things get worse, however, their budgets get cut and they start changing their plans, dropping marketing programs, new product launches, etc., basically hunkering down until things blow over. Once in maintenance mode, they operate on a skeleton crew and, when they engage outside help, they inevitably look for the lowest bidder. Staffing agencies start competing on price; job-seekers register with multiple agencies; clients turn up the heat on the agencies as they become less differentiated (representing, as they do, the same people), and things get frickin' bleak.
Of course, it's really only in this gully of economic stagnation that things are especially bad for temps, and, frankly, the "badness" involves shrinking paychecks more than vanishing opportunities (though they do vanish as well). It's not good.
Still, as things pick up, the prospects for "temps" improve before the prospects of "perms" for the same reasons their prospects were rising as the economy was diving. That is, as the future brightens, companies become more ambitious and start doing more things which means hiring more people. However, since they are recovering from hard times, they are cautious once more and still want to control costs which means bringing people in as needed and only hiring them "full-time" when absolutely necessary.
In other words, as we descend into a morass of economic uncertainty, the immediate prognosis is not negative (you like that?) for the temps among us. In fact, it is a time of opportunity because we offer companies a solution to a vexing problem: How do I hire people to get stuff done without digging myself into a deeper hole? On the other side of the abyss, as we are climbing out of the dank economic trough, temping provides both employees and employers a convenient ladder back to daylight. So there is good news on both sides of the abyss.
I'm not going to sugarcoat it, though: an abyss is an abyss an abyss. And if we wind up there as a society, for whatever length of time, it won't be no good for nobody.
Image Courtesy of desi.italy.
