Labor Market, Research Paper Example

The Bureau of Labor Statistics reported that 77 percent of the 953,000 jobs created up to August this year were part-time which may be perceived by the market observers as the end of the age of 40 hour week or full-time jobs. There is no denying that the world has changed tremendously over the last few decades and employers have not been immune to the effects of changes in the external environment. The trend of employers substituting full-time employers with part-time employers is not being influenced by a single factor but multiple factors all of which are aimed at improving competitiveness and profitability.

One of the major impacts of globalization has been an increase in the intensity of competition. Companies do not only face competition from local competitors but also foreign competitors as trade restrictions have been disappearing or significantly eased. In addition, it has become more difficult to maintain competitive edge through core competencies because the pace of technological dissemination has increased and access to skilled and cheap factors of production has become more equitable. Companies usually have two major avenues available to them to increase profitability one of which is increasing profit margins and the other is reducing costs. Rising intensity of competition usually causes profit margins to decline, thus, the focus on cost reduction may increase. Labor is a significant proportion of total operating and production costs for more companies, thus, it is an attractive cost center to target to reduce costs. This may be exactly what has increased the attraction of part-time employees because they are cheaper than full-time employees. Full-time employees are usually paid benefits such as health insurance and other compensation packages which part-time employees are not. The fact that companies often turn to part-time employees in place of full-time employees has also been demonstrated by the recent healthcare act in the U.S., often called Obamacare. Obamacare has prompted many companies to cut the number of hours of their full-time employees, essentially turning them into part-time employees and ending their eligibility for full-time employment benefits such as health insurance (McVeigh). Not surprisingly, the focus on part-time employees as a cost-cutting measure is usually greater in industries with low profit margins such as the restaurant industry. Jamie Richardson, Vice President of fast food chain White Castle, has implied his company will mostly hire part-time employees from now onwards so that they do not have to comply with Obamacare’s requirement of providing insurance for working over 30 hours (Ydstie). Businesses’ reaction to Obamacare helps us understand why part-time employees appeal to employers because they do not have to be paid additional benefits in addition to salary.

Second reason why businesses may be substituting part-time employees for full-time employees may be the need to be more flexible. Not only competition has become more intense but the pace of change has also increased. Businesses have no choice but to respond to changes in the external environment in a timely fashion or else losing to the competition. It is hard to predict the external factors such as economy’s performance, consumer demand and tastes, and government policies that affect businesses. Part-time workers enable companies to respond more quickly to changes in the economic environment such as economic downturns and booms (Snelling Personnel Services), sudden popularity or declining demand for one or more product lines, and avoiding long learning curves since part-time workers may already have the required skills and won’t need to be trained. Part-time workers also help businesses improve their operating efficiency because the firm’s labor costs vary with demand levels due to the ease of hiring and laying-off workers.

The third reason why businesses may be substituting full-time workers for part-time workers is economic uncertainty. Uncertainty makes it difficult to plan and full-time workers require more commitment in terms of time and cost than part-time workers. Thus, businesses may be relying more on part-time workers because economic uncertainty makes it difficult to plan their long-term labor needs. Economic uncertainty has only been made worse in the U.S. due to factors such as political uncertainty. In fact, economists believe that companies will start relying less on part-time workers as economy gains traction and the potential impact of Obamacare becomes clearer. Executives at staffing firms claim that employers are requesting part-time workers also because they are not certain how Obamacare will impact their labor costs for full-time workers. Economic growth has also been mixed over the last few years, thus, businesses are reluctant to add full-time workers too soon. Uncertain economic environment increases the importance of maintaining liquidity, thus, businesses have greater incentive to rely on part-time workers for the time being. Keith Hall, a senior research fellow at George Mason University claims that fiscal and regulatory policies uncertainty led to 2 million fewer jobs in 2012 (Mutikani). Even the Fed survey has confirmed the fact that the economic uncertainty among U.S. businesses has been growing (Harding).

All of these have several implications for the employers. First of all, this may truly be the end of lifetime careers with a single company because factors of production have become more mobile and intensity of competition has forced companies to focus more on cost centers due to declining pricing power. This may also pose certain challenges for employers to find new ways to motivate and inspire employees to do their best because part-time employees may not be committed to their employer in the same manner as full-time employees. Thus, employers have to find innovative ways to increase employee loyalty in order to more efficiently utilize their human capital.

The trend for part-time employees may also mean that employers may reduce spending on training and education activities and instead it will either become the responsibility of employees to keep their skills up-to-date. A second scenario may be the emergence of third parties such as temp agencies and training organizations in large numbers to provide recruiting solutions to companies. The uncertainty levels will continue to grow because our world is becoming more complex place due to globalization. It may be reasonable to argue that the line between full-time and part-time employees may continue to blur further because on one hand, companies want more flexibility regarding human capital but on the other hand, the importance of high-quality human capital has also been growing. Thus, the companies will have to find a balance between retaining high-quality human capital as well as reduce labor inefficiency, especially during declining economic climate.

It is clear that the decline in full-time employees has occurred due to a number of factors. First of all, companies are trying to reduce labor costs to protect their bottom line profitability. Second, companies seek more flexibility to deal with the competitive environment that has been changing at a rapid pace and only becoming more intense. Third, the uncertain economic and political environment has not helped either. While part-time employees may help save direct costs, the indirect costs may be too high, thus, companies have to find a balance between cost-savings and keeping employees motivated and committed.

Works Cited

Harding, Robin. Fed survey shows rise in economic uncertainty. 16 October 2013. 23 November 2013 <http://www.ft.com/cms/s/0/aa9e06da-3688-11e3-aaf1-00144feab7de.html#axzz2lWjtj8zH>.

McVeigh, Karen. US employers slashing worker hours to avoid Obamacare insurance mandate. 30 September 2013. 23 November 2013 <http://www.theguardian.com/world/2013/sep/30/us-employers-slash-hours-avoid-obamacare>.

Mutikani, Lucia. Analysis: Obamacare, tepid U.S. growth fuel part-time hiring. 21 August 2013. 23 November 2013 <http://www.reuters.com/article/2013/08/21/us-usa-economy-jobs-analysis-idUSBRE97K05K20130821>.

Snelling Personnel Services. Cost of Temporary Staffing vs. Cost of Full-time Employee. New York, NY, n.d.

Ydstie, John. Full-Time Vs. Part-Time Workers: Restaurants Weigh Obamacare. 24 July 2013. 23 Noveber 2013 <http://www.npr.org/2013/07/24/205123907/full-time-vs-part-time-workers-restaurants-weigh-obamacare>.