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TRENDLINE
Contingent Worker Forecast and Supply Report
Inside this Issue Note from the Editor DCR National Temp Wage Index I-Squared: Spoiling or Saving the U.S. Economy? 1 2 4
Economic Recovery brings Optimism to Temp Employment 7 Unemployment Crisis: Unearthing the Facts Behind Official Claims Public or Private: Which Type of Job to Opt for?
8 10
I am optimistic that this is going to be the year that really makes a difference and we start to take off towards the end of this year
~Charles Evans, President and CEO of the Federal Reserve Bank of Chicago
Ammu Warrier
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Over the first quarter of 2013 the temporary workforce population continued to increase at a rate of approximately 18.4k per month. On a year over year basis (from Q1 of 2012 to Q1 of 2013), the national temp workforce has increased by 158.8k. This shows a clear upward trend with a consistent demand for temporary workers. As per our wage prediction, the DCR National Temp Wage Index, temp wages will continue to rise throughout the current quarter as well.
In March 2013, companies with 49 or fewer employees added 74,000 jobs (seasonally adjusted), accounting for 47% of employment gains across all payroll size groups. Of this, the majority (44,000 jobs) was added by service providing businesses with 1-19 employees. It is predicted that over the next decade small business numbers will increase with the greatest growth in personal and micro-businesses, and that such small businesses will be smaller in workforce size to meet agility requirements, increasing the use of contingent workers. Changes in Small Business Employment by Sector
The H-1B is a non-immigrant visa in the United States under the Immigration and Nationality Act, which allows employers to temporarily employ foreign workers in specialty occupations. The U.S. sets a limit of 85,000 H-1B visas every year, which prior to 2009 was a cap reached within the first week of accepting petitions. Over the past four years, however, employers have filed fewer petitions, resulting in it taking up to nine months to reach the limit. However, under the current law, tens of thousands of H-1B visas granted are not counted under the cap due to exemptions. According to the Economic Policy Institute, 135,530 H-1B visas were issued in 2012, far exceeding the cap of 85,000. In January of 2013, The Immigration Innovation Act (known as I-Squared) was introduced. This piece of legislation would increase the maximum limit to 300,000 H-1B visas for the private sector along with exemptions for graduates of U.S. universities holding advanced degrees.
The American economy has become very dependent on foreign labor. Indeed, most of our workforce growth since 1990 has come from immigration, a trend that is expected to continue for at least the next 20 years. How these workers are employed, therefore, will have important implications for American economic health, as well as for national unity and social stability. ~Ray Marshall, Former Secretary of Labor
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Different Angles
There are various viewpoints on the issue of allowing an increasing number of foreign immigrants into the United States. An Employers Viewpoint: A larger talent pool will provide greater choice when selecting workers, especially as it relates to recruiting high-skilled foreign workers at comparatively lower wages. Employers today are hiring fewer workers and are actively searching for workers with specialized experience, requiring no training or learning curve. Many foreign immigrants have vast experience in their home countries yet are willing to accept lower wages in order to break into the U.S. job market. At low wages employers can afford to keep a large number of H-1B workers on the bench, which is not feasible with domestic workers.
Theres a huge demand for underpaid workers through this programthough federal law requires employers to pay H-1B workers at a prevailing wage, the law gives pay scale options depending on the profession. And the vast majority of the time they choose the lowest wage or the second-lowest wage, both of which are below the average wage ~Daniel Costa, Immigration Policy Analyst at Economic Policy Institute
An Academic Institutes Viewpoint: Most foreign students studying in the United States elect a STEM (science, technology, engineering and math) field as their major. For example, foreign students encompass half the enrollment in engineering graduate programs. Since these students later become part of the working population, Americans again have to compete with foreign college graduates with advanced degrees in science and technology. However, this step might be essential. For example, analysts predict that in this decade the United States will have to fill 1.2 million jobs in computing professions that require a bachelors degree, and at the current pace American colleges will not matriculate even half the number of American graduates needed to fill these positions.
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An Opponent to the Bills Viewpoint: Opponents to the I-Squared bill believe that the influx of foreign workers will have a negative impact on the economy and job market. Because the H-1B visa is renewable for a total of six years, an increase in the cap could add more than 2 million new high-tech workers to an arguably unhealthy labor market. Additionally, current unemployment rates and wage growth do not suggest a labor shortage in STEM occupations, where the unemployment rate of college graduated workers in STEM occupations was 3% in 2012. Critics of the bill also argue that the proposed legislation does not address all the flaws of the current program, including artificially low wages, recruiting requirements and benefits to offshore outsourcing companies. Finally, opponents point to issues in the bill itself, including the authorization of employment for spouses and dependents of the H-1B visa holder.
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Some of these segments should have been included in the unemployment calculation, but it will make the unemployment rate increase. This is an interesting concept and puts a large question mark on the population segment who have either not worked in a long time or have struggled to find jobs and have given up. It also provokes questions on the unemployment calculation method.
BLS Definition of Unemployment: Persons are classified as unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work.
The official unemployment rate in February 2013 is 7.7% (down from 7.9% in January 2013), which is commonly attributed to a positive jobs report. Rex Nutting of Market Watch refutes this, saying that the unemployment rate fell due to 130,000 unemployed people who were unable to find jobs and became discouraged, thus dropping out of the U3 measure of unemployment. The U6 measure, which includes some discouraged workers, shows an unemployment rate of 14.3%. However, statistician John William created a measure that includes all discouraged workers (people who have completely ceased looking for a job) which shows an unemployment rate at 23%. Following this logic, the real rate of unemployment is 2-3 times the official reported rate. The BLS reports that 236,000 new jobs were added in February. Dr. Paul Craig Roberts of Global Research questions the creation of these jobs. The 23,700 new jobs in retail trade are questionable due to the absence of consumer income growth. The 20,800 jobs in motion pictures and sound recording industries are problematic since this is a category that historically has not had substantial change in employment. However, the 48,000 jobs in construction are credible due to the recent boost in the housing market; the 10,900 jobs in accounting and bookkeeping are also legitimate as tax preparation is seasonal, with income tax annual filing deadline of April 15th.
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On average 29.14% of the total compensation cost is comprised of benefits for the entire workforce including government and private employees. From the graph above it is clear that part-time workers earn almost half of the wages of private employees, and one-third of the wages of state and local government employees. In terms of benefits, the major share of costs is for health insurance, which accounts for 8.5% of the total on average. This is followed closely by legally mandated benefits, including Social Security, Medicare, Workers Compensation and Unemployment Insurance, at 7.8%. Paid leave comprises another 7.0% of total costs; while the remainder is made up of retirement contributions and supplemental costs, such as overtime pay.
A large share of state and local governments costs per employee goes towards benefits at 35%, compared with 31% for full-time private sector workers. The costs to the government are greater per worker at $41.94 with $27.24 in salaries. Meanwhile, private employers on average pay $33.63 overall per worker, with $23.22 in wages. The lowest cost is for part-time workers in private industry, with a total compensation cost of $15.22, where the large majority is towards wages with only $3.26 for benefits. The makeup of benefits expenses varies between private and government workers. Government benefit costs are higher for health and retirement contributions, while private employers pay more in bonuses and overtime. Over the coming years this disparity may decrease, as new healthcare laws require more employers to offer insurance to workers. Similarly, public pressure and difficulties with local and state pension systems could have an impact on governments contributions to retirement and saving plans.
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Methodology
The DCR Wage Index is developed to assess the relative movements of temporary wage rates in the U.S. economy. The wage rates for temporary workers or contingent workforce are based on payments made by staffing firms to these workers based upon hours worked. Data collected from sources such as Bureau of Labor Standards (BLS) and other government sites as well as an internal pool of staffing companies and consultants, is aggregated and classified based on regions and skill categories, to arrive at an aggregate index. The baseline for the index is set at 100 for January 2007. Index value for a particular month indicates relative wages with the said baseline and is representative in terms of direction and scale of change. Five years of data has been included to observe seasonal patterns and distinguish seasonality from long-term wage movements. The data and the model has been further refined over last six months. DCR Wage Index combines the exhaustive data from BLS with practical and more recent developments and data from on-field consultants and clients, to provide timely near-term indications of trends and consistent long-term actionable and objective information.
Source Data
DCR Work Index uses multiple economic variables to ensure the robustness of its forecasts and cross-validation of trends. Key data sources and parameters of interest included and influencing the index are: Unemployment data Gross Domestic Product Prime rate of interest New and seasonal Job openings Non Form employment Job Opening All Export All Import Average Hourly Earnings of All Employees Total Private Aggregate consultant data on job market parameters
References:
https://www.youtube.com/watch?v=WEMkFoEq3Ac http://www.huffingtonpost.com/stan-sorscher/i-squared-immigration_b_2834419.html http://www.wbez.org/us-demand-high-skilled-foreign-workers-106398 http://www.usatoday.com/story/money/columnist/kay/2013/03/30/at-work-a-little-goodnews/2037311/ http://www.globalresearch.ca/the-unemployment-crisis-in-america-staring-economic-armageddon-in-the-face-while-hiding-it-with-official-lies/5326492 http://www.usatoday.com/story/money/business/2013/03/10/new-jobs-more-money/1973743/ http://www.bls.gov/news.release/ecec.t12.htm http://blogs.wsj.com/economics/2013/03/23/number-of-the-week-employers-benefits-costs/ http://www.bls.gov/news.release/ecec.t04.htm http://www.uscis.gov/portal/site/uscis/menuitem.eb1d4c2a3e5b9ac89243c6a7543f6d1a/?vgnextoid=9a1d9ddf801b3210VgnVCM100000b92ca60aRCRD&vgnextchann el=9a1d9ddf801b3210VgnVCM100000b92ca60aRCRD http://www.epi.org/publication/immigration-innovation-i2-act-2013/ http://qz.com/65279/40-of-americas-workforce-will-be-freelancers-by-2020/ http://http-download.intuit.com/http.intuit/CMO/intuit/futureofsmallbusiness/intuit_2020_report.pdf http://www.adpemploymentreport.com/2013/March/SBS/SBS-NER-March-2013.aspx http://www.shrm.org/hrdisciplines/staffingmanagement/Articles/Pages/Hiring-Forecasts-for-Q2-2013.aspx
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