Contract Workers

Contract workers are employed through formal arrangements, but with tenuous, often short-term connections to one or more employing organizations. Contract work typically involves one of two work arrangements: a two-way agreement between a contractor and employer, often called a client, or a three-way agreement involving a staffing agency or contracting company operating as market intermediary. Contract workers are often mobile, moving from one client to the next. Contract workers appear most prominently at both ends of the wage distribution, in lower-wage occupations and in higher-wage professional work. Contract employment is thus a bifurcated phenomenon, with workers in different socioeconomic locations.

Contract workers tend to be clustered in specific industries and sectors of the economy. In professional occupations, contract arrangements are common in information technology, communication and media, and related fields employing knowledge workers. In some segments of these industries, an individual contractor might be called a consultant, freelancer, portfolio worker, or per diem worker—designations that depend principally on industry and occupational practice. In lower-wage occupations, contract workers are found in a range of industries, including retail, health care, food service, construction, agriculture, transportation, manufacturing, building services, and domestic and personal services. Lower-wage contract workers might also be seasonal, migrant, or day laborers. Contract work is thus associated with marginal employment among disadvantaged groups, including undocumented immigrants.

Contract work is one of a number of nonstandard work arrangements, often equated with contingent work, that have proliferated in recent decades. Lacking job security with any single employer, contract workers are part of a larger shift toward flexible work relations. By hiring workers on contract, employing organizations can readily alter the size and scope of a workforce. For workers with few labor market options, this flexibility can make contract work especially precarious. In contrast, some workers in higher-wage occupations may be able to exercise greater individual flexibility than most standard jobs allow. At different ends of the wage spectrum, therefore, contract work represents either the erosion of good jobs or the expansion of employment opportunities. Yet, all contract workers are situated outside the internal labor markets of employing organizations and so typically lack access to employer-sponsored training and career support. Most also lack access to employer-sponsored benefits, including health insurance. Contract work thus represents some measure of devolution from the standard employment relationship, which developed in the early 20th century from earlier systems of craft-based and subcontracted work.