Careers and Contingency.

• Author: Lester, Gillian

Disagreement among legal scholars over the phenomenon of "contingent employment"--work having limited hours, duration, or security--has led to disparate prescriptions for legal reform. For some, the best solution would be to either leave the market alone, or eliminate existing regulations that drive employers to create contingent jobs. Others believe current regulations do not go far enough and advocate reforms ranging from expanding mandatory benefits and protections to facilitating collective bargaining among contingent workers in order to restore such benefits as long-term security, training, and career advancement. The debate about law reform has centered partly on disputes over the size, growth, and characteristics of the contingency phenomenon. Workers variously described as "contingent" are so eclectic as to render broad-brush claims on both sides of the debate misleading. As an alternative, Professor Gillian Lester offers the concept of underemployment--a failure of the market to match workers with jobs that fully exploit their human capital and preferences--as a superior explanation of the labor market problems that ought to concern policy makers. More fundamentally, however, opponents in the debate disagree over how labor markets work. Orthodox neoclassical economists, who generally oppose regulation, believe workers are matched with jobs in accordance with their human capital, preferences, and employers' needs. Reform-minded "strong segmentationists," by contrast, argue that contingent jobs tend to be dead-end "secondary" jobs, often involuntary and alienating. Finding both orthodox and strong segmentationist accounts incomplete, Professor Lester turns to "New Keynesian" explanations of labor markets, originally developed to explain equilibrium unemployment. She argues that this third approach provides important insights into contingent employment that have largely eluded contemporary debates on contingency. Finally, she discusses the policy implications of New Keynesian accounts, identifying directions for further research.

INTRODUCTION

Perhaps the most celebrated "crisis of work"(1) of the past decade is the perceived replacement of career employment with "contingent" jobs of limited duration, hours, or security. Journalists, academics, and legislators have alternately expressed alarm and enthusiasm about what is widely seen to be an important labor market trend.(2) Enthusiasts maintain that contingent work is a symptom of a well-functioning labor market that matches individuals' skills, preferences, and aptitudes with the needs of employers. Skeptics argue, in contrast, that contingent work epitomizes a dangerous phenomenon of increasing job insecurity and inequality of labor market opportunity in the United States.(3) They advocate labor market reforms to assist a rising class of workers who, despite a desire for permanent employment, oscillate between unemployment lines and short-term jobs that under-utilize their education, skills, and availability. Permanent workers, skeptics argue, may develop firm-specific skills over time, increasing their productivity and thereby opening the door to promotions and higher compensation. Contingent workers, by contrast, never develop the long-term attachments necessary to command such advantages. Moreover, job changes experienced by contingent workers are stigmatizing, making it more difficult to find a new job, especially for older workers, whose opportunities may be particularly limited.

Compounding these harms, reformists further argue, is the fact that many contingent workers fall outside the scope of mandated employment benefits and protections, which are geared toward the traditional archetype of the full-time, long-term employee. Indeed, contingent workers may fail to meet the legal definition of a covered "employee" under both statutory and private rules.(4) Moreover, even those contingent workers who qualify as employees may be denied benefits or protections under any number of bright-line "gatekeeper" tests. Unemployment insurance (UI), for example, is available only to workers who have worked some minimum number of hours, earned some minimum level of income from wages, or both, over a particular period; these factors may exclude contingent workers at a disproportionate rate.(5) This lack of coverage by benefits and protections reduces the quality of contingent jobs, assuming workers who lack but desire coverage will find it difficult or impossible to bargain for these terms.(6) At the same time, these attenuated de jure or de facto responsibilities towards workers with less continuity, permanence, or hours of work are undoubtedly an important reason why employers cultivate contingent relationships.

In this article, I explore the debate on contingent employment and argue that neither opponents nor advocates of reform offer a fully satisfactory account of the labor market problems at stake. First, the descriptive category of "contingent employment," as currently cast, is either under- or overinclusive of the class of workers who require market reforms. Second, even if we agree on a functional definition of the "problem class," assessing policy solutions requires grappling with radically divided views of the causes and implications of contingency. The result is that the opponents in the debate often talk past each other as well as past the underlying problem.

The group of workers variously described as "contingent" is eclectic: it includes teenagers holding part-time jobs after school, retirees earning extra cash on the side, single mothers holding down multiple temporary jobs in a struggle to accommodate family and market demands, "second earners" from affluent families, "downsized" executives working as independent contractors, and elite professionals whose fast-paced careers move them from one project to the next. Different definitions give conflicting estimates of the number of contingent workers, ranging from 2 to 30% of the workforce, and studies attempting to measure changes in job stability have produced equivocal results. These wide variations in interpretations of the scope and magnitude of the problem make it difficult to assess competing law reform proposals. A central task of this article is to illustrate how greater precision in specifying both harms and remedies is essential to any coherent program of reform. I argue that the concept of underemployment--a failure of the market to match workers with jobs that fully exploit their human capital and preferences--may better capture the labor market problems at issue than many existing definitions.

A prior question in thinking about any kind of labor market reform is whether the underlying labor market theory informing a proposal itself offers a satisfactory account of contingency. A second task of this article is thus to investigate two dominant theoretical accounts of contingent employment, which I label as "orthodox neoclassical" and "strong segmentationist." Orthodox neoclassicists tend to deny the existence of "involuntary" contingent employment (and thus deny the need for government intervention unless it is designed to eliminate regulations). However, they offer only weak explanations for the wage gap between contingent and noncontingent workers which persists even after controlling for conventional human capital measures. In the absence of a stronger explanation of these persistent gaps, we are left to speculate that there is a nontrivial class of workers who, despite genuine motivation and capabilities, are unable to secure stable employment, and have lower pay, benefits, and opportunities for advancement than other workers with the same preferences, human capital, and endowments.

Strong segmentationists, by contrast, argue that orthodox neoclassical observers misunderstand and understate the degree and extent of coerciveness of contingent employment. They use this claim to defend proactive government interventions to mandate wider availability of benefits and opportunities for collective bargaining. The challenge of defining and measuring labor market coercion, however, is daunting, and I argue that strong segmentationists have fallen short. While involuntary employment in bad jobs with poor benefits, security, and promotion opportunities is a real and troubling problem, "coerced" contingency may be less pervasive than segmentationists imply. At the same time, assuming quite plausibly that workers' choices are more constrained than orthodox observers acknowledge, it is not obvious that elimination of such harms is a task for labor market reform per se. Parallel difficulties plague strong segmentationists' argument that contingent workers experience "alienation."

Finding neither of these approaches entirely satisfactory, I turn to a third theory--which I label as "New Keynesian"--arguing that it offers a more tailored explanation of the contingency phenomenon at issue. New Keynesian "efficiency wage" and "insider-outsider" models, originally developed to explain persistent unemployment, may be adapted to the problem of contingent employment. These accounts explain how perfectly rational labor market behavior may lead to persistent underemployment. Remarkably few commentators have mentioned New Keynesian labor market models in contemporary debates about the rise of contingent employment, and to my knowledge, no legal scholars have marshaled these accounts in evaluating different law reform proposals. The principal contribution of this article is to introduce these models into the legal debate about contingency.

In summary, I argue that workers variously described as "contingent" are so heterogeneous that the more discrete concept of underemployment may better capture the labor market problem that concerns, or ought to concern, reformists. Moreover, although the dominant paradigms offer concrete reform proposals, their explanations of the causes and consequences of...