May 17, 2016 Kim Krisberg 1Comment

Hardly a day goes by lately without another story on companies like Uber and their model of classifying workers as independent contractors while treating them more like traditional employees and sidestepping traditional employer responsibilities. It’s a model that has serious implications for workers’ rights and wages. However, there’s another form of employment that may be even more damaging to hard-fought labor standards: subcontracting.

In March, the University of California-Berkely Labor Center released “Race to the Bottom: How Low-Road Subcontracting Affects Working Conditions in California’s Property Services Industry,” a new report examining the world of subcontracting and its impact on wages and job conditions. According to co-author Sara Hinkley, a post-doctoral fellow at the Labor Center, she and colleagues wanted to study the effects of subcontracting over the long term, so they decided to focus on two California industries that have relied on subcontracting since the 1980s — janitorial and security services. Employment in both sectors has experienced rapid growth, with the share of janitors employed by contractors doubling from 1980 to 2014 and the share of security officers employed by contractors going up 50 percent.

Along with that trend, such workers have also experienced lower wages, fewer benefits and greater vulnerability to workplace violations, the report found.

“None of that was surprising,” Hinkley told me. “We thought that when people are subcontracted, they end up making less money and having fewer benefits than workers in-house. But it was disappointing to have it confirmed.”

To begin the report, Hinkley and co-authors Annette Bernhardt and Sarah Thomason write:

While Uber and other gig-economy platforms are currently capturing much of the media’s attention, they currently only constitute a very small percent of employment. More common are other forms of contracting out that have been growing for decades in some industries — that is, firms subcontracting with other firms or independent contractors for functions that used to be performed in-house. As a result, entire new industries of contractors have grown up to provide these functions, ranging from the high-end of legal, accounting, and IT services to the low-end of business services contractors and temp agencies. In California, employment in these service contractor industries grew by 68 percent from 1990 to 2014, more than three times as fast as all private industries combined (19 percent).

The report explains that within security and janitorial contracting, labor costs make up the bulk of providing services. That also means that it’s labor costs, such as wages and benefits, which often take the biggest hits when contractors compete for jobs — hence the title, “Race to the Bottom.” Among the report’s many findings:

  • Contracted janitors earned 20 percent less than non-contracted janitors between 2012 and 2014. Contracted security officers earned 18 percent less than their non-contracted counterparts. However, a significant number of janitors and security officers working for unionized contracting firms avoided lower wages and, in some cases, even earned higher hourly wages than in-house workers.
  • Forty-five percent of contracted janitors and 32 percent of contracted security officers had no health insurance between 2012 and 2014. The report noted that such rates are due, in part, to low rates of employer-sponsored insurance within the industry overall. But again, union workers fared much better.
  • Fifty-three percent of contracted janitors and 36 percent of contracted security officers live in families that fall below 200 percent of the federal poverty level.
  • A 2008 survey in Los Angeles found that 32 percent of workers in the property services industry earned less than minimum wage and about 80 percent were not paid legally mandated overtime.
  • Unionized and responsible contractors face significant pricing pressures from “unscrupulous” contractors, the report stated. And that makes it much harder for responsible contractors to compete on quality instead of lower labor costs.
  • Women janitors, who often work alone in isolated environments, face risks of sexual harassment and assault on the job. Security officers face high rates of workplace violence and fatal injuries on the job. Such risks can be exacerbated through multiple layers of subcontracting in which workers may find it nearly impossible to determine who is responsible for worker safety and training.

Hinkley noted that within the security and janitorial industries, it’s fairly easy and relatively inexpensive for new contractors to emerge. As such, more and more contracting companies are launched simply on the basis of reducing costs for host employers and that steadily pushes down wages and standards — “without a floor of some kind, that (downward trend) can continue indefinitely,” she added.

Practicing outside the law is another way some contractors keep costs down. According to the report, previous research has documented a relationship between outsourced property services and a variety of workplace violations, such as wage theft; not paying unemployment insurance, workers’ compensation and payroll taxes; and misclassifying workers as independent contractors rather than as employees.

“At the very bottom, it gets even more fuzzy because it’s not entirely clear who the worker has an employment relationship with,” Hinkley said, referring to the multiple layers of subcontracting that can stand between the host employer at the top and the worker who provides the actual service. “Historically, a building owner hires one contractor, but doesn’t pay attention to who actually shows up to do the work. That fragmentation is more associated with the very bottom end of the industry and that’s where a lot of the violations happen.”

A particularly disturbing part of the Labor Center report focuses on sexual harassment and assault in the property services industry. Report authors interviewed Lilia Garcia-Brower from the Maintenance Cooperation Trust Fund, an industry watchdog group that works with janitors, who said: “In the janitorial industry, it’s the perfect storm of conditions that come together: extreme vulnerability of a female workforce, a chain of command that’s traditionally male, and a workplace where workers are isolated and alone. It’s set up for abuse to happen.”

While sexual assault and harassment among this workforce is likely under-reported, those familiar with the industry, such as Garcia-Brower, say stories of harassment are very common, according to the report. Helen Chen, who co-authored the sexual harassment and assault chapter of the report, said that surveys typically find that 30 percent to 50 percent of women report being sexually harassed at work and that number is likely higher in low-wage industries.

Chen added that because the janitorial sector employs high numbers of immigrant and undocumented workers, the “threat of retaliation hangs over workers’ heads and gives employers the confidence to continue the harassment.” Compounding this issue is that many supervisors don’t even know what to do upon receiving a complaint about sexual harassment, said Chen, coordinator of public programs at Berkeley’s Labor Occupational Health Program. In addition, there are few resources to help traumatized workers.

“A lot of workers don’t talk about harassment with family, friends or co-workers,” Chen told me. “There’s just this overwhelming sense of shame and humiliation that goes along with it. …It speaks to the importance of developing strong sexual harassment policies and truly enforcing such policies. It has to be something that everyone is thinking about.”

Fortunately, Hinkley said that contracting out for services doesn’t have to come with hazardous work conditions and labor violations. Instead, companies can achieve cost savings by becoming extremely efficient at providing a particular service, she noted. And in fact, Hinkley said many employers have told her they’d much rather compete on expertise and innovation, rather than with “people who are pulling the bottom out from under workers.”

While the “Race to the Bottom” report was written before California adopted legislation raising the minimum wage to $15 by 2022, Hinkley noted that such policies really do help level the playing field for companies that want to do right by workers.

“There’s a lot of room for policymakers to find these different pieces of the labor market in which employers drive costs down and set some basic protections that will help raise the bottom level,” she said.

To download a copy of the report, visit the Berkeley Labor Center. To learn more about sexual assault in the janitorial industry, read this investigation on “Rape on the Night Shift.”

Kim Krisberg is a freelance public health writer living in Austin, Texas, and has been writing about public health for nearly 15 years.

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