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October 1996, Vol. 119, No. 10
Earnings and benefits of contingent and noncontingent workers
Steven Hipple and Jay Stewart
T here is a perception that contingent jobs pay low wages and offer few benefits, such as health insurance and pensions. Economic theory does not offer much guidance on whether to expect the earnings of contingent workers to be higher or lower than those of noncontingent workers. Neoclassical economic theory predicts that workers will have to be paid compensating differentials if some aspects of the job are less desirable. This means that if workers prefer more stable jobs, then they have to be paid more for the additional risk of contingent employment arrangements. On the other hand, dual labor market theories argue that markets are segmented into a "good job" sector and a "bad job" sector. Jobs in the bad job sector are characterized by low pay, poor working conditions, few benefits, and poor prospects for moving into the good job sector. In addition, workers in the bad job sector may not have the "clout" to negotiate higher wages or employer-provided benefits. Until the Contingent Worker/Alternative Work Arrangement Supplement to the Current Population Survey (CPS) was conducted in February 1995, only limited data were available to examine the compensation of con-tingent workers. This article takes a first look at the compensation data from that survey.
Overall, contingent workers earn less than noncontingent workers. For contingent workers, median weekly earnings were $285, compared with $416 for noncontingent workers. (All the comparisons in this article use the broadest estimate of the contingent work force, and exclude the self-employedboth incorporated and unincorporatedand independent contractors. See the article by Anne E. Polivka, pages 39, this issue.) This overall difference in earnings is not surprising because contingent workers differ in many respects from their noncontingent counterparts. These differences may account for the overall earnings gap between the two groups.
One of the key differences between contingent workers and their noncontingent counterparts is that a much larger proportion of the contingent work only part time, and part-time workers in general earn less than full-timers.1 Among both full-time and part-time workers, however, the contingent workers earnings are about 80 percent of those of noncontingent. (See table 1.) Even among all part-time workers, some of the earnings disparity is attributable to the fact that contingent workers put in almost 10 percent fewer hours than noncontingent.
This excerpt is from an article published in the October 1996 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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1 Health insurance coverage rates are calculated by dividing the number of workers in a specified worker group who have health insurance from some source by total employment for the same worker group.
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