DCR Workforce May 2013 Trendline Report


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Inside This Issue:

DCR National Temp Wage Index
I-Squared: Spoiling or Saving the U.S. Economy?
Economic Recovery brings Optimism to Temp Employment
Unemployment Crisis: Unearthing the Facts Behind Official Claims
Public or Private: Which Type of Job to Opt for?

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DCR Workforce May 2013 Trendline Report

  1. 1. “ “In this month’s edition of TrendLine we once again provide you with key insights into thetemporary staffing industry, highlighting our latest research on pivotal trending themes andcurrent events. Along with an in-depth analysis of contingent worker supply and demand, webring you predictive forecasts of wage trends and market standing.Our first piece presents to you the DCR National Temp Wage Index, a statistical tool designedto provide you with a pulse of contingent worker wage history and predictions. We alsobriefly discuss various factors that affect contingent workforce economics including proposedimmigration regulations, the changing nature of work and the growth of small businesses.Many workers from other countries who want to immigrate to the United States refer to themonth of April as “H-1B month”. This topic is particularly interesting this year as lawmakersare currently discussing several pieces of immigration reform legislation. With that in mind,our featured article this month dives deep into The Immigration Innovation Act (“I-Squared”),exploring the rationale for its creation and the impact it would have on the job market. Look forour examination of the different viewpoints regarding this regulation.The next article focuses on the optimism felt by human resource professionals as they look atthe recent economic recovery. We examine the prospects of increased hiring in 2013 throughthe interesting lens of the average workweek length. Keep an eye out for our graph on growthareas of temporary jobs.As a continuation of our articles from the March 2013 edition of TrendLine, “HopelesslyUnemployed: A Missed Population in Calculation” and “Unemployment Rate through aDifferent Perspective”, we continue our investigation into the calculation method behind theofficial unemployment rate. We question the facts behind official claims as they relate tounemployment and also explore the legitimacy of numbers behind job creation claims.Our final article this month observes the composition of total compensation costs for privateand public employers, underlining the industries that dole out the better benefits.Ammu WarrierAmmu Warrier, PresidentInside this IssueNote from the EditorDCR National Temp Wage IndexI-Squared: Spoiling or Savingthe U.S. Economy?Economic Recovery bringsOptimism to Temp EmploymentUnemployment Crisis:Unearthing the Facts BehindOfficial ClaimsPublic or Private: WhichType of Job to Opt for?1247810“I am optimistic that this isgoing to be the year thatreally makes a difference andwe start to take off towardsthe end of this year”~Charles Evans,President and CEO of theFederal Reserve Bank ofChicagoREPORT # 15 | May 2013TRENDLINEContingent Worker Forecast and Supply ReportNote from the EditorTrend Line: Contingent Worker Forecast and Supply Report. © DCR. All Rights Reserved - 1
  2. 2. “The number of contingent employees will increase worldwide. In the U.S. alone, contingent workers will exceed 40 percent of theworkforce by 2020. Traditional full-time, full-benefit jobs will be harder to find.”~Intuit 2020 ReportPending new immigration regulations would help to alleviate gaps in current law by giving employers a method to bring inforeign workers for year-round jobs. The new W-visa program would admit 20,000 low-skilled foreign workers into the countrystarting in 2015 and could gradually reach a cap of 200,000 in five years. Depending on unemployment rates, job openings,employer demand and other data, the numbers of visas could fluctuate. The current H-1B visa program for low-wage workersis capped at 66,000 per year and only applies to temporary or seasonal jobs. The instillation of this program would increasethe flexibility for employers to bring workers on board as and when required, and also keep the employment interests of U.S.workers intact.Experts anticipate that most of the foreign workers taking advantage of this new program will come from the nearby countriesof Mexico, Jamaica and Guatemala. Predictions are that the construction industry, which is more seasonal in nature, has a higherchance of employing such workers. The majority of the opportunities created through the proposed W-visa program wouldbe in areas such as long-term care, the hotel and restaurant industry and other low-wage service sectors. Temporary foreignworkers are expected to obtain a higher preference over local workers due the versatile nature of their acceptance of job dutiesand wages.Over the first quarter of 2013 the temporary workforce population continued to increase at a rate of approximately 18.4k permonth. On a year over year basis (from Q1 of 2012 to Q1 of 2013), the national temp workforce has increased by 158.8k. Thisshows a clear upward trend with a consistent demand for temporary workers. As per our wage prediction, the DCR NationalTemp Wage Index, temp wages will continue to rise throughout the current quarter as well.Recently, spurred by Yahoo, the debate over telecommuting has unearthed an interesting issue, related not to workplaceflexibility but to the essential nature of work itself. Permanent freelancing and temporary work is a rapidly growing sector ofthe American workforce. In 2006 there were 42.6 million independent and contingent workers, accounting for 30% of the entireAmerican workforce. Over the last three years (2009 to 2012), the number of temporary employees rose by 29% and a surveyof 200 large companies found that, on average, temp workers accounted for 22% of each company’s workforce (historicallycomprised almost 100% of permanent employees).The Conceivable Impact of New Immigration RegulationsA Nation of Temporary WorkersTrend Line: Contingent Worker Forecast and Supply Report. © DCR. All Rights Reserved - 2DCR National Temp Wage Index
  3. 3. In March 2013, companies with 49 or fewer employees added 74,000 jobs (seasonally adjusted), accounting for 47% ofemployment gains across all payroll size groups. Of this, the majority (44,000 jobs) was added by service providingbusinesses with 1-19 employees. It is predicted that over the next decade small business numbers will increase with thegreatest growth in personal and micro-businesses, and that such small businesses will be smaller in workforce size to meetagility requirements, increasing the use of contingent workers.Small Businesses’ Substantial ContributionsDCR National Temp Wage IndexTrend Line: Contingent Worker Forecast and Supply Report. © DCR. All Rights Reserved - 3Changes in Small Business Employment by Sector(Source: ADP, Inc: Moody’s Analytics)
  4. 4. I-Squared: Spoiling or Saving the U.S. Economy?Trend Line: Contingent Worker Forecast and Supply Report. © DCR. All Rights Reserved - 4The H-1B is a non-immigrant visa in the United States under the Immigration and Nationality Act, which allows employers totemporarily employ foreign workers in specialty occupations. The U.S. sets a limit of 85,000 H-1B visas every year, which priorto 2009 was a cap reached within the first week of accepting petitions. Over the past four years, however, employers have filedfewer petitions, resulting in it taking up to nine months to reach the limit. However, under the current law, tens of thousands ofH-1B visas granted are not counted under the cap due to exemptions. According to the Economic Policy Institute, 135,530 H-1Bvisas 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 wouldincrease the maximum limit to 300,000 H-1B visas for the private sector along with exemptions for graduates of U.S. universitiesholding advanced degrees.“The American economy has become very dependent on foreign labor. Indeed, most of our workforce growth since1990 has come from immigration, a trend that is expected to continue for at least the next 20 years. How theseworkers are employed, therefore, will have important implications for American economic health, as well as fornational unity and social stability.” ~Ray Marshall, Former Secretary of Labor
  5. 5. I-Squared: Spoiling or Saving the U.S. Economy?Trend Line: Contingent Worker Forecast and Supply Report. © DCR. All Rights Reserved - 5There are various viewpoints on the issue of allowing an increasing number of foreign immigrants into the United States.An Employer’s Viewpoint: A larger talent pool will provide greater choice when selecting workers, especially as it relates torecruiting high-skilled foreign workers at comparatively lower wages. Employers today are hiring fewer workers and are activelysearching for workers with specialized experience, requiring no training or learning curve. Many foreign immigrants have vastexperience in their home countries yet are willing to accept lower wages in order to break into the U.S. job market. At low wagesemployers can afford to keep a large number of H-1B workers on the bench, which is not feasible with domestic workers.An Academic Institute’s 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 engineeringgraduate programs. Since these students later become part of the working population, Americans again have to compete withforeign 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 abachelor’s degree, and at the current pace American colleges will not matriculate even half the number of American graduatesneeded to fill these positions.“There’s a huge demand for underpaid workers through this program…though federal law requires employers topay H-1B workers at a prevailing wage, the law gives pay scale options depending on the profession. And the vastmajority 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 InstituteDifferent Angles
  6. 6. Trend Line: Contingent Worker Forecast and Supply Report. © DCR. All Rights Reserved - 6An Opponent to the Bill’s Viewpoint: Opponents to the “I-Squared” bill believe that the influx of foreign workers will havea negative impact on the economy and job market. Because the H-1B visa is renewable for a total of six years, an increase inthe cap could add more than 2 million new high-tech workers to an arguably unhealthy labor market. Additionally, currentunemployment rates and wage growth do not suggest a labor shortage in STEM occupations, where the unemployment rateof college graduated workers in STEM occupations was 3% in 2012. Critics of the bill also argue that the proposed legislationdoes not address all the flaws of the current program, including artificially low wages, recruiting requirements and benefits tooffshore outsourcing companies. Finally, opponents point to issues in the bill itself, including the authorization of employmentfor spouses and dependents of the H-1B visa holder.I-Squared: Spoiling or Saving the U.S. Economy?
  7. 7. Economic Recovery brings Optimism to Temp EmploymentTrend Line: Contingent Worker Forecast and Supply Report. © DCR. All Rights Reserved - 7According to a Right Management survey of more than 2,000 human resource executives in 14 countries, 52% of U.S. executivessaid that 2013 would be a year of recovery and growth with increased investments in talent as a high priority.Hiring executives in Brazil, China and India are even more optimistic with 68% of executives in Brazil, 73% in China and 80% inIndia expecting recovery.According to CareerBuilder’s annual job forecast, 40% of employers have plans to hire temporary and contract workers this year,up from 35% in 2012. And the newest Jobs Outlook Survey by the Society for Human Resource Management finds that “half ofHR professionals are confident that the U.S. economy will add jobs in the second quarter of 2013”.Another surprising indicator of optimism for the job market is the trend of longer workweeks. The average workweek inFebruary 2013 was at 34.5 hours, up from 33.8 in 2009 and within sight of the 34.7 hours per worker per week at peakeconomy in 2006. According to Drew Matus, an economist at UBS, this indicates that employers are nearing the end of theirability to get more work done by extending workweeks, thus leading to a need for accelerated hiring. At near-peak workweeks,employers see a slowdown in productive growth, which motivates the hiring of new workers. In the fourth quarter of 2012,economists said that productivity fell at an annual rate of 1.9% (the sharpest drop since late 2008). Moody’s Analytics economistMarisa Di Natale provides the construction industry as an example of this trend, where the average workweek is now 39 hours,demonstrating a reason for the industry adding 48,000 jobs in February 2013.Leading areas of job growth are in human resources and home health aides. Human resources, training and labor relationsspecialists are seeing a 25% growth and a median hourly wage of $26.44. Meanwhile, home health aides have a growth rate of21% and a median hourly wage of $9.96.Growth Area of Temporary Jobs
  8. 8. Unemployment Crisis: Unearthing the Facts Behind Official ClaimsTrend Line: Contingent Worker Forecast and Supply Report. © DCR. All Rights Reserved - 8The BLS divides unemployment into six categories, U1 to U6, that measure different aspects of unemployment. Theofficial unemployment rate is U3.Some of these segments should have been included in the unemployment calculation, but it will make theunemployment rate increase. This is an interesting concept and puts a large question mark on the populationsegment who have either not worked in a long time or have struggled to find jobs and have given up. It alsoprovokes questions on the unemployment calculation method.The official unemployment rate in February 2013 is 7.7% (down from 7.9% in January 2013), which is commonlyattributed to a positive jobs report. Rex Nutting of Market Watch refutes this, saying that the unemployment ratefell due to 130,000 unemployed people who were unable to find jobs and became discouraged, thus droppingout of the U3 measure of unemployment. The U6 measure, which includes some discouraged workers, shows anunemployment rate of 14.3%. However, statistician John William created a measure that includes alldiscouraged workers (people who have completely ceased looking for a job) which shows an unemployment rateat 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 questionsthe creation of these jobs. The 23,700 new jobs in retail trade are questionable due to the absence of consumerincome growth. The 20,800 jobs in motion pictures and sound recording industries are problematic since this is acategory that historically has not had substantial change in employment. However, the 48,000 jobs in constructionare credible due to the recent boost in the housing market; the 10,900 jobs in accounting and bookkeeping are alsolegitimate as tax preparation is seasonal, with income tax annual filing deadline of April 15th.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.U1 Percentage of labor force unemployed 15 weeks or longerU2 Percentage of labor force who lost jobs or completed temporary workU3 Percentage of labor force who are without jobs and have looked for work in the last four weeks(Official Unemployment Rate)U4 U3 plus the percent of the labor force that counts as “discouraged workers”U5 U4 plus the percent of the labor force that count as “marginally attached” or “loosely attached” workersU6 U5 plus the percent of the labor force that counts as “underemployed”
  9. 9. Unemployment Crisis: Unearthing the Facts Behind Official ClaimsTrend Line: Contingent Worker Forecast and Supply Report. © DCR. All Rights Reserved - 9A Comparison of Unemployment Rates
  10. 10. Trend Line: Contingent Worker Forecast and Supply Report. © DCR. All Rights Reserved - 10Public or Private: Which Type of Job to Opt for?Benefits Breakdown (Employer Costs per Hour)On average 29.14% of the total compensation cost is comprised of benefits for the entire workforce including governmentand private employees. From the graph above it is clear that part-time workers earn almost half of the wages of privateemployees, 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 andUnemployment Insurance, at 7.8%. Paid leave comprises another 7.0% of total costs; while the remainder is made up ofretirement contributions and supplemental costs, such as overtime pay.A large share of state and local government’s costs per employee goes towards benefits at 35%, compared with 31% forfull-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 forpart-time workers in private industry, with a total compensation cost of $15.22, where the large majority is towards wageswith only $3.26 for benefits. The makeup of benefits expenses varies between private and government workers. Governmentbenefit costs are higher for health and retirement contributions, while private employers pay more in bonuses and overtime.Overthecomingyearsthisdisparitymaydecrease,asnewhealthcarelawsrequiremoreemployerstoofferinsurancetoworkers.Similarly, public pressure and difficulties with local and state pension systems could have an impact on government’scontributions to retirement and saving plans.
  11. 11. MethodologyTrend Line: Contingent Worker Forecast and Supply Report. © DCR. All Rights Reserved - 11References:https://www.youtube.com/watch?v=WEMkFoEq3Achttp://www.huffingtonpost.com/stan-sorscher/i-squared-immigration_b_2834419.htmlhttp://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-good-news/2037311/http://www.globalresearch.ca/the-unemployment-crisis-in-america-staring-economic-armageddon-in-the-face-while-hiding-it-with-official-lies/5326492http://www.usatoday.com/story/money/business/2013/03/10/new-jobs-more-money/1973743/http://www.bls.gov/news.release/ecec.t12.htmhttp://blogs.wsj.com/economics/2013/03/23/number-of-the-week-employers-benefits-costs/http://www.bls.gov/news.release/ecec.t04.htmhttp://www.uscis.gov/portal/site/uscis/menuitem.eb1d4c2a3e5b9ac89243c6a7543f6d1a/?vgnextoid=9a1d9ddf801b3210VgnVCM100000b92ca60aRCRD&vgnextchannel=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.pdfhttp://www.adpemploymentreport.com/2013/March/SBS/SBS-NER-March-2013.aspxhttp://www.shrm.org/hrdisciplines/staffingmanagement/Articles/Pages/Hiring-Forecasts-for-Q2-2013.aspxThe DCR Wage Index is developed to assess the relative movements of temporary wage rates in the U.S. economy. Thewage rates for temporary workers or contingent workforce are based on payments made by staffing firms to theseworkers based upon hours worked. Data collected from sources such as Bureau of Labor Standards (BLS) and othergovernment sites as well as an internal pool of staffing companies and consultants, is aggregated and classified basedon 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 withthe said baseline and is representative in terms of direction and scale of change. Five years of data has been includedto observe seasonal patterns and distinguish seasonality from long-term wage movements. The data and the model hasbeen further refined over last six months.DCR Wage Index combines the exhaustive data from BLS with practical and more recent developments and data fromon-field consultants and clients, to provide timely near-term indications of trends and consistent long-term actionableand objective information.Source DataDCR Work Index uses multiple economic variables to ensure the robustness of its forecasts and cross-validationof trends.Key data sources and parameters of interest included and influencing the index are:Unemployment dataGross Domestic ProductPrime rate of interestNew and seasonal Job openingsNon Form employmentJob OpeningAll ExportAll ImportAverage Hourly Earnings of All Employees Total PrivateAggregate consultant data on job market parameters
  12. 12. About DCR WorkforceTrend Line: Contingent Worker Forecast and Supply Report. © DCR. All Rights Reserved - 12DCR Workforce is an award winning, best-in-class service provider for contingent workforce and servicesprocurement management. Our proprietary SaaS platform (SMART TRACK) assists in providing customizable VMSand MSP Solutions to manage, procure and analyze your talent with complete transparency, real-time control, highperformance and decision-enabling business intelligence.DCR Workforce serves global clientele including several Fortune 1000 companies. Customers realize greaterefficiencies; spend control, improved workforce quality and 100% compliance with our services.For more information about DCR Workforce and its Forecasting Toolkit (Rate, Demand, Supply and Intelligence)including Best Practice Portal, visit dcrworkforce.comFor more information call +1-888-DCR-4VMS or visit www.dcrworkforce.comPublic Relations:Debra Bergevine508-380-40397815 NW Beacon Square Blvd. #224 Boca Raton, FL 33487debra.bergevine@dcrworkforce.com | sales@dcrworkforce.com | marketing@dcrworkforce.comwww.dcrworkforce.com | blog.dcrworkforce.comfacebook.com/DCRWorkforce linkedin.com/company/dcr-workforce twitter.com/DCRWorkforce© 2012 DCR Workforce, Inc. All Rights Reserved. DCR Workforce and Smart Track are Registered Trademarks. CCO — 082912