ASEE PRISM - September 2000
The New BreedA growing number of engineers are taking the freelance route, contracting themselves out for short-term assignments--often to the highest bidder.
By Warren CohenIllustration by Steve Pica

In his 25 years as an engineer, Michael Harper has never held a steady job. On the other hand, he has never lacked for work. As a contract engineer specializing in aerospace, Harper has traveled around the country taking assignments lasting anywhere from a few months to five years. His jobs have taken him to Boeing in Seattle, Grumman in Long Island, and countless other firms that needed his expertise but didn't want to add another body to the payroll. For his part, Harper likes the diversity of assignments and higher pay he accrues as a contract worker. "I'm not interested in direct employment," he says. "Hopefully I can retire sooner than I could if I were some 30-year guy at the same place."

Contract or contingent workers once went by a less formal name: temporary workers. And still, when most people think of such employees, it calls to mind secretaries or day laborers, who fill in at a company for a period of a few days. But increasingly in the new economy, technology and computerization allow firms to staff more precisely, depending on their immediate needs. As a result, contract workers have become an increasingly important part of the employment landscape.

The use of contract workers has grown fivefold since the 1980s, according to the U.S. Department of Labor. The percentage of the workforce employed by temp agencies has climbed from 0.5 percent in 1982 to 2.3 percent in 1999. Add in other types of temps, such as self-styled independents and freelance workers, and the figure soars to 10 percent. Include part-timers, and the number of "nonstandard" employees in the economy rises to about 26 percent of the workforce.

Engineers are a growing part of this trend. Although the Labor Department doesn't break out engineering as a separate category, 21.7 percent of all professional specialty and technicians are contingent workers--and 32.4 percent of contingent workers are college graduates, more than any other educational level. Manpower Professional, a division of Manpower International, the nation's largest temporary employment service, reports that its skilled employee division is growing at 15 to 20 percent a year, faster than the company as a whole. Says Ben Elliott, a recruiter with Manpower Professional in Charlotte, North Carolina, "Engineers make up 40 percent of our office personnel, which also includes other professional services like information technology and telecommunications."

Increasingly, engineering educators are making students aware of the realities of the new workplace. With entrepreneurial careers on the increase, engineering faculty members need to help their students develop entrepreneurial skills so they can benefit fully from America's new economy. One of the key aspects of the ABET 2000 criteria is to produce graduates with more than just technical skills.

It's somewhat paradoxical that with the national economy so strong, temporary employment continues to rise. After all, with low unemployment rates and a constant need for highly skilled workers, it would seem that engineers especially could demand regular staff positions. But the trend shows no sign of abating. Last year, 70 percent of businesses surveyed by the American Management Association reported having replaced some permanent workers with temps. Roughly two thirds said they planned to increase contingent staffing in the next five years.

WINNERS AND LOSERS

On the surface, contract employment seems like a win-win situation for everyone involved. Companies sensitive to the bottom line who don't want to pay for permanent workers they don't need year round save money both on salaries and benefits. (Worker benefits make up roughly 27 percent of total compensation today, according to the Bureau of Labor Statistics.) Workers gain flexibility and freedom they may not otherwise have as regular staff and get higher salaries. Engineering companies and workers say that pay can run about 15 to 20 percent higher than for full-time employees. Many workers locate jobs through agencies firms that pay benefits, and according to the Department of Labor, roughly 40 percent of contingent workers, like aerospace engineer Michael Harper, prefer the arrangement.

Illustration by Steve Pica

Last year, 70 percent of businesses surveyed by the American Management Association reported having replaced some permanent workers with temps.

Of course, these advantages are balanced by the ever-present uncertainty of temporary work. These include the possibility of being released at any moment, not having the same access to promotions as full-time workers, and missing out on some of the new economy's employment perks, like stock options.

Chuck Whitehurst has seen both sides of the issue. When the Houston-area resident got his first job as a pipe designer for a chemical company 11 years ago, he was on the permanent staff. But with the up and down cycles of the oil and chemical industry, Whitehurst saw that he had no more protection from the vagaries of layoffs than the temps. "With reductions in force, direct employees had as little security as contingent workers," he says. "Seniority didn't matter anymore, only performance, so contractors sometimes were kept on while direct employees were let go."

In 1996, Whitehurst's wife got a full-time position with medical benefits that covered both of them, so he decided to take advantage of the higher pay he could earn as a contract worker. He signed up with a staffing agency that hooked him up with a chemical firm where he's been for five years. Engineers hired on a contract basis at this organization represent 90 percent of the staff. He estimates that he makes 25 percent more than he would if he were part of the permanent staff. "I worry sometimes about security, but in the Houston area and the Gulf Coast, there are a lot of companies with similar situations who hire contract workers," he says. "And as a full-timer, there really is no security anyway in this business."

The salaries can be an alluring enticement to contract work. E.J. Morgan, a recruiter with Manpower Professional in Tucson, Arizona, says that he had one client who was offered a direct position in electrical engineering paying $61,000. But Morgan found the company offering the same job as a contractor for $114,000. The worker obviously chose the contract route. "Some workers with skills in short supply, such as software engineers, can call their own shots anyplace in the U.S. and drive up their fee," says Morgan.

Another advantage for contractors is the chance is to pick up different skills while doing a number of different jobs. Harper notes how much the perception of temps has changed. Once when he began, peers derided him as a "job-shopper." But now, his fellow workers are envious of the opportunities. Harper has learned how to use various types of software at different jobs. Harper now is fluent in Catia, Unigraphics, and ProEngineer, the three most popular design tools. "This makes me very marketable," he says. "With my skills, I could find a job on the same day if I got notice from my current firm that I was history."

A MATTER OF ECONOMICS

For companies, the choice to hire full-time or contingent workers is an economic one depending mostly on whether the business is cyclical, like oil and gas, or more steady. The more peaks and valleys, the more contingent workers. But Morgan also notes that some companies see contingent workers as a safe way to hire new employees. He says it costs a company $12,500 on average in recruiting, personnel costs, and benefits to bring someone in for a direct hire. "The company runs the risk that the person may last only two or three months and might not be the right person for the job," he says.

Flexibility, money, and skills aside, there are some dangers to being a contract worker. Charles Bofferding, executive director of the Society of Professional Engineering Employees in Aerospace, a union group for Boeing engineers, worries about how companies can incorporate regular staff with contract workers when the company is shifting its direction.

Instead of building planes from design to finish, Boeing is trying to become a systems integrator. Similar to the auto companies, Boeing hopes suppliers will design components and deliver them to the Boeing plant, where engineers will meld them into a final unit. Right now, of Boeing's 12,000 engineers, only 446 are contingent workers. But Bofferding fears that if the number increases, it might be hard to synchronize new workers and new components. "We may not have the ability to integrate systems if we don't build them and understand them," he says.

Professional advancement is another concern. Whitehurst notices that full-timers often get extra training and tours of duty at different locations. This can expand their profile at an organization, whereas contingent workers usually stick to the same job for which they were originally hired. "Companies will spend money to train full timers while contingent workers might have to go to night school on their own," says Whitehurst.

Formal benefits can also be lacking. According to the Department of Labor, only one in five contingent workers have health insurance from their employer. In contrast, half of all regular, full-time workers are covered. Only 20 percent of contingent workers get employer-provided pensions compared with 50 percent of full- timers. In some cases, the higher salary can offset these disadvantages, but more often than not temp agencies that place contract workers have little pressure to match benefits of a full employer.

It is important to note that not all contract workers are contract workers by choice. Problems can arise when contingent workers who haven't been able to achieve permanent status stick around as long as the regular staff. At Microsoft, one of every five technical workers is a temporary employee, but according to one survey, 63 percent have been at the company for more than a year. Though they are still generally earning higher base salaries, many of these "permatemps" are growing angry at the disparity in the increasingly valuable "soft" benefits--such as discounts on Microsoft software, sick leave, and stock options--offered to them compared with what the regular staff is getting. Also, since many of the contingency workers are hired from different temp agencies, there can also be major disparities in pay and health benefits for similar jobs.

TOMORROW'S WORKFORCE

Both engineers, companies, and labor market analysts believe that the trend toward more flexible staffing is heading upward. Web sites and employment manuals now tout the virtues of "free agent" workers, who roam the market seeking the highest pay and the most flexibility. And companies claim they want to be more project oriented, which means they can abandon poor-performing business lines during slow times. With flexible employment, firms can hire and fire on an as-needed basis. These trends will have profound implications for engineering down the road. Predicts Morgan, "In the engineering field, I would say that 50 percent could be contract employees in the next 10 years."


Warren Cohen is a freelance writer in New York City