Jake has a nice post on the relationship between temporary hiring and its relationship to payrolls. Here is his graph:

And he comments:

This cycle may be slightly different as employers delay the full-time hiring due to uncertainty and quite frankly an ability to get top talent “on the cheap” on a temporary basis. Still, a nice sign on the margin.

No disagreement here that it is a positive sign and I agree that employers are likely to use temporary workers as a cheap way of adding employees. Should they be allowed to do that?

Right now is probably not the right time to be doing anything that would discourage business owners from adding employees so let’s stipulate up front that I don’t think the practice of ramping up employment via temporary workers ought to be meddled with right now. Longer term though, it deserves a closer look.

The use of temps and contract workers by American business has been an expanding practice for the better part of the last decade. Under euphemisms like right sizing companies have been laying off workers and then rehiring them as temps, consultants and contract workers. Often those rehired go right back to the same jobs they held before while the employer is freed of niggling details like providing benefits and paying its half of the payroll tax.

Oh, and one other detail that the recession has brought home to many. Generally, as a temp or contract worker you are not entitled to unemployment benefits. There is no safety net under these workers.

To be sure the classification of employees in this manner is not overtly evil, not is it always and everywhere an attempt to disenfranchise workers. It does beneficially afford employers the flexibility to quickly adjust to changing economic circumstances which has positive benefits to the larger economy.

The problem is that it is open to substantial abuse. When discharged employees are brought back and in some cases retained for years as temps doing identical jobs or employers classify the bulk of their workforce as contract laborers then a line has been crossed between legitimate staffing and sham job classifications in order to evade legitimate employment expenses. The net result is that the economy, particularly those parts of it that depend upon employer contributions for solvency, are short-changed and we are all worse off.

As I said, now is not the time for a full scale assault on the practice. Jobs of any sort are a precious commodity right now but at some point in time reform would seem to be required. At the very least, anyone employed in a temp position should have access to unemployment benefits and employers should be required to fund their share of such benefits based on their total work force, not just their permanent workers. It goes without saying that state and federal officials should pay more attention to the abuses that have arisen in this arena and more aggressively audit firms who appear to make excessive use of temporary workers.