The Common Good
July-August 2001

Temporary Measures

by Josh Greene | July-August 2001

How temp agencies use welfare-to-work laws to rack up big profits.

September 2000, 2100 Lakeside, Cleveland's massive, one-size-doesn't-quite-fit-all men's homeless shelter: It's 10 p.m. and 400 men are sleeping in space meant for 200. When the bunks were full they took to the cots, and when the cots ran out they laid blankets on the floor. A young man who doesn't quite fit the scene walks through, tapping sleeping men with his foot.

"Psst, want to work?" he asks.

He's a recruiter from a temp agency. Specifically it's AmeriTemps, but across the country recruiters from many of the nation's 1,400 exploitative labor halls are doing the same thing.

The homeless here compare the shelters to company towns of days gone by. In their eyes it's no coincidence that temp agencies spring up in parts of town populated by the homeless.

"You've heard of company towns, company stores, and company pay? Well this is company housing," says one old man. "How can you afford to get out of here making $5.15 an hour? You end up with $30 after a shift. How can you afford $300 for an apartment? And then you've got utilities and you still have to eat."

Another, younger man named Carlos echoes this thought.

"Basically it's a warehouse for the temp agencies," he says. "They'll come in here in the middle of the night, wake you up because they need some workers. Then they lie to you. They'll tell you you'll make $7.50 an hour and then when you get paid you find out it's really $5.15."

This is one of the faces of welfare reform. The nation's ability to push down unemployment without causing inflation was a driving force behind the thriving economy of the late 1990s. Historically when the economy nears full employment, wages are forced up and the gears of capitalism's machinery begin to slow down. To keep this from happening, a large, more "flexible" surplus labor pool was needed. Enter the temp industry of America.

While millions of Americans were forced off the welfare rolls, the temp industry burgeoned. The face of the temp worker changed, as temp workers switched from being primarily white collar to blue collar, rapidly expanding into light manufacturing, services, and construction work. This was more than just a change in composition: Since 1982 the temp industry has exploded, growing from 400,000 workers to more than 3.4 million.

For employers, temp work reduces their administrative, payroll, and paperwork costs. Their work force becomes elastic as they can decide on a nightly basis how many workers to call for. Firing workers is no longer necessary because technically they don't have any. Plus, no health care obligations.

If the factories like it, the temp industry loves it. They make money on each hour the worker works (for a residential carpenter earning $7 an hour in Ohio, Labor Ready bills out $15.04; temp firms bill out minimum-wage factory workers at about $10). They make money transporting workers to the job, charging $1.50 to $2 each way. They make money cashing the checks they issue at the end of each shift. (Labor Ready claimed one-fifth of their 1999 profits and 52 percent of their 2000 profits from their check-cashing machines.)

While the temp agencies profit indirectly from welfare reform (The Wall Street Journal estimates that 20 percent of former welfare recipients spend some time working for temp agencies), they also profit directly.

Since the 1996 Welfare Reform Act ended welfare "as we knew it," temp agencies have been like vultures to the carcass. Welfare reform was supposedly about weaning the welfare-dependent folks off the system by providing them training and support. Community colleges and county-contracted organizations quickly got in line to receive federal funding for this mission. The temp industry stuck out its hands too.

Manpower Inc., the world's biggest temp agency as well as the nation's single biggest civilian employer (having recently surpassed the federal government), was one of the first big businesses to sign on with President Clinton's 1997 Welfare-to-Work Partnership. The partnership serves as a tool for the business community to both make accessible and reap the plethora of former welfare funds. And reap they do.

Take, for instance, the Work Opportunity Tax Credit. Under this federal program, if employers such as temp agencies employ a former welfare recipient, they can recoup up to 40 percent ($2,400) of the workers' first $6,000 in wages. Additionally, under the federal welfare-to-work tax credit, they can recoup up to 35 percent of the workers' first $10,000 in the first year of employment and, as an incentive to keep the workers employed for an additional year, up to 50 percent the second year. Keep in mind that at $5.15 an hour, with compensated overtime rare, these workers won't exceed $10,000 in annual earnings. Under just these two programs, temp agencies can qualify for tax rebates as high as 90 percent of the wages they pay out.

The tax credits were supposed to urge businesses to bring former welfare recipients into the workforce. Behind the scenes, however, big temp business was pulling the strings. The American Staffing Association, a huge front representing the $72-billion-a-year temp industry, did some serious lobbying. They sold policymakers the idea that temp agencies were vital to providing this inexperienced workforce with necessary transitional employment, training, and experience (although not at a living wage and without benefits).

At AmeriTemps in Cleveland, when you apply for work for the first time, they ask you to call an 800 number. Staffers are vague about why you're required to read your Social Security number to a stranger over the phone. They explain only that you're obtaining a registration number. The person on the other end of the line runs the SSN through a data bank, checks to see if you are an ex-con, veteran, former welfare recipient, or of some other qualifying status, and then gives you your number. Companies like Net Profit teach temp agencies how to access these databases or they subcontract the service at a 20 percent finder's fee. Net Profit brags in their advertisements of having received more than $200 million in tax credits for their clients since 1990.

With a majority of the low-skill, low-pay crowd ending up in jobs of a mindless repetitive nature, one is left to question what possible training these agencies are offering. Racking parts—putting huge quantities of plastics on racks where they're dipped and chrome coated—is one of the main temp gigs in Cleveland. Folding, packaging, and running punch presses make up much of the rest. Young men say the work, while repetitive and "boring as hell," isn't too tough. Old men wince. Everyone winces when a factory on the edge of town by the name of Atlas Technical Plating, nicknamed "The House of Pain," is brought up. One man trying to sleep on a cot at the shelter, young and muscled, says he was too sore to work again for several days after working a shift at Atlas. "They work you to death," he says, "continuously lifting 8-to-10 pound racks above the head for 8 to 10 hours."

The men talk about shops where your "training" is learning, on the job, how to operate punch presses, also known as "finger choppers."

"A couple guys in here got their fingers chopped off," an older man named Greg Friar says. He shakes his head while he repeats the words "$5.15 an hour." Someone else adds that the punch presses have safety measures, "straps that come down and grab your hands...but sometimes they're not tuned up."

"You get hurt, you'll be lucky if you get workman's comp," Friar says. "If you have a gripe they tell you 'you don't like it, hit the door.' And if you work 40 hours, they say they don't have to pay you overtime if you didn't work all 40 hours at that place. Now, according to them, you're their employee, not the factory's. If you go down to the labor board, they'll make them pay you the overtime, but then you can't work there anymore."

The temp industry's incredible growth and unsupervised working conditions—subsidized by government funding—has drawn the ire of organized labor.

"We're talking about government money going to corporations to supposedly put people to work in full-time jobs," says Will Collette, a researcher with the AFL-CIO's national Building and Construction Trades (BCT) department in Washington, D.C. "The temp industry is actively advising all their members of the untapped potential and golden opportunities in corporate welfare. It's fundamentally against everybody's industry."

The department recently began a national campaign against the temp industry, specifically Labor Ready, the nation's biggest blue-collar temp agency.

"We found that the amount of temp workers in construction was growing rapidly, at a 15 to 20 percent clip per year," Collette says. "If left unchecked, within 5 to 10 years there would be as many temp workers working in construction as there would be union workers."

At its elemental level, in the construction industry the temp agencies have essentially created alternative "non-union" hiring halls.

"It's scary," Northeast Ohio BCT organizer Dave Cantanese says. "The prevailing wage can be eroded. If union workers do most of the work, then that's the prevailing wage. If temps show they are doing most of the work, then that's the prevailing wage."

"Basically these guys (temp workers) are just paying non-union dues over and over again," he says referring to the temp agencies' take. "They pay 50 percent for non-union representation."

Organized labor's war against Labor Ready has already shown results. After grievances were filed with Ohio and Washington state's workers' compensation bureaus, this single temp agency was fined in excess of $1 million for misclassifying workers and underpaying premiums. Investigations in other states are still pending, and Washington state has reported that it will expand its audit to include additional years.

It's not just a matter of shortchanging the state. Workers' comp premiums vary according to the occupation. For hazardous jobs the premiums are as high as a third of the wage rate, while for office jobs they can be as low as one-half of one percent of the wage. Misclassification of blue-collar work as white collar is serious. First, the companies doing this have an incredible advantage when it comes to bidding jobs. Additionally, if a heavyweight employer pays less than its share, eventually everyone's rates will go up (because claims and premiums are pooled). This puts employers and contractors who pay decent wages and benefits further behind as they end up paying higher and higher workers' comp rates.

"The whole nature of work is changing in this country," says Collette. "The shift to contingent work changes, confuses, and complicates the relationship between the worker and the work—and not for the benefit of the worker, that's for damn sure."

It's 10 p.m. on a cold January night in Cleveland. Work has been slow lately, and men and women have been gathered in the hall since 9 when the doors first opened. It's first come, first served, and all 40 wait, knowing that only a handful will be sent out tonight. The shift—and pay—starts at midnight. Adding in transportation and waiting, those that do get sent out will have given more than 11 hours for an 8-hour-shift's worth of pay.

Here at AmeriTemps, the dispatcher, Will, subjects the crowd to what many call the Sermon on the Mount. He stands behind a counter that—thanks to an elevated platform on the other side—makes him look 10 feet tall (whereas only the tallest workers can even rest their chins from this side), and stares down at the group. Old bearded men with worn faces shift in their seats and cast their eyes to their shoes.

"Our way or the highway.... Times are changing, and those that don't adhere will be weaned out," he says, as if possessed by the Holy Spirit. He explains how the real world works. Workers will get in line. There will be no more complaints from companies. Attitudes will be positive.

No one makes a sound while Will condescends for 20 minutes. They know that if they speak up, get up, or even stare back, they'll lose the chance for a hard night's work at $5.15 an hour.

Outside, Stephen Abnor, a laid-off welder, echoes what many in the shelter say.

"It's a new name for an old game," the 53-year-old says with a dramatic pause. "Slavery. That's all it is. How are you supposed to get paid for me working? No benefits, no hospitalization, and then they're deducting all these things."

"Let's face it, 90 percent and upwards of these people are black," he continues. "When a white boy comes in there, he fills out the application, sits down, but his seat never gets warm. Not to make this a racial issue, but I want you to know, even after years of welding, my eyes are bad, but I'm not blind."

Josh Greene is a free-lance writer and sometimes construction worker in Cleveland. The abuse of temp workers came to his attention last fall when he was invited by several homeless men to spend a week on the streets. Greene has written extensively on this topic for the Cleveland Free Times.

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