Distraction Free Reading

Precarity, Exclusion, and Contract Work in the Tech Industry

At the satellite office of a Fortune 500 company, employees buzz around the main floor of the building. At first glance, they all seem similar. Dressed in business casual – jeans and a dress shirt— people wait in line for coffee at the coffee cart, stop and chat with coworkers, or zip past one another on the way to meetings. However, if you look at their badges, hanging from lanyards on their necks or trousers, a pattern appears. Some have dark green badges, while others have bright red ones. Those with the bright red badges, standing out in the crowd, are the contract workers.

A 2018 NPR/Marista Poll reports that in the United States about 1 in 5 workers are employed under contract, and that number will only grow in the next decade. This number is especially high in the tech industry. In 2018, both Fortune and CNBC reported that Google’s contract employees now outnumbered “full-time employees” (FTE) or permanent workers. At the Fortune 500 company mentioned above, the majority of those with red badges are indeed from the tech departments within the company – digital design and engineering. While scholarship on the topic has pointed to the growing tech underclass completing tech piecemeal work (Gray and Suri, 2019), for this post, I am discussing positions traditionally classified as skilled or, even, highly-skilled work in software and hardware design, development, and engineering.

Over the last two years, I have traveled in the tech circles of my local software and hardware design and engineering communities, working as both a contractor and full-time employee. Drawing on Karen Ho’s (2009) experience of work as ethnography, I base my observations in this post from my discussions, meetings, and conversations with others in the community and my own experience in situ. Because the tech community in the Upper-Mid West is small, I have purposefully combined detailed or kept some of the details vague.

A History of Flexibility

Freelance and contract work is nothing new for the tech space. During my 2010 fieldwork in Berlin’s startup community, several of my informants worked happily as freelancers. This kind of work aligned with the popular discourses in these communities, which privilege mobility and flexibility. Freelance and contract work is supposed to trade traditional work perks, like healthcare, vacation, and retirement for increased worker freedom. Many of my informants enjoyed this freedom; they could pick and choose projects, move from company to company, and work within their own self-defined parameters. However, this “freedom” part is being left out of the equation by many companies in the US, including the aforementioned Fortune 500 company. In other words, some corporate contract positions are merely traditional jobs without the benefits.

In 2000, Microsoft settled a class-action lawsuit, in which temporary workers claimed they were actually treated like permanent ones. The case began in 1992 when contractors brought a lawsuit against Microsoft claiming that the company had misclassified them as temporary workers and, thus, were denying them employee benefits. The court found in favor of the “permatemps” and Microsoft agreed to pay the contractors a settlement of $97 million (Florzak 2002, 169). While this case remains a cautionary tale, many corporations still behave this way—although, perhaps slightly more carefully. While corporate contract jobs vary by company, these workers often work alongside their “fully-employed” counterparts, often even doing the same work. Furthermore, unlike contractors from my fieldwork in Berlin, these non-employees are told when, where, and how they must work.

More than lack of benefits

A key difference between contract and non-contract workers is the lack of benefits. This means that huge swaths of white-collar tech workers are creating and designing software and hardware without health insurance, sick leave, or retirement benefits. I have witnessed tech workers forgoing basic medical care because they did not have health insurance. Although their take-home pay is much higher than service workers and low-skilled laborers without insurance, these American tech workers often deal with similar conundrums when it comes to being sick: Is it worth losing 8 hours of pay to stay home? Is it worth paying hundreds or thousands of dollars to visit a doctor? For workers without healthcare and without job security, an unexpected illness or injury can be disastrous.

The terminal nature of the contract, although often renewable, looms over any job. Renewal criteria and decisions are not always explicit beforehand, leaving some workers in a guessing game. As such, given short 6-month contracts, some workers are always on the job market. One software designer described to me how towards the end of her 6-month contract, she began reaching out to her network and applying for jobs – just in case. In the end, her contract was extended, but the constant need to look for and possibly secure employment is psychologically exhausting.

While they are often doing the same work on the same projects alongside full-time employees, contractors are constantly reminded of their employment classification. While they differ from company to company, these reminders include things like holiday party exclusion, different email addresses or even completely different email systems, and even small things, like reward T-shirts. Many companies’ sponsored social events for employees are not available to contractors and becomes a mechanism to further socially isolate contract workers.

While some contractors speak of companies where contract workers are overtly separated or isolated, the experience of most in the Upper Mid-west highlights a subtler form of exclusion where small things like badge color or coworker comments help remind people of their status. In some settings, townhalls and corporate meetings—all which effect the contractor—are excluded from eligible billing time or, in some cases, deemed to have too much “sensitive” information for non-employees. In one case, a worker described to me that while she was directly involved in creating the sensitive information presented at a meeting, she could not actually attend given her contract status.

Broken (psychological) contracts

Furthermore, within the corporate setting contractors also miss the intangible benefits of being a permanent employee like mentorship and training. By doing this the contract class becomes a shadow employee force with little corporate mobility; It creates a dividing line between haves and have-nots. Questions of corporate mobility become especially salient in some fields, like software engineering, where many contractors are both immigrants and people of color. Because of the enormity and importance of this topic, I plan on addressing it as its own follow-up post here on the Platypus, but it is worth mentioning that contract work becomes a legal structural way to discriminate against people of color and keep managerial and executive leadership white.

While the lack of benefits and job security are clearly problematic, particularly when the flexibility of traditional contracts is ignored, I argue that this form of employment is not beneficial for either side. While the contract position may create short-term savings for companies, the long-term effects have yet to be measured. Psychological contracts, which Kapusta-Pofahl (2019) describes as the informal, mutual expectations developed between employees and employers that are tied directly to employee morale, have no opportunity to flourish in these precarious employment situations. The psychological contract, which “fills in where the formal contract leaves off” (96), emphasizes the relationship between employee and employer in the actual production of work. Broken psychological contracts imposed by the precarious and exclusionary employment offered by temporary contracts contribute to high turnover, poor morale, and ultimately, has the potential to impact a company’s long-term technological productivity and innovation strategies (Dabos and Rousseau 2004). Therefore, while contract and temporary employment in software design and engineering is not within itself a problem, the way that large American corporations are implementing these roles within their companies will have lasting impacts on the employees themselves, the tech industry, and ultimately, the US economy at large.

Works Cited

Dabos, G. E., & Rousseau, D. M. (2004). “Mutuality and reciprocity in the psychological contracts of employees and employers.” Journal of Applied Psychology, 89(1). 52-72. DOI: 10.1037/0021-9010.89.1.52.

Florzak, Doug. “Are You Ready for the E-lance Economy? (Applied Theory).” Technical Communication, May 2002, 162 -170.

Gray, Mary and Suri Siddharth. Ghost Work: How to Stop Silicon Valley from Building a New Global Underclass. Boston: Houghton Mifflin Harcourt, 2019.

Ho, Karen. Liquidated: An Ethnography of Wall Street. Durham: Duke UP, 2009.

Kapusta-Pofahl, Karen. “Faculty Psychological Contracts in Precarious Time: The Need for Strategic Human Resources Management in Higher Education.” Journal of Higher Education Management, 32(2). 97-103. http://www.aaua.org/journals/pdfs/JHEM_2018_33-2_Online.pdf

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