Use of employees and alternative work arrangements in the United States: a law, economics, and organizations perspective

This paper considers the incidence of employees versus other forms of work in the United States, including temporary agency workers, contract company workers, independent contractors, and self-employment. It does so within a single, unifying framework. The approach takes an economics of organizations focus to consider when it is optimal for the firm to control the work routine instead of the worker. This is critical in defining and determining employment versus other forms of work. The cost of measuring output and monitoring effort and of worker versus firm expertise are important in determining the organization of work. This approach proves fruitful, but it also is important to account for the impact of certain legal restrictions in the U.S. labor market. The empirical findings show that independent contractors are in jobs that require worker expertise and training and for which monitoring of worker effort is difficult. Contract company workers' characteristics are a hybrid between independent contractors' and employees'. Temporary agency workers occur where the firm wishes to legally outsource its low-wage workers yet still maintain a degree of control over their work routine.