What is “the fissured workplace”?

Every day, many of us eat at restaurants, stay at hotels, receive packages, and use our digital devices with the assumption that the branded company we pay for these services—Hilton, Amazon, Apple, etc.—also employs the people who deliver them. This assumption is increasingly incorrect: Our deliveries are often made by contractors and our hotel rooms are cleaned by temporary employees from staffing agencies. This is what I call the fissured workplace, the cracks upon which today’s economy largely rest, and it leaves so many without fair and decent wages, a career path, and a safe work environment. 

Over the past few decades, major companies throughout the economy have faced intense pressure to improve financial performance for private and public investors. They responded by focusing their businesses on core competencies— that is, activities that provide the greatest value to their consumers and investors—and by shedding less essential activities. Firms typically started outsourcing activities like payroll, publications, accounting, and human resources. But over time, this spread to activities like janitorial and facilities maintenance and security. Still in many cases it went deeper, spreading into employment activities that could be regarded as core to the company: housekeeping in hotels; cooking in restaurants; loading and unloading in retail distribution centers; even basic legal research in law firms.  

Like a fissure in a once solid rock that deepens and spreads, once an activity like janitorial services or housekeeping is shed, the secondary businesses doing that work is affected, often shifting those activities to still other businesses. A common practice in janitorial work, for instance, is for companies in the hotel or grocery industries to outsource that work to cleaning companies. Those companies, in turn, often hire smaller businesses to provide workers for specific facilities or shifts. 

Impacts of the Fissured Workplace

Because each level of a fissured workplace structure requires a financial return for their work, the further down one goes, the slimmer are the remaining profit margins. At the same time, as you move downward, labor typically represents a larger share of overall costs—and one of the only costs in direct control for satellite players further from the mothership, so to speak. That means the incentives to cut corners rise leading to violations of our fundamental labor standards. At the US Department of Labor’s Wage and Hour Division, the federal agency I led from 2014-January 2017, we saw violations related to fissuring in the form of failure to pay janitors, cable installers, carpenters, housekeepers, home care workers, or distribution workers the wages and overtime they had rightly earned—losses typically equivalent to losing three to four weeks of earnings. For a family struggling to get by, that translates to more than five weeks of groceries, a month of rent, or five weeks of child care.

Being split off from the main firm doesn’t only affect labor standards compliance, however. It can lower wages and access to benefits. When you work as an employee for a major business, decades of research shows your wages and benefits tend to get a bounce, regardless of whether that large employer is a union shop or not. But if you’re cut off, you’re suddenly no longer a member of the corporate family. Earnings fall significantly when a job is contracted out—even for identical kinds of work and workers. Opportunities for “climbing the ladder” fade because the person in the mail room (or, more likely, at the IT service desk) is now a subcontractor without a pathway. That not only means lower wage growth and reduced access to benefits, but also diminished opportunities for on-the-job training, protections from social safety nets like unemployment insurance and workers compensation, access to valuable social networks, and other pathways to upward advancement. It also may subject workers to greater health and safety risk as lines of responsibility become murkier. Taken together, the fissured workplace makes the workplace for many workers a more challenging and risk place to earn a living.  

Workers have faced decades of flat real earnings and deteriorating labor conditions and a widening of income inequality for the economy as a whole. Changes in how wages are set in the economy means that the fissured workplace also contributes to this trend towards growing earnings inequality.  The reasons for understanding and then addressing it could not be more serious.  

Responding to the Fissured Workplace

There is a critical paradox for the companies that shed so many activities to other organizations. If the mothership provides satellite businesses upon whom they depend exquisite detail in the timing, specifications, quality, and of course price for their contracted services—and my research and experience say they do—shouldn’t the company have some responsibility for compliance with laws?  Shouldn’t they provide opportunities for advancement for “temporary workers” who may work within their company on a full time basis, often for years?  

Federal and state laws that regulate employment, often dating back to the first half of the twentieth century, assume straightforward and clear employee/employer relationships. They make presumptions about responsibility and liability similar to those we make as customers, presumptions that ignore the transformation that has occurred under the hood of many business enterprises. Traditional approaches to enforcing those laws similarly ignore the myriad new relationships that lie below the surface of the workplace. As a result, the laws crafted to safeguard basic standards, to reduce health and safety risks, and to cushion displacement from injury or economic downturn often fail to do so. 

Responding to the fissured workplace does not mean attempting to roll back economic history. That is neither an achievable nor desirable objective. We can seek ways to balance the benefits of new working arrangements with the interests of millions of workers who create enormous value each day for major businesses, their investors, and their customers. The materials available on this site provide descriptions, explorations, and evaluations of the strategies and approaches we followed during the Obama administration as well as new and creative policy options for the future. And we will examine actions that might be taken by worker advocacy organizations and employers to address the many challenges created in the modern workplace. We hope you will be a part of this ongoing exploration and return to this site often.