At one time in history, the janitors, bus drivers, food service workers, and security guards who staff corporate campuses might have been employed directly by the businesses where they cooked lunches and cleaned floors. That’s become less and less true in recent decades, according to a new analysis of labor data by researchers at the University of California - Santa Cruz — especially in Silicon Valley.
In their study, Everett Program executive director Chris Benner and Kyle Neering designate a category of “potential contract workers,” who work in industries that they’ve determined have a high likelihood of contracting to some extent with the tech industry. Those include menial jobs like landscaping and security, but also white-collar occupations such as consulting and accounting.
Extrapolating from the size of the tech industry in the two counties that make up Silicon Valley, they then estimate that there are between 19,000 and 39,000 people who are contracted to work for tech companies, and 78,000 people in the potential contract workforce more broadly. That’s an increase in contracted employment of 54 percent since 1990, compared to just 18 percent in the private sector workforce writ large.
That trend isn’t unique to Silicon Valley, Benner says. But tech companies pioneered and modeled the systems needed to monitor and coordinate external service providers, allowing them to focus on their core competencies — and scale up or down quickly with a minimum of HR hassle, which is inherent to running a start-up.
There are also some crucial differences between the people who work at Google without working for Google, or work at Facebook without working for Facebook.
Subcontracted workers make about 70 percent of the salary that in-house workers in similar occupations make, or an average of $40,000 a year, compared to $113,300 for directly-hired tech employees — making it incredibly difficult to find an affordable place to live within a reasonable distance from work. According to Census data, they depend more heavily on food stamps, and 30 percent lack health insurance.
They’re also much more heavily Hispanic. While eight percent of direct-hire workers in the tech industry are Hispanic, the number is 35 percent of workers in potentially contracted industries. The demographic category that shrinks dramatically in the contracted workforce is not white people, but Asians and Asian Pacific Islanders, who are heavily represented in the ranks of developers and engineers at tech companies.
Looking at just the blue-collar occupations, however, the picture changes again — white people start to disappear, and Hispanic people constitute a majority. "Maybe 'more diverse' is too loose a term," says Benner. "The key point is that there is strong occupational segregation by race, with Latinos and African-Americans in poorer employment opportunities."
Ben Field is the executive director of the South Bay Labor Council, which has helped launched a campaign to organize workers in those subcontracted industries. He’s come to the conclusion that the tech sector isn’t an engine of middle-class growth in the same way that the auto manufacturers were towards the middle of the 20th century, because increasingly globalized tech companies don't always consider themselves integral to the communities where their headquarters reside.
“Silicon Valley has evolved from a place that saw its responsibilities fairly broadly — not only to its shareholders and customers, but also its workers,” Field says, naming companies like Hewlett-Packard among those that that once demonstrated a commitment to their backyards. “Now it is really a place that has focused primarily on its shareholders, and customers as well, and their workers are not really part of their primary considerations.”
One defender of Silicon Valley, the San Jose Chamber of Commerce, did not respond to a request for comment. A spokesman for the Silicon Valley Leadership Group was unavailable for comment.
These increasingly prevalent business relationships, which are part of what's come to be known as the "fissured workplace," put workers in a tough position. Companies that have outsourced their non-core functions seek the provider that can offer the same services at the lowest cost, forcing subcontractors to keep wages as low as possible in order to compete.
“You’re at the end of those supply chains, and the employer doesn’t have the money to provide good wages,” says Derecka Mehrens, executive director of Working Partnerships USA, which is also working to raise standards for low-wage workers in Silicon Valley. “So the organizing model has been very difficult, because you’re trying to squeeze water from a rock.”
That might be starting to change. The various campaigns around subcontractors, by contrasting the enormous profits of tech companies with the difficult circumstances of their indirect employees as a parable of the inequality that plagues the rest of the economy, has won some gains: The bus drivers who shuttle employees from San Francisco to work down Valley have rapidly unionized, and negotiated contracts with markedly higher wages. Some companies have stepped up on their own, most notably Facebook, which last year announced a policy requiring all its contractors to pay at least $15 an hour and offer a minimum of 15 paid days off. Apple decided to hire all its security guards as employees.
In a report accompanying the UC Santa Cruz paper, Working Partnerships outlines a list of actions that could constitute a “responsible contracting” policy, which it hopes companies will embrace as a way of sharing their wealth with workers they depend on, even if they’re not contributing to the product itself.
Meanwhile, some of the direct-hire employees of the tech companies themselves are pushing their own CEOs to take a look at the services they’ve contracted out, to make sure those workers are as well-treated as the ones whom they keep happy with laundry pickup and free lunch.
Paige Panter is the director of product at a company called Unitive, which helps businesses hire more diversely. After hearing about the subcontracting phenomenon from a union organizer, she got involved with a new group called the Tech Workers Coalition, which has begun to gather members and organize events around the question of how the privileged workers at the core of Silicon Valley companies can leverage their positions to help those on the periphery.
“There is a growing attitude of tech workers who are tired of our execs and venture capitalists setting this tone of privilege and being ok with the status quo,” Panter says.
The biggest problem they confront, Panter says, is the perception that Silicon Valley can remedy inequality through hiring people with little formal education who can acquire tech skills and make six-figure salaries, too. That may be possible, but it doesn’t take care of all the service workers who support the technical “talent.”
“One thing we’re really working on is undoing this magical thinking that anyone can go to a dev bootcamp and become a programmer,” Panter says. “That’s a beautiful story, but there’s this other step: Any time a new tech job comes into appearance, four more service or low-wage jobs are created. It’s never going to be the route to fix the system.”
To start out, the Coalition is figuring out how to ask their companies to look at what it would cost to hire their contracted workers directly. That way, tech might become a more effective engine for regrowing the middle class.