The Plight of the Invisible Worker

Israel is at the top of the Western world in the extent of contract workers in the labor force.

By ZIV HELLMAN
November 2, 2011 15:59
Invisible workers 521

Invisible workers 521. (photo credit: NATI SHOHAT / FLASH 90)

 
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Tedesa Yeshi, a middle-aged Ethiopian immigrant living in the Kiryat Menachem neighborhood of Jerusalem, was initially very happy to be hired by a manpower company in 2005 to work as a cleaner. She was promised steady work and salary.

There was indeed plenty of work for Yeshi, who was sent to clean several public institution buildings at long and late hours.

But at a certain point, salaries started being paid late, and then not at all for several months. The company’s representatives, she says, treated her and her complaints dismissively.

“I kept asking what about the salary, and they kept telling me to wait another day or two,” recalls Yeshi. One day in 2006, the manpower company suddenly shut down, its owners declaring bankruptcy. Yeshi, who lacks the economic means to pursue lengthy legal action against the company, has not been paid to this day, but is still trying to get some compensation with the assistance of the legal department of Yedid, a non-profit organization dedicated to promoting civil and social rights.

Employees of Yedid’s legal department handling complaints relating to manpower companies tell The Jerusalem Report that they often deal with issues of overtime hours without pay, denial of holiday leave, sick days or maternity leave, late salaries and sometimes even no salaries paid at all, as in the case of Yeshi.

Yeshi still hopes that someday the money that is owed to her for her hard work will be paid. She is still working as a cleaner for manpower companies. “I don’t see that I have much choice,” she sighs.

In Israel in 2011, contract workers hired by manpower companies are ubiquitous. Estimates of the number of contract workers in the country indicate that perhaps as much as 10 percent of the labor force today works for an outsourcing manpower firm. According to the International Labor Organization the comparable figure in Britain is 4.8 percent, in Japan, the Netherlands and France it is 2.8 percent, and in the United States 2 percent, placing Israel at the top of the Western world in the extent of contract workers in the labor force. The number of manpower companies offering workers for hire is now at least 1,300 and growing every year to supply increasing demand from both the public and the private sectors.



Some of the contract workers are what are termed “invisible workers,” employed in cleaning, maintenance, gardening and security, the workers whom middle-class office employees see every day but often treat as if they are not even in the same room with them. But the phenomenon has expanded to such an extent that, in many cases, two people doing almost identical work in the same office may actually be working for two different employers, although one is a permanent staff employee and the other a contract worker hired through a manpower company.

Such a situation can persist for years. A new term has been coined to describe the phenomenon: “perma-temp workers,” people who work at the same job on what appears to be a permanent basis but are actually temporary workers who are technically fired and rehired every few months.

In the past, outsourced workers were mainly cleaners and gardeners, but that is no longer the case. Line workers at manufacturing plants, secretaries, customer service representatives, administrators, teachers, invigilators, stenographers, private security guards, nurses, technicians, social workers, pharmacists and even on-site psychologists nowadays may be contract workers hired through manpower companies.

The differences between a permanent worker and a perma-temp colleague are more than merely technical. By law, permanent workers benefit from labor law protections that do not apply to temporary workers. In workplaces in which workers covering work conditions, salary levels and benefits, the collective agreements usually cover only permanent employees. Over time, the differences in salaries and benefits can become significant, essentially creating two different classes of workers.

“This is the most vulnerable form of employment,” says Ariel Rubinstein, a recipient of the prestigious Israel Prize and professor of economics at Tel Aviv University, who has been active for over a decade in efforts to improve the conditions of contract workers.

“It strips workers of their independence. On the one hand, they take orders from the immediate place in which they work, but, on the other hand, they are formally working for someone else, the contractor, whom they rarely see – maybe once a month when they get their pay slips, maybe not. These workers often do not know where to turn with complaints. And they can be fired at a moment’s notice.”

The phenomenon of outsourced contract work has spread so widely that a campaign by advocacy groups and politicians to push for legislation to regulate or even ban certain forms of contract work has been gaining momentum in recent months. The Histadrut Federation of Labor Unions is giving the matter such high priority that it is threatening to conduct a nationwide strike unless the government and the Knesset take urgent steps to curtail manpower hiring.

The Histadrut is demanding that as many contract workers as possible be moved to direct employment under individual or collective agreements.

The focus on the subject of contract workers has not emerged out of a vacuum – it is one of the results of the summer’s massive social protests, which brought out hundreds of thousands of Israelis to march in the streets demanding social justice.

Yossi Yonah, professor of education at Beersheba’s Ben-Gurion University, who co-chaired with Avia Spivak, professor of economics at Ben-Gurion, a committee hired by the protest movement to compose a comprehensive report on recommended economic reforms, tells The Report that the subject of contract workers emerged early on in the committee’s deliberations as a centrally significant issue.

“The subject came up again and again in just about every subcommittee,” says Yonah. “It quickly became clear that dealing with this phenomenon would have to be an integral part of our final report. And we came to the conclusion that we, as a country, need to put a stop to manpower hiring.”

Rubinstein says that he has come to the conclusion that laws banning most outsourced hiring need to be adopted as soon as possible. “The social protest movement keeps talking about social justice,” says Rubinstein. “This is precisely a matter of social justice.”

Back in 1998, on the occasion of Israel’s 50th Independence Day, Rubinstein was asked to lecture on economic competition and its effects on the country. This drew Rubinstein into studying how his own employer, Tel Aviv University, had decided to outsource campus cleaning services for cost reductions.

The more he looked into the subject, the more it disturbed him.

“Who gets to know the cleaners in his or her office building? Who talks to them?” says Rubinstein. “People ignore them. They are ‘invisible workers,’ treated like leaves blown by the wind. I started by talking to the cleaners. Cleaning services used to be done by university employees, but at a certain point the university decided, for the sake of efficiency, to outsource cleaning.”

The experience was an eye-opener for Rubinstein.

“I saw 15- and 16-year-old girls working late hours for perhaps 1,000 shekels ($275) a month,” continues Rubinstein. “They were shabbily dressed, sometimes barefoot and not even given gloves to protect their hands.

Many did not even know what they were being paid, had never seen a pay slip, and their wages were going to their parents.”

Under Rubinstein’s leadership, a group of professors at Tel Aviv University banded together to advocate for the rights of outsourced workers. They became a form of ombudsman for the workers, a place they could safely turn to, knowing that the professors, who could not be fired by the university and had some clout, would speak to university administrators for them.

The actions undertaken by Rubinstein’s group brought about significant improvements in the way contract workers were treated by Tel Aviv University, in his estimation.

Similar advocacy groups for contract workers spread to other universities, led by student and faculty groups.

In mid-October, the Hebrew University Student Union initiated a lawsuit against the Hebrew University of Jerusalem in an attempt to push the university to reveal the details of contracts it had signed with five manpower companies for the hiring of hundreds of cleaning and maintenance workers. In a press statement, the student union stated it was undertaking this action out of concern that the working conditions in the contracts might be “harmful to the workers.”

Although the focus on the plight of contract workers may have largely begun in universities, advocacy groups are now increasingly looking into the conditions of contract workers employed by the governmental sector, which includes government ministries, municipalities and local authorities, and subsidiary companies owned by government offices.

A thorough study conducted by the Knesset Research and Information Center four years ago revealed that the percentage of the workforce in government offices that is hired through outsourced contractors ranges from eight percent to 35 percent, and is 20 percent on average. Many of these workers are perma-temps; for example, 37 percent of the contract workers in the Labor Ministry had been working there at least five years as of 2007.

The Civil Service Administration does not consider such workers to be under its purview, because they are employees of the contractors, not the state. Furthermore, the Knesset researchers found that little to no fundamental studies had been conducted by government offices to ascertain whether the system of hiring contract workers is more efficient than hiring permanent staff.

How did this come about? “The roots go back to the 1985 economic stabilization program,” explains Yonah.

“There was intense pressure to reduce deficits, partly by cutting down on the public sector. The large immigration wave from the former Soviet Union that began in late 1989 greatly increased the population, thus necessitating an increase in the number of public sector employees to serve the larger population, but the state had already committed to reducing overall public sector employment.

“The solution that was found was to hire outsourced workers instead of hiring them directly. That way the work gets done,” Yonah adds. “But since official statistics on government employees usually consider only permanent staff, the government could claim that it had not expanded its workforce.

It spread from there to the private sector.

We are now the No. 1 country in the world in terms of the percentage of workers hired through outsourcing contracts instead of hired directly.”

Orly Benjamin, senior lecturer in the Department of Sociology and Anthropology and the Gender Studies Program at Bar-Ilan University, tells The Report that the phenomenon should be regarded in a global context, as part of globalization efforts by international bodies.

“In 1979, the World Trade Organization began articulating government procurement codes,” says Benjamin. “In 1983, Israel signed the government procurement code, and 14 governmental bodies began implementing competitive compulsory tendering. Prior to that, the cost of the tender was not the exclusive criterion for choosing the winning bid.” Competitive compulsory tendering refers to rules requiring public agencies to hire services through tenders that give contracts only to contractors who can promise cost reductions. Benjamin explains that once cost became the sole criterion, contractors had an incentive to submit price bids so low that the only way they could profit was to find ways of reducing labor costs by squeezing workers in various ways, such as paying them below minimum wage per hour, denying them holidays, not paying for overtime hours, and so on.

“Even the contractors admit that low bids lead to systematic violations of the labor laws,” continues Benjamin. “The state used to buy gardening and private security services from contractors who submitted bids that on paper left them with losses.

Those contractors actually profited at the expense of workers. In effect, this practice amounts to a ‘race to the bottom,’ ensuring dismal job conditions.”

Benjamin also sees anti-labor union intentions behind the spread of the contract worker phenomenon. “It is part of a general policy of weakening organized labor,” says Benjamin. “Permanent workers are protected by labor unions and collective bargaining, so employers turn to perma-temps. Municipalities turned to this approach to break the power of sanitation worker unions.”

The growing attention in recent years to the conditions of contract workers, along with legislation passed four years ago, has had some effect mitigating some of the most excessively negative aspects of contract work. For example, a law passed in 2007 mandates that winning contracting tenders for government outsourcing explicitly guarantee minimal payments for workers as part of the contracts.

“The more extreme violations of basic norms are rarer nowadays,” says Rubinstein.

“Minimum wage laws are being respected, as are laws on vacation days. But these workers are still very vulnerable. They often work extra hours without being paid appropriately, out of fear of losing their jobs.”

Rubinstein also cautions against overly-demonizing manpower companies. “The manpower companies are not always run by cruel people, as I discovered by going out and talking to them,” he says. “They are often owned by people who once worked in such places themselves and eventually became contractors. Their profits are not sky high; their profit margins are usually 12 percent to 15 percent, not the sort of rates that will make them billionaires. The main issue is the fierce competition they all face, with tremendous pressures to cut costs all the time. If the competition cuts costs by exploiting workers and gets away with it, the pressure on the others is intense.”

Opinions are divided on the question of what policies, if any, government authorities should implement. The Histadrut is calling for contract workers to be moved to direct employment. “In the past we fought for more regulation, but now we are moving it up a notch, and demanding that as many contract workers as possible become permanent workers,” says Eyal Malma, the Histadrut spokesman.

“Regulation and enforcement have been shown to be too weak,” Malma continues.

“We understand that there are cases, such as hiring workers for a specific, short-term project, in which contract work is legitimate, but we do not feel it is right for two people to work side by side in an office with one of them getting the full benefits of a permanent worker while the other one is a contract worker.”

Benjamin expresses some reservations regarding this approach. “Turning outsourced contract workers into permanent employees is not a panacea,” she contends.

“Companies have ways of reducing costs at the expense of permanent workers, just as they find ways of doing that by outsourcing.

There are companies in Israel who are known to implement illegal practices on all their employees, such as fining them for every sick day they take away from the job. The solution should be that all non-unionized employment, either through outsourcing or in direct employment, must be subjected to public criticism and transparency procedures.”

Rubinstein, in contra st, is persuaded that only banning outsourced contract work can make a significant difference.

“I used to believe that outsourced workers could be protected from the worst of what they suffered through pressure groups, such as the one I was active in at Tel Aviv University and by proper regulation,” Rubinstein asserts. “I no longer believe that.

That approach depends too much on the good will of those involved. I noticed that if the professors in the group at Tel Aviv were less active for a few months, because some prominent members were away for example, then the university would slip back into bad practices.”

That logic leads Rubinstein to a singular conclusion. “The phenomenon should be forbidden. Plain and simple,” he says. “Cut out the middleman, the contractors, and hire the workers as employees where they work. What do the manpower contractors do? They save the employer some human resources overhead, by finding workers, giving them pay slips, promising to supply immediate substitutes if a worker is ill or suddenly leaves. That is not really all that significant. The significant saving in hiring outsourced workers is the fact that they do not get all the benefits a full-time employee gets beyond the base salary. So hiring workers directly instead of outsourcing will be more expensive. Let’s not hide that. There is a price tag. But it is the right thing to do.”

Rubinstein also admits that an outright ban might not be the answer to all cases, because there are situations in which contract work is the best situation for both employers and employees. “I am not sure how such a ban [on contract workers] should be written in full legal detail,” he says.

“There are cases in which hiring outsourced contract workers is legitimate and probably shouldn’t be banned. There are, for example, computer experts whose job structurally involves temporarily going to companies and working as consultants. That is a legitimate outsourced job. But certainly jobs in which an employee is treated on the job as if he or she is on long-term staff but in fact is employed by a contractor, that should not be allowed.”

Yonah has also come to the conclusion that moving tens of thousands of people who are now contract workers into the ranks of permanent employees is the only moral choice.

Wouldn’t that be a wrenching change to impose on the economy? “Yes, it will require some period of adjustment,” agrees Yonah.

“Let’s say three to four years. Reduce 50,000 to 60,000 contract workers today to 30,000, then the following year to 10,000, and finally get to zero. It can be done.”

Nearly everyone agrees that now is the time to contend with the issue, given renewed public interest in social and economic subjects in the wake of the summer protests. At a press conference on October 11, Histadrut chairman Ofer Eini explicitly linked his organization’s threat of a strike for ending contract work to the protest movements. “The people who went out into the streets put the wind at our back and gave us the strength to correct a decades-old historical injustice,” said Eini.

“Hundreds of thousands of workers are being exploited.”


Rubinstein argues that “the time is right now, because the middle class is feeling pressure. The middle class has the free time to demonstrate that the poor do not have, and the wealthy have no interest in demonstrating. The phenomenon of outsourced workers was once limited mainly to lower-class work. That is not true anymore, it is not just cleaners and kitchen workers now.”

Yonah is optimistic that the government and the Knesset will understand that public pressure on the subject cannot be ignored and will undertake the needed reforms.

“We have an opportune moment that we did not have in the past to do something about this right now,” says Yonah. “Let’s make the most of current circumstances and put a stop to contract hiring.”

Malma vows that the Histadrut will not back down on this subject. “We are doing this because it is a struggle involving worldviews,” he says. “This is much more significant than the price of cottage cheese.”

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