The evolution of work and the growing contingency of labor practices in the Massachusetts life sciences industry

Abstract

Contingent work has been used to describe a wide range of non-standard, short-term employment arrangements to include self-employment, home-based work, on-call work, temporary work, contracting, and other alternative employment arrangements. In 2005, the Bureau of Labor Statistics estimated that about four percent of total employment in the U.S. was comprised of contingent workers. Just five years later this figure nearly doubled to 7.9 percent according to a report by the U.S. Government Accountability Office, though more liberal measurements record this number to be closer to 40 percent (2015). Another five years later in a report published by Katz and Krueger, the estimate doubled once again to 15.8 percent (2016). It is clear that the use of contingent labor to complete work tasks is increasingly an essential element utilized by businesses as they shed non-essential functions in order to focus on their core competencies. This reflects a belief that a lean operating model will optimize companies' cost structures and provide flexibility to react efficiently during down and upturns in the economy. The use of contingent labor modifies the conventional relationship between capital and labor in the formation of skill. Previously, skill was described as encompassing general and specific skills. General skills represent the skills and experiences workers bring to the job from formal training and tacit knowledge gained in previous work contexts. Specific skills represent skill augmentation that derives directly from the work experience gained by working with a unique employer. The labor contract typically includes the combination of both skill enhancing experiences. Rents are collected by both parties up to the value of each party's marginal product and hence contribution to labor productivity. Today's utilization of contingent labor ignores the significant costs associated with recruiting and training new hires as well as the indeterminable loss in value from utilizing a workforce that is less incented to see their companies succeed. The lack of specific skills of contingent workers diminishes productivity and causes the firm to incur training costs, which may not be recovered due to the shorter job tenure. This thesis investigates the use of contingent work in the Massachusetts life science industry. The demands of capital markets are fiercely pressuring companies to grow and generate large returns for its investors. However, this places an uneven amount of focus on the commercialization of its products causing the industry to hone in on its core competencies and shed non-essential functions, thereby expanding the use of contingent labor. This thesis is framed by the discussion of a looming imperative amidst industry constraints and the subsequent effects created by the dichotomy. The first part of this thesis describes the evolution of work and the emergence of financial pressures compelling the life science industry to utilize contingent labor in several of its key R&D and manufacturing functions despite the obvious benefits associated with career jobs to both the employer and employee. The demands of capital markets continue to drive specific actions of the life science industry (imperative), however the industry is characterized by high cost, long production cycles, tremendous volatility, and a critical reliance on capital flows (industry constraints). Chapter five presents the findings, which examines the net results from the interplay between the imperative and constraints. What effects is this imperative having on life science companies facing these constraints and how are they reacting (subsequent effects)? Many are beginning to behave irrationally and at odds with its long-term goals diminishing the innovative potential of the industry as a whole and adversely impacting the workforce powering the entire mechanism. This thesis attempts to coalesce these broad themes to tell the story of what is happening to work in the Massachusetts life science industry.