Economists: SC firms turning to contract labor

COLUMBIA A growing use of contract labor by South Carolina employers has led economists to conclude that more firms in the state have made it a permanent part of how they do business.

Doug Woodward and Joseph Von Nessen, research economists at the University of South Carolina, discussed the phenomenon Wednesday while presenting their annual economic outlook.

They said an increasing share of South Carolina's job growth falls under the "employment services" category, which includes contract labor firms and temporary help services.

The category typically grows at the beginning of an economic recovery, then declines as firms gain the confidence to boost their own payrolls instead of turning to a staffing agency, Von Nessen said.

In recent years, however, the category has continued to grow beyond the initial period of economic recovery from the last recession, he said.

It accounted for 7 percent of South Carolina job growth between 2003 and 2007, and 13 percent over the past four years, Von Nessen told The Greenville News.

Over the past year, the figure grew to 32 percent, he said.

Economic growth has stabilized "and yet that hiring pattern hasn't changed," Von Nessen said. "And that's unique to this expansion."

It's a national trend but more pronounced in South Carolina, he said.

Von Nessen said it's possible that employers got accustomed to using contract labor during the unusually long period of uncertainty following the last recession.

Now, he said, it's possible some firms have decided to make it a permanent part of how they do business.

Among the major employers using contract workers in the Upstate is BMW Manufacturing Co. in Greer.

The automaker says there are more than 8,000 jobs at its U.S. plant but won't say how many workers are on its own payroll and how many work for a staffing service.

BMW spokesman Steve Wilson did say Wednesday that starting pay for production workers on the BMW payroll is $15.50 an hour, plus benefits. For contract workers, it's $15 per hour, plus benefits, he said.

Greenville-based Michelin North America, lists 8,900 employees in South Carolina, and all of them are on the company's payroll, according to spokesman Tony Fouladpour.

"We don't break out the number of contractors as this fluctuates with demand," he said.

Joe Seiner, a professor at USC's law school and labor expert, said South Carolina's low unionization rate and lack of legal consequences for firings may encourage the use of contract labor.

He said companies have various reasons for turning to contract labor.

For example, he said, they might use it to keep the number of employees on their own payrolls under 50 to escape the federal requirement of offering 12 weeks of unpaid leave to workers who are pregnant or facing a serious medical condition.

Hoyt Wheeler, another labor expert, said contract workers are typically paid less and have fewer benefits.

Their widespread use is worrisome for a state "concerned about the quality of jobs" but acceptable "if all you want is people having some kind of job," said Wheeler, a retired professor of management at USC's Moore School of Business and a longtime labor arbitrator.

Wheeler said South Carolina has typically recruited companies with the argument that they won't have to worry about a labor union if they put jobs in the state.

But union workers have their work terms guaranteed by contract, he noted.

"If you want higher wages, that's the way you get them," Wheeler said.

Allison Skipper, spokeswoman for the state Commerce Department, said companies cannot use contract jobs to claim tax credits that South Carolina grants in exchange for job creation.

The USC economists also said they expect the South Carolina economy to continue growing in 2015.

They predicted jobs would grow at a rate of 1.9 percent, about the same as this year's 2 percent rate.

Woodward and Von Nessen also said they expect the unemployment rate to fall from 6.7 percent to 6.3 percent.

"If you liked 2014, then you'll like 2015," Von Nessen said.

They said Myrtle Beach was the South Carolina metro area with the biggest job gains in 2014, partly explained by lower gas prices.

"Low gas prices really works in our favor, especially a place like Myrtle Beach" where a lot of the tourists arrive by car, Woodward said.