Chapter 3: Temporary Labour
Identify ethical problems: Does the hiring of temporary labour create an ethical problem?
The hiring of temporary labour might create an ethical problem, depending on the
circumstances. Sometimes managers use temporary labour for a short-term need, such as a
special project. For example, temporary employees may be hired for construction of a new
facility. This type of hiring would probably not pose an ethical problem. An ethical dilemma is
more likely to occur in cases where workers are hired for long-term needs. In such cases,
potential conflicts exist among the company, regular workers, temporary workers, and others.
This ethical problem is open-ended (i.e., has no single correct solution) because of uncertainties
about how the use of temporary labour affects companies, workers, and the economy. Are
workers better or worse off? Are pay levels higher or lower? What trade-offs occur between
different worker groups, and are those trade-offs appropriate? What are managers’
responsibilities to different groups of workers? Does the use of temporary labour improve
business competitiveness? Does it lead to greater homelessness? What is the overall societal
cost/benefit?
Objectively consider others: What assumptions lie behind the different viewpoints presented in
this example?
For this problem, you were asked only to identify assumptions, not to evaluate them. This
question should help you learn to recognize assumptions for different viewpoints and to
present them objectively. You might want to express their opinion about whether or not you
agree with a viewpoint; however, your answer to this question should be as nonjudgmental as
possible. Your goal is to explore assumptions rather than to judge them.
Here are some possible assumptions underlying the different viewpoints presented in the
textbook; you may think of others.
Assumptions of managers:
 It is desirable to reduce the risk of loss.
 As business conditions change, temporary workers are likely to be hired and terminated
more quickly than regular workers (i.e., temporary labour costs are more likely to be
truly variable).
 The quality of work is unaffected by the use of low-paid or less-skilled temporary
workers, or a decline in quality is more than offset by a lower wage cost.
 Regular workers will not demand pay increases if they learn that skilled temporary
workers receive higher rates of pay.
 Low-skilled workers will accept lower pay when hired on a temporary rather than a
regular basis.
 It is okay to avoid making hiring commitments to low-skilled employees.
 Even during labour shortages, it is possible to hire temporary workers to fill positions.
Assumptions of economists and business analysts:
 Companies are less reluctant to hire temporary than regular workers.
 New workforce entrants, workers who have been laid off, and workers wanting flexible
work schedules are more likely to be hired as temporary workers than as regular
workers.
 Regular employees are less likely to be laid off when companies use temporary labour.
 Regular employee morale is higher when the risk of layoff is lower.
Based upon the issues listed in the text, assumptions of labour groups, homeless advocacy
groups, and others opposed to the use of temporary labour might include the following:
 The use of temporary labour allows companies to pay lower rates, and lower rates are
unfair to both skilled and unskilled workers.
 The least-skilled and lowest-paid workers are more likely to be laid off when they are
hired as temporary workers.
 The least-skilled and lowest-paid workers who are laid off are more likely to live in
poverty and/or become homeless.
 Temporary workers are less well represented than regular workers.
 Temporary workers are less likely to receive health care and retirement benefits than
regular workers.
Clarify and apply ethical values: Is the hiring of temporary labour a business issue, a social
issue, or both?
Based on the arguments presented in the textbook, the hiring of temporary labour is both a
business issue and a social issue. It is a business issue because it affects company profitability
and risk, which in turn affects the overall economy. It is a social issue because it potentially
affects the well-being of workers, particularly those who are less-skilled and lowest-paid.
Different people are likely to have different opinions about whether it is fair for employers to
pay different wage rates and provide different benefits to temporary and permanent workers
who perform the same jobs and also about whether it is fair for businesses to pass their
business risks directly on to the employees. However, the textbook asks you to identify the
values you use when addressing these questions. Thus, you need to consider what it means to
be fair and how values relate to the concept of fairness. Below are several possible values that
could be used by managers when making temporary labour decisions; you may think of others.
 Value: Managers should take actions that maximize company profits. Under this value, it
is not relevant to address questions of fairness when deciding whether to use
temporary labour, unless employee, customer, or others’ perceptions of fairness affect
the costs and benefits to the company from using temporary labour.
 Value: Managers should take actions that are legal. This value is similar to the preceding
one; it would not be necessary for managers to consider questions of fairness beyond
compliance with labour or other laws.
 Value: Managers should take actions that maximize the social benefit and/or take
actions that do no harm to others. Under these values, managers would need to assess
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the effects of their employment choices on others and society as a whole. This type of
assessment could be difficult to perform, given uncertainties about the effects of
temporary labour arrangements on unemployment, poverty, homelessness, access to
health care, etc. Thus, it is not immediately clear whether it would be fair to give
different pay and benefits to temporary versus permanent employees who perform the
same jobs, or whether it would be fair for businesses to pass their business risks directly
on to the employees. These practices would be considered fair if they improve overall
societal benefits, as argued by economists and business analysts. However, these
practices would be unfair if they harm society, as argued by labour groups, homeless
advocacy groups, and others.
Value: Managers should take actions that are most fair to permanent employees. Under
this value, the interests of regular employees should take priority over the interests of
temporary employees, shareholders, society as a whole, or others. Assuming that
regular employees are self-interested, they would consider a company’s temporary
labour practices as fair as long as they receive pay and benefits that are no less than
those offered to temporary workers who perform the same work. Also, they would
probably consider the risk assumed by temporary workers to be fair because it would
reduce the unemployment risk for permanent workers.
Value: Managers should be honest with their employees. Under this value, the
managers could choose any form of labour practices, as long as they are honest with
employees. In turn, this honesty would allow permanent and temporary employees to
make informed decisions about whether they wish to work under the conditions
offered.
Value: Managers should base employment practices upon the merit of individual
employees. Under this value, it would be unfair to pay different wage rates and provide
different benefits to temporary and permanent workers who perform the same jobs or
to pass risk directly onto employees unless based upon some aspect of merit other than
job performance. For example, higher merit could be given to employees who have
worked for the company for a longer period of time, in which case those employees
(most likely permanent employees) could receive higher pay and/or benefits or lower
layoff risk.
Work toward ongoing improvement: How can company managers determine on an ongoing
basis whether their hiring practices are ethical?
When addressing this question, it is first necessary to consider why a company’s managers
would need to work toward ongoing improvement. In other words, why can’t managers simply
adopt ethical hiring practices? Why would ongoing improvement be needed? Keep in mind that
uncertainties exist about the costs and benefits of different hiring practices to companies,
employees, society, and others. Also, it is unclear which values or trade-offs are most
appropriate. Given these uncertainties, managers cannot determine absolutely whether their
hiring practices are ethical. However, managers who wish to make ethical decisions must seek
and consider new information about the effects of their hiring practices. New information
might include studies conducted by the company or data made available by others. Managers
must also re-evaluate their values and reconsider the trade-offs they make in their hiring
decisions. Over time, new insights might lead managers to adopt new, more ethical practices.