Shining a Light on Tech’s Shadow Workforce

Samantha Gordon is Senior Vice President of Programs at TechEquity Collaborative.

Despite a worldwide pandemic that dramatically widened income inequality, pushed women out of the workplace, and disproportionately harmed low-wage workers, the tech industry and its profits have only grown. Apple, Microsoft, Alphabet, Amazon, Tesla and Facebook added a combined $2.9 trillion to their collective market caps in 2021 and each has individually reached $1T or more in market cap in 2021 alone. From the biggest players in the market to future forecasted unicorns, there are no signs of slowing growth.

But the widespread perception that tech workers have prospered over the last two years isn’t a fully accurate depiction. The reality is that many who work in tech—the temporary, contract, and contingent workers who are classified differently from their directly-employed counterparts despite performing critical roles for the companies—have been locked out of tech’s prosperity.

The prevalence and scale of contingent employment has grown steadily over the past several years, outpacing direct employment at major companies like Google, which in March 2019 employed 121,000 contract workers and 102,000 direct employees. In the course of our research, TechEquity found evidence that contract workers are less likely to benefit from the traditional pathways into the tech industry and are more likely to belong to underrepresented racial, ethnic, and gender groups than the direct tech workforce.

Over the last year, we’ve investigated these potential harms as a part of our Contract Worker Disparity Project. Through a first-of-its-kind survey, first person interviews, and an in-depth literary and data review, we've uncovered several key themes that typified the contract worker experience:

1. A dual management structure that prevents opportunity for advancement. Contingent workers have a fragmented reporting structure: their day-to-day work is overseen by a manager at the parent (tech) company while the operational aspects of their employment—pay, benefits, and legal protections—are the purview of the staffing agency that hired them. These two management structures rarely coordinate. Contractors reported that navigating this structure made it harder to do good work and to advocate for themselves. Although this practice is set up to protect tech companies from liability, it often leads to disempowerment for the worker.

2. Job precarity. Contracting roles typically start as a three- to six- month engagement and are extended or terminated based on the whims of the parent company. Contract workers lack insight into why their contracts may not be extended, and potential for their extension is tenuous and never guaranteed. At any moment their role can be cut or they can be let go without warning, leaving them without an income or protections.

3. A lack of voice in the workplace.Because of this precarity, which allows parent companies to not renew contracts at any time for any reason, workers are afraid to speak up against workplace harassment or other injustices. Additionally, they are concerned with being deemed “difficult to work with” as this impedes their potential for contract extension or transition to direct employment.

4. Unequal pay for equal work. Contract workers are often performing the same job functions as their directly-employed peers—but getting paid less for the same work. For example, 75% of software developer contract workers who completed TechEquity’s survey are in the the 25th percentile or lower for average earnings across the industry overall.

5. An overrepresentation of certain racial and gender groups in job classifications —otherwise known as occupational segregation—with little power and comparatively low pay. In every dataset that TechEquity examined, one fact was glaringly obvious—contract work in tech is disproportionately done by people from under-represented racial, ethnic, and gender groups. Coupled with the lack of representation in the direct tech workforce, the practice of contracting out sets the conditions for occupational segregation.

Ultimately, these themes show heightened power differentials between contract and direct workers; contract workers and staffing agencies; and contract workers and tech companies.

Dat* (name changed for anonymity) was excited to make a career pivot into working for a tech start-up, having always wanted to be a part of a small team of ambitious but down-to-earth colleagues. What they found, however, was a new version of the old boys club.

“It was always so uncomfortable. I always felt like there was such a divide. I thought that, ‘oh well eventually they’re going to hire me on permanently, or eventually the team is going to warm up to me.’ But no, I always felt like an outsider.”

The final straw came when Dat was prevented from attending the company’s remote retreat—which Dat had planned. Not only did they miss out on the four-figure bonus that everyone else received, they missed out on a formative bonding experience with their colleagues. “At that point I was just like, ‘oh, I will never be a part of this team. Like ever.’” Dat’s company ended their contract less than a year later. A former colleague later shared with Dat that their contract was ended because the team didn’t feel like they “clicked.”

While contract worker experiences vary widely, all have a common theme: contract workers are undervalued, have less job security, and are locked out of tech’s prosperity. It’s clear we need strong public policy like the Pay Transparency for Pay Equity Act and changes to ethical corporate practice to close the equity gap in contract work.

As we enter a period characterized by increasing inequality, we need to ensure that workers re-entering the workforce through temp work are not being exploited and that contingent work can lead to safe, stable, and secure careers. If we take the proliferation of gig work after the Great Recession as a signal of what’s to come, tech’s contract workforce could be on the precipice of considerable expansion as we enter a period of economic recovery.

There is little to no analyzable and comparative data to understand the full picture of these disparities, and the Contract Worker Disparity Project underscores the need for a comprehensive approach to collecting and analyzing contract worker employment data. That’s why we developed the Pay Transparency for Pay Equity Act (California SB 1162) as a mechanism to increase transparency and protect all workers from further harm. Authored by California State Senator Monique Limón and co-sponsored by us at TechEquity Collaborative, California Commission on the Status of Women and Girls, California Employment Lawyers Association, Equal Rights Advocates, and the National Employment Law Project, the bill will reveal gender and racial pay disparities by requiring pay transparency at every stage of the employment process, from hiring and promotion to ongoing employment.

The Pay Transparency for Pay Equity Act will expand on existing law that requires large companies to disclose pay rates by gender, race, and job level to the California Department of Fair Employment and Housing. It will:

1. Closes loopholes that leave behind contract workers by requiring staffing agencies to disclose pay information for contract workers by gender, race, and job level.

2. Make pay equity reports public so workers, companies, policymakers, and the public have the data needed to finally close the gender and racial wage gaps.

3. Require companies to post the salary range in the job description and share promotional opportunities to their existing employees before selecting a candidate.

Last week SB 1162 passed through the California Senate Judiciary Committee, overcoming a major legislative hurdle to becoming law. If legislators and companies are serious about closing the racial wealth gap and protecting all workers, their support for this bill will allow them to demonstrate to their constituents and their employees that they can do more than post a black square and issue a statement of support.

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TechEquity Collaborative invites readers in California to participate in upcoming legislative hearings on SB 1162.