Freelance Nation: How Protections for American Workers Are Becoming Increasingly Irrelevant   2 comments

Once upon a time you could be fairly certain that investing the time, money, and effort required to earn a four-year degree would allow you to land a good job with medical/dental/vision benefits, a retirement plan, and paid vacation time. In the event of a bad break, you could count on being covered by worker’s comp and unemployment insurance. While you may never get rich, you’d be comfortable, with no trouble financing a new car or qualifying for a mortgage. In fact, go back far enough and this type of security and lifestyle was even available to many people without a college degree.

Those days are increasingly behind us.

While big companies have spent the last 2-3 decades offshoring jobs to countries with low labor costs and few worker and environmental protections, businesses of all sizes are in on the latest trend to impoverish American workers and strip them of protections. What am I talking about? The rise of freelance nation.

Companies have figured out that in a labor market where demand for jobs far outstrips their supply, there’s no need to put workers on the payroll when it’s so much cheaper to just hire them as independent contractors. Pay only for the work you need, and then it’s adios, baby.

It’s easy to see why businesses would be enthusiastic about hiring freelancers. Not only are independent contractors about 30% cheaper than full-time staff, but those pesky regulations enacted to protect workers apply only to employees, not freelancers. How convenient is that?

Obviously contract work is a great deal for businesses, but it’s considerably less appealing if you’re a worker. According to the General Accounting Office and the Freelancers Union, one-third of the US work force now consists of independent contractors, freelancers, and temps. And our numbers are growing rapidly.

What this means is that at least one in three American workers:

  • Have no safety net when a long-term contract job comes to an end or freelance work dries up, because independent contractors aren’t eligible for unemployment benefits (this, of course, is the situation my partner and I are in right now).
  • Will not receive worker’s comp payments when injured on the job.
  • May legally be offered work that pays far below the minimum wage (lest you believe this isn’t really a problem because freelancers are highly skilled professionals who surely make substantially more than the minimum wage, I urge you to sneak a peak at freelance marketplace sites such as oDesk where American companies regularly post jobs paying as little as $1-2 an hour. And the saddest part? You’ll see American workers applying for those jobs. Also, not all independent contractors are highly skilled and educated; many low-skill workers are classified as independent contractors specifically so the company doing the hiring is relieved of responsibility to the worker under labor laws).
  • Are not entitled to overtime pay, no matter how many hours a week they spend working on an employer’s/client’s project.
  • Receive no support from the Department of Labor when employers/clients stiff them on the agreed-upon wages/payment (deadbeat clients are a huge problem for freelancers, and since non-payment of freelancers’ fees is considered a contract dispute rather than a labor dispute, it’s up to the individual freelancer to hire an attorney and sue the deadbeat, which many independent contractors can’t afford to do).
  • Must pay slightly over 15% self-employment tax on their earnings, even if their income is below the poverty line and they’re not making enough to cover the basics.
  • Are not eligible for employer-based health insurance, dental/vision coverage, retirement plans, child care, sick leave, and paid vacations–everything must be paid for out-of-pocket, which many freelancers can’t afford, so they are forced to go without.
  • Will find it much more difficult to finance a car, buy a house, rent an apartment, or refinance a mortgage since lenders/landlords want to see stable, reliable, and verifiable income, something many freelancers lack.
  • Have no recourse if discriminated against or subjected to unfair labor practices because employment law statutes cover only individuals defined as employees.

As the percentage of freelancers continues to rise, the laws and regulations designed to protect workers will become increasingly meaningless. Unless, that is, Congress wakes up to the fact that the labor market is changing and the employer/employee relationship is becoming a thing of the past.

First and foremost, we desperately need a safety net for independent contractors who can’t find (enough) work as well as affordable health care (a single payer system would of course solve that problem) and standard worker protections to remove some of the incentives of hiring workers as independent contractors instead of employees.

There was a time when the typical freelancer was a highly skilled professional who, usually at the height of his career (and yes, I’m using male pronouns intentionally because this freelancer was at least twice as likely to be male than female) and armed with a thick Rolodex of industry contacts, made a calculated decision to go solo in order to be his own boss, raise his profile, and maximize his income. It may well be that this freelance professional didn’t need much in the way of worker protections.

These days, however, many people are turning to freelancing not because they want to be their own boss, but because it’s the only work they can find. These workers aren’t high profile professionals in their field and they don’t have impressive client lists to draw on. Often they’re economically dependent on a very small number of clients, which puts them in a poor bargaining position and sets them up for disaster if a couple of those clients jump ship. These freelancers most definitely need worker protections.

What’s going on in this country right now is economic warfare where those who hold all the cards are finding more and more ways to extract maximum wealth from those who don’t. Keeping workers in a state of perpetual fear and uncertainty is part of their strategy. And what better way to accomplish this than to hire workers as independent contractors who enjoy neither the protections nor the safety net of traditional employees. A worker whose very survival is at stake is bound to agree to just about anything, no matter how lousy the terms.

But while this strategy is working out well on the micro level, the consequences for the economy–and the country–as a whole are devastating. Impoverished workers have little money to spend on goods and services, thereby driving down aggregate demand. Even freelancers who make decent money some months are more likely to save their earnings than spend them on non-essentials since they never know if they’ll be making enough money the next month. And when you’re operating without a safety net, you are hyper conscious of the fact that coming up short just once could land you and your loved ones in the street.

The constant uncertainty and fear of going under also take a heavy human toll. Stress disorders, untreated health problems, substance abuse, domestic violence, divorce, repossessions, foreclosures, evictions, homelessness, suicides–we’re going to see more of all the preceding as people struggle to hold on in the post-New Deal America created by our Corporate Masters.

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2 responses to “Freelance Nation: How Protections for American Workers Are Becoming Increasingly Irrelevant

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  1. Reblogged this on Kmareka.com and commented:
    Interesting post on the dangers and uncertainties that the American worker is every-increasingly facing.

    Kiersten Marek
  2. This is a well thought and written piece. I think it’s less likely that the U.S. Government will adopt meaningful and intelligent regulations than the global online community of freelancers will create some type of union. Absent both these outcomes, I expect there will be a natural progression, driven by greed and the human spirit that will follow this pattern: 1) Indians, Chinese, Russians increasingly come online – making the ratio of jobs to supply even smaller 2) There will be less demand and wages for lower-skills, while demand will grow for higher-skilled jobs, even though these will still offer lower wages than U.S. workers can live comfortably on. 3) Demand will grow for products these emerging economies can afford 4) More American companies will close, offshore, or use freelancers 5) More Americans will become unemployed and live marginally, trying to complete with cheap foreign labor in a race to the bottom 6) American cities, counties, states go bankrupt due to loss of tax base and increasing demands from highly paid civil servants, their expensive benefit and retirement packages 7) Affluence grows in India, China, Russia – but majority of low wage earners riot 8) Back in the USA, freelancers can earn a few more bucks per hour, since foreign labor becomes more expensive 9) Collapse of U.S. economy and massive civil unrest 10) Restructuring as communes flourish that are self-sustaining, and focus on quality of life – similar to those agri-based ones in Hawaii, where participants work just 4 hours per week and spend the rest of the week in study, art, music, dance and child care. 11) Global re-engineering of government that is no longer run by globalist bankers and military-industrial, and petro-chemical cartels. If you’re looking for work now, the best options in my view are A) Take advantage of this globalization by starting your own agency (sweat shop) B) Get a job in government, but realize it will soon be survival of the most necessary and political C) Raw materials and farming – natural resource sales D) Jobs requiring skills, equipment and on-site activity. Be careful though because even Sonograph Technicians won’t be safe once robots can be operated from India on patients in the USA – so cops, doctors, construction workers, civil engineers are less likely to be replaced by robots. Yes, it is disgusting what you see on eLance and oDesk. I signed up last week, scored #1 on a few tests and in the top 3%-10% in several others. However the wages are too often less than what I could earn washing windows in San Jose. Also, there are what appear to be flagrant violations of EEO gender-bias and age discrimination (actually written into the job specs!) as well as apparent violations to the Fair Labor Standards Act (FLSA), which sets basic minimum wage and overtime pay standards. I don’t expect Obama or Romney care. I would participate in a global freelancer union. I would also enjoy joining a self-sustaining commune as exist in Hawaii. The political and economic model we have today has become morally bankrupt, and it’s just a matter of 1-3 years before it collapses under its own weight. It won’t require a revolution, just a little time to reach the end of it’s current trajectory.

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