Guest Post by Steven Hill, a senior fellow with the New America Foundation, is the author of “Raw Deal: How the Uber Economy and Runaway Capitalism Are Screwing American Workers.” This first appeared on Salon.com and addresses some key issues around the Sharing Economy.
A significant factor in the decline of the quality of jobs in the United States has been employers’ increasing reliance on “non-regular” employees — a growing army of freelancers, temps, contractors, part-timers, day laborers, micro-entrepreneurs, gig-preneurs, solo-preneurs, contingent labor, perma-lancers and perma-temps. It’s practically a new taxonomy for a workforce that has become segmented into a dizzying assortment of labor categories. Even many full-time, professional jobs and occupations are experiencing this precarious shift.
This practice has given rise to the term “1099 economy,” since these employees don’t file W-2 income tax forms like any regular, permanent employee; instead, they file the 1099-MISC form for an IRS classification known as “independent contractor.” The advantage for a business of using 1099 workers over W-2 wage-earners is obvious: an employer usually can lower its labor costs dramatically, often by 30 percent or more, since it is not responsible for a 1099 worker’s health benefits, retirement, unemployment or injured workers compensation, lunch breaks, overtime, disability, paid sick, holiday or vacation leave and more. In addition, contract workers are paid only for the specific number of hours they spend providing labor, which increasingly is being reduced to shorter and shorter “micro-gigs.”
In a sense, employers and employees used to be married to each other, and there was a sense of commitment and a joined destiny. Now, employers just want a bunch of one-night stands with their employees, a promiscuousness that promises to be not only fleeting but destabilizing to the broader macroeconomy. Set to replace the crumbling New Deal society is a darker world in which wealthy and powerful economic elite are collaborating with their political cronies to erect the policy edifice that allows them to mold their proprietary workforce into one composed of a disjointed collection of 1099 employees. Employers have called off the marriage with their employees, preferring a series of on-again, off-again affairs.
This is a direct threat to the nation’s future, as well as to what has been lionized around the world as the “American Dream.”
I’ve experienced the vagaries of this new working life myself. After working for many years in the Washington, D.C.–based think-tank world, the program that I directed lost most of its funding and was shut down shortly thereafter. All my employees, myself included, were laid off. I was promoting my latest book that had been published a few months before, so I surfed that wave for many more months. For a while, all seemed normal and natural, but without realizing it I had stepped off the safe and secure boat of having what is known as a “good job,” with a steady paycheck, secure employment and a comprehensive safety net, into the cold, deep waters of being a freelance journalist.
Suddenly I was responsible for paying for my own health care, arranging for my own IRAs and saving for my own retirement. I also had to pay the employer’s half of the Social Security payroll tax, as well as Medicare — nearly an extra 8 percent deducted from my income. The costs for my health-care premiums zoomed out of sight, since I was no longer part of a large health-care pool that could negotiate favorable rates.
But that’s not all. Suddenly not only was the pay per article or lecture not particularly lucrative, but I didn’t get paid for those many hours in which I had to query the editors for the next article or lecture, or conduct research and interviews. It was as if I had become an assembly line worker who was paid on a per-piece rate; the “extraneous” parts of my working day — rest and bathroom breaks, staff meetings or time with co-workers at the water cooler, usually paid time in a “good” job — had been stripped to the bone. Not to mention I no longer had paid vacations, sick days, holidays, nor could I benefit from unemployment or injured workers compensation. Instead of receiving a paycheck from a single employer, now I had to track my many and varied sources of income, making sure that unscrupulous editors didn’t stiff me.
In short, I had to juggle, juggle, juggle, while simultaneously running uphill — my life had been upended in ways that I had never anticipated. And I began discovering that I was not alone. Many other friends and colleagues — including Pulitzer Prize-winning journalists, professionals and intellectuals, as well as many friends in pink-, white- and blue-collar jobs — also had become 1099 workers, tumbleweeds adrift in the labor market. They found themselves increasingly faced with similar challenges, each in his or her own profession, industry or trade. In short, we had entered the world of what is known as “precarious” work, most of us wholly unprepared.
Not to worry. The sharing economy visionaries — who like Dr. Pangloss in Voltaire’s Candide always see “the best of all possible worlds” — had a plan in place for us. We could “monetize” our assets — rent out our house, our car, our labor, our driveway, our spare drill and other personal possessions — using any number of brokerage websites and mobile apps like TaskRabbit, Airbnb, SnapGoods, the ride-sharing companies Uber and Lyft, and more.
This is the new economy: contracted, freelanced, “shared,” automated, Uber-ized, “1099-ed.” In essence, the purveyors of the new economy are forging an economic system in which those with money will be able to use faceless, anonymous interactions via brokerage websites and mobile apps to hire those without money by forcing an online bidding war to see who will charge the least for their labor, or to rent out their home, their car, or other personal property.
Websites like Uber, Elance-Upwork, TaskRabbit, Airbnb and others are taking the Amazon/eBay model the next logical step. They benefit from an aura that seems to combine convenience with a patina of revolution; convenience as revolution. The idea of a “sharing” economy sounds so groovy — environmentally correct, politically neutral, anti-consumerist and all of it wrapped in the warm, fuzzy vocabulary of “sharing.” The vision has a utopian spin that is incredibly seductive in a world where both government and big business have let us down by leading us into the biggest economic crash since the Great Depression.
But the “sharing” economy’s app- and Web-based technologies have made it so incredibly easy to hire freelancers, temps, contractors and part-timers, why won’t every employer eventually lay off all its regular, W-2 employees and hire 1099 workers? Any business owner would be foolish not to, as he or she watches their competitors shave their labor costs by 30 percent (by escaping having to pay for an employee’s safety net and other benefits).
Outsourcing to these 1099 workers has become the preferred method for America’s business leaders to cut costs and maximize profits. One new economy booster clarified employers’ new strategy: “Companies today want a workforce they can switch on and off as needed” — like one can turn off a faucet or a radio.
Indeed, the so-called “new” economy looks an awful lot like the old, pre-New Deal economy – with “jobs” amounting to a series of low-paid micro-gigs and piece work, offering little empowerment for average workers, families or communities. We’re losing decades of progress, apparently for no other reason than because these on-demand companies conduct their business over the Internet and apps, somehow that makes them “special.” Technology has been granted a privileged and indulged place where the usual rules, laws and policies often are not applied.
If that practice becomes too widespread, you can say goodbye to the good jobs that have supported American families, goodbye to the middle class and say adios to the way of life that made the United States the leading power of the world.