This article has been updated since being originally published.
You work hard. You put in long hours until a project is complete. You use all the powers of your mind, education, and experience to exceed expectations. Why? Because you are driven. And more importantly, the results of this gig will determine if you get another gig.
You are a freelancer.
According to Sara Horowitz, founder and executive director of the Freelancers Union, MacArthur Foundation “Genius” fellow and Deputy Chair of the Federal Reserve of New York, you are one of 53 million people driving $715 billion dollars into the economy every year.
So why is it that 77 percent of you don’t get paid or get paid late? Why can’t you afford health insurance, even with the Affordable Care Act?
Trump allegations only tip of the iceberg
It’s an issue that has found a boost in visibility with the candidacy of Donald Trump, the Republican presidential nominee. An extensive USA Today report found that a large number of the 3,500 lawsuits that have been brought against him over the past three decades are from individuals who claim not to have been paid. And a great many of those taking Trump to court were working on a contractual basis.
People who were temporarily hired to fix elevators, paint conference rooms, install chandeliers, and the like were alleging they couldn’t get payment from a billionaire. Which sounds bad. But in fact, other data suggests that in many cases, the richer the client, the more freelancers they employ and profit from—to the freelancers’ detriment.
A recent self-study at the World Bank concluded that, despite imposing a 150-day limit on contract workers (another term for freelancer), it still depended on 19,608 contract workers, compared to a mere 15,551 traditional employees.
Why is this happening? There’s a simple reason: freelancers save companies a lot of money. They do not receive the health insurance, 401k plans, paid time off, and other benefits of traditional employment. They own their own tools; they pay their own administrative costs and payroll taxes—the money that goes toward social security, Medicare, disability, and unemployment. They do not qualify for unemployment benefits. They are “flexible.”
Part-time pay, full-time needs
Some businesses, shy of being audited by the IRS, will insist that contract workers remain part-time only.
This complicates life on both sides: Freelancers seek economic stability and like to see a project through to completion—hard to do on jigsaw puzzle hours. Meanwhile, businesses want their projects to be completed successfully and efficiently by people who know what they are doing—hard to do when key people are unavailable. But the tradeoff is still favorable for the business; they avoid an audit, and freelancers are cheap, easily-fired, benefit-free pseudo-employees.
Freelancers often have to dip into savings for items like health care. Affordable Care Act? Great, except the income is too variable to keep up with payments. Oh, and freelancing is a credit killer too, because of that same income variability factor.
So why do people do it? As the World Bank scenario demonstrates, even if flexibility is not really what workers are looking for, freelance jobs may be what is available in their line of work. According to an Intuit 2020 Report, 80 percent of large corporations intend to increase their dependence on contingent workers worldwide; in the United States alone, freelancers will exceed 40 percent of the workforce by 2020.
How did we get here?
It wasn’t always this way. After passage of the Wagner Act—known also as the National Labor Relations Act—in 1935, employees were on a more equitable footing with employers, at least with large, corporate employers. The Act affirmed the rights of employees to organize, engage in collective bargaining, and have recourse before a National Labor Relations Board.
The 1935 Social Security Act reinforced that model, binding employer and employee together in a 50-50 tax split to build federal resources for America’s aging population. Contrary to contemporary skeptics, these arrangements contributed to an era of unprecedented economic growth.
A new class conflict?
Today, we live in a different culture. Unionized workers make only about 11 percent of the total workforce, including government employees. In the private sector, unions represents under 7 percent of workers. The percentage of contract workers, by contrast, has boomed.
Freelancers are part of a fresh creative and entrepreneurial class and, if statistics and projections are right, they are at the vanguard of a new era where “worker,” “professional,” and “businessman” become more fluid, even interchangeable designations. For now, very few freelancers fit the model of independence and success like the writer Stephen King or my friend Bob, who skis by day and writes complicated algorithms by night—but has no spouse or children.
The corporate workplace is already increasingly divided between regular, or W-2, employees and contract, or 1099, workers; soon, freelancers will represent half of the economy’s workforce. That will make for a lot of people pondering the loss of employee-employer equity, and the price of so-called job freedom.
The views and opinions expressed here are those of the author and do not necessarily represent those of Avvo.
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