A generation or two ago, workers were able to count on companies large and small to take care of them. More than just their pay, the working people of America got something critical from their job – security, a promise that the material things in their life were something they could depend on. In return, there was loyalty – and after decades of work, a pension.
There is little doubt that the nature of work is changing. The exact nature of these changes and the magnitude is hard to pin down, but it’s clear that people don’t work the same way they used to. As we contemplate the next version of the economy forming around us as this Depression slowly comes to an end it is more and more clear that the nature of work – and the corresponding social arrangements that come from it – will continue to change.
This is why reform in policy, taxation, and many other fixed arrangements is essential.
Today about 140M Americans are employed at least part time. The total number of unemployed and underemployed (those working fewer hours than they want) is about 13.1M by the comprehensive U6 unemployment rate, a staggering figure that is down about 5.5M in the last 18 months. There is reason to be concerned but still reason to hope.
Many of those who have jobs work as freelancers, contract workers, or some similar definition of people who work primarily from one gig to the next. The definition of such workers is important because it is completely not fixed by anyone – resulting in a lot of confusion as to who exactly works for themselves.
Disclaimer: I am a freelance writer, and I fall into this definition anyway you call it.
Sales Pitch: I am always available to hire!
How many people work for themselves? By the official figures, it’s only about 9.5M of today’s workers, or 6.8% of the workforce. The official Bureau of Labor Statistics (BLS) numbers show this number actually dropping over the last 65 years that data has been kept:
This is a measure only of traditional “self employed” people such as farmers and shop owners. The BLS has not changed its definition, so anyone who works for someone else for more than 20 hours a week does not count. It does not matter if they are a contract employee on an 1099 form – employment is employment to the BLS.
Two different studies were done in 2014 on people who work for themselves, and the results vary dramatically. The most cited is the most dramatic, last September’s report from the Freelancer’s Union that showed up to 53M Americans got at least some of their income from freelance work, or 38% of the workforce. Of these, 21.1M (15% of the workforce) were full time “Independent Contractors” and 14.3M (10%) were “Moonlighters” who received a supplemental income from freelance work. The rest are independent business owners and people who received income from a mix of work.
Another study, performed by MBO Partners, is part of a series that has been done since 2011. They found that 17.9M (13%) were full-time “independent” employees and 12.1M (9%) were “side-giggers” who freelanced for additional income. The definitions, again, are important because they vary from one report to the next.
What we can say from MBO partners is that the number of “independent” employees rose from 15.M in 2011 to 17.9M in 2014. That 2M jobs is an impressive 30% of the 6.8M jobs created in total in the same period. Clearly, independent and/or contract work is growing in popularity.
This is important for many reasons dealing with how workers are protected, taxed, counted, and generally taken care of.
There is little doubt that such workers have lower overhead per employee than a traditional employee. The attraction for companies is obvious and immediate simply for the cost per employee. It is also beneficial to have a flexible workforce that can take care of projects as they come along for many companies.
Separating health care from employment, one of the goals of the Affordable Care Act (ACA or Obamacare) is obviously essential as more workers are on their own. There may even be a net spike in such workers even as the economy grows as this kind of relationship becomes more attractive.
The benefits almost certainly end there, however. High tech companies in particular have no control over intellectual property, despite non-disclosure and non-compete contracts, in this environment. Workers also have far fewer protections against discrimination and other employment problems – and have to constantly find work for themselves.
Then there is the system that is setup to tax workers’ incomes. How much income doesn’t quite make it to the Form 1099 Misc Income? It’s impossible to say, or let’s leave it that I won’t say. It’s … a number. Add to this the worker’s responsibility for the employers share of social security, which is the 7.2% FICA tax on all income called the “self employment tax”, and we have a terribly antiquated system that is doing no one any good.
The 9.5M measured “self employed” that the BLS keeps track of is obvious low by about half, but what is the exact number? It’s very hard to tell because there is no fixed definition. But we know that the percentage is growing and covers about one quarter of all workers.
That number of people essentially outside the system as it was constructed is simply far too large and cries out for reform in every way workers are considered.
The relationship to work is obviously changing rapidly – beyond even the elimination of loyalty to one company for the duration of a worker’s career. Getting a handle on the needs of today’s employees must become the top priority for reform if we ever develop a Congress that is capable of doing any actual work to prepare us for the next economy.