Sunday, September 28, 2014

Are we relying too much on apps to do our chores?

This is from Claire Cain Miller at the New York Times:
Near the top of the list of tiresome tasks that the Internet has yet to solve is this one: trekking to the post office.

Enter a San Francisco start-up called Shyp, which is expanding to New York on Monday. For a small fee, it fetches, boxes and mails parcels for you. The other week, I had a get-well package to mail to my cousin. I opened the app, snapped a photo of the items I wanted to send and entered her address. Fifteen minutes later, someone was at my door — and that was it. No boxes, no tape, no weighing, no buying stamps, no standing in line.

Are Shyp and similar tech start-ups for outsourcing chores the realization of the laziness economy? Or are they the opposite — a giant step toward unleashing the human productivity and creativity that technologists have prophesied?

Technology has conditioned us to expect ease, efficiency and speed in almost everything we do. Once it came from sewing machines and dishwashers, later from Google and Kayak, and most recently from start-ups that provide on-demand services like Uber for cars, Instacart for groceries and Munchery for dinner.


How do we judge whether technology is making us more productive, or just lazy and impatient?
Miller certainly raises an interesting question on the role of technology and labor-saving devices.  The example she gives is this new phone application Shype, where you can open up a phone app and have someone pick up and mail your packages for you.   She raises such outsourcing of chores in the economic terms of opportunity cost--the cost that you could be doing something more productive during that time you spent mailing a package, which could have been a better use of your time.  In a sense, she is right. 

The problem I have here with Miller's Shype example is that she is not distinguishing the technology of labor-saving devices and services.  In regards to the technology of labor-saving devices, I have the choice of either manually washing my clothes by hand in a running stream, or using the technology of a washing machine to automatically wash my clothes.  Either way, I am still performing the chore of washing the clothes myself.  When I think of services, I am paying someone else to perform the chore, rather than doing it myself.  For the chore of washing my clothes,  I could take my clothes to a dry cleaning business and pay them to wash my clothes.  Or I could hire a house-keeper to wash my clothes for me.  I am entering into a contract with another individual or business to pay them money in return for performing a chore, such as washing clothes.

Miller delves into this idea of outsourcing chores:
Outsourcing individual chores to other people, as opposed to machines or software, has been made possible by location-aware mobile phones. Few people can afford a full-time personal assistant, but many more can pay a few dollars to outsource chores here and there. Shyp costs $5 to mail an unlimited number of boxes; you pay the postage.
So perhaps the bigger problem for people using apps like Shyp is becoming too dependent on something that might not be around for long. The mortality rate for start-ups is sky high — and particularly for delivery start-ups. The implosions of Webvan and Kozmo during the dot-com bust taught web entrepreneurs some clear lessons: It’s expensive to build warehouses, hold inventory and hire drivers to go to people’s houses.
Shyp, however, just a year old, is already earning money. That is because most of its revenue comes not from the $5 pickup fee, but from taking advantage of the deeply discounted bulk shipping fees for high-volume mailers. It charges its customers the retail price for the least expensive shipping method — the Postal Service, FedEx, U.P.S. or DHL — and keeps the difference.

Whereas some of the on-demand businesses lose more money the more people that use them, Shyp makes more money when more people use it — the kind of business school basic that much of Silicon Valley seems to have forgotten. Some customers have actually moved from one home to another using Shyp, paying just $5 for messengers to retrieve their belongings and package them. Kevin Gibbon, Shyp’s co-founder and chief executive, said he welcomes that because Shyp makes a lot of money on the difference between the bulk shipping fees it pays and the retail fees customers pay to mail such heavy boxes.
 Welcome to the world of sharing economy.  This is an economy where individuals seek out miscellaneous services from sellers using e-commerce middleman web applications.  This is a world where such individuals seeking work are independent contractors, taking small, one-time gigs on a variety of services.  Such gigs could be anything from driving customers to an appointment, after-school babysitting, picking up groceries or dry-cleaning, organizing a closet or desk, handyman work, or anything else.  The pay on these gigs are minimum wage, and no benefits.  This sharing economy has been growing due to the long-term unemployed not being able to find stable jobs and are using the sharing economy to survive. TaskRabbit, Uber, Lyft and Sidecar are all examples of e-commerce middleman web applications matching the buyers and sellers in this sharing economy. 

The problem with this type of sharing economy, is that these e-commerce middleman companies view their websites as arenas--an eBay for gigs.  They do not assign independent contractors to individual gigs, but rather channel these tasks to either the fastest taker, or lowest bidder, pitting workers in a labor elimination match that lowers wage and pay rates.  There is no minimum wage for these contractors.   There are no employee benefits, unemployment benefits, Social Security, health insurance, or even workers comp.  These companies can pretty much change their pricing and pay structure with impunity, and if the contractors complain, they are "deactivated."

I can't say how Shyp runs their business model, or how they pay their contractors--Shyp calls them "Heros."  But I will guess that Shyp hires independent contractors, and then uses email or cell phone to immediately contact those contractors whenever pickups are required.  Shyp does not say how much they will pay their contractors, however Miller says that Shyp will pay $5 for messengers to retrieve and package a customer's items.  I also doubt that Shyp provides any sort of contractor benefits or protections, but I can not say. 

The more I think about this story, the more I wonder if Shyp is just another example of where the U.S. economy is turning into a servant economy?  Where the wealthy and privilege can log into Shyp or TaskRabbit on their iPhones and have a low-paying servant perform whatever menial task these individuals need at a moment's notice?  When I look at this, I see two people laughing all the way to the bank here.  The first is the rich and privilege, for having to pay a low rate for a servant to perform such menial tasks.  The second is the e-commerce middleman, where the jobless recovery and wage stagnation has created such an over abundance supply of cheap labor, willing to take such menial, low-paying jobs for survival. 

The menial servant get screwed.

More charts showing the rich are still getting richer....again!

I've seen this story making its rounds through The New York Times, Kevin Drum, Vox, and Daily Kos. The source story is through Vox, where Bard College economist Pavlina R. Tcherneva created a chart that vividly shows the distribution of income gains during economic expansion periods have increasingly gone to the rich.  First, the chart:

And here is the Vox story:
Pavlina Tcherneva's chart showing the distribution of income gains during periods of economic expansion is burning up the economics internet over the past 24 hours and for good reason. The trend it depicts is shocking:
For a long time, most of the gains from economic growth went to the bottom 90 percent of the income distribution. And, after all, the bottom 90 percent includes the vast majority of people. Since 1980, that hasn't been the case. And for the first several years of the current expansion, the bottom 90 percent saw inflation-adjusted incomes continue to fall.
The data series ends in 2012 and we don't know how long the expansion will last, so that negative income trend may evaporate before all is said and done. But unless there's a massive break with the previous three expansions we will continue to have an economy where the typical family's living standards grow much more slowly than GDP growth per se would allow.
A couple of thoughts first.  First, the distribution trend of the income gains was both falling for the bottom 80 percent and rising for the top 10 percent throughout the entire chart.  In the 1949-53 expansion, the bottom 90 percent received 80 percent of the income gains, while the top 10 percent received 20 percent of the gains.  Through the 1950s to 1970s, the bottom 90 percent saw their income gains erode on a slow basis, with the top 10 percent receiving a slow increase.  I'm guessing the slow change of income gains from the 1950s through 70s could be due to a number of changes in the U.S. economy.  The first may have been the gradual reduction of income and capitol gains tax rates to the upper 10 percent, allowing them to get a larger piece of the pie.  A second potential change may have been the off-shoring of high-paying American manufacturing jobs during the 1970s--there is a good size drop between the 1961-69 bar and 1970-73 bar.  The inflation of the 1970s may have also taken its toll on American wage earners, where prices were increasing faster than wages.

The real shocker of this chart is 1982-90, which was the start of President Reagan's supply-sided economics.  Income gains for the top 10 percent almost doubled, dramatically overtaking the bottom 90 percent, and never looked back.  What happened here?  Again, I would guess it was a combination of President Reagan's tax cuts to the rich, the massive slashing of capital gains slashing, and the complete decimation of the unions--especially with Reagan's firing of the unionized air traffic controllers, and replacing them with scabs.  High paying American manufacturing jobs that were lost in the 1970s were replaced with minimum wage service sector jobs, further reducing income gains for the bottom 90 percent.  I'd further guess that the off-shoring of American jobs went further from manufacturing to back-office support jobs in the 1980s, and even now to the higher technology jobs of the 1990s and 2000 decades.  The bottom 90 percent of Americans earn their money through wages and salaries, where wages have remained stagnant since at least the 1980s--they are not getting the income gains for the past 30 years, as corporations have resisted increasing wages for American workers, decimated the unions through union-busting strategies, and have out-sourced jobs to lower wage countries such as China or India, or have forced Americans to take contracting and staffing jobs with low pay and no benefits instead of becoming regular employees.  The top 10 percent make their money not through wages and salaries, but rather through investment income through stocks, bonds, real estate income, hedge funds, and such.  Their investment and income gains just continues to grow and grow.

It gets worst.

This is from the New York Times Neil Irwin, who sifts through the numbers:
Fast-forward to the 1990s and early 2000s expansions, and a new pattern emerged, with the huge majority of income gains going to the top 10 percent, leaving pocket change for everybody else. From 2001 to 2007, 98 percent of income gains accrued to the top 10 percent of earners, Ms. Tcherneva found, basing her analysis on data from Thomas Piketty and Emmanuel Saez, the academics who have made a speciality in documenting the rise of income inequality around the world. (As a point of reference, an American needed a 2011 adjusted gross income of $120,136 to be in the top 10 percent of earners that year, according to I.R.S. data.)
Which brings us to the current expansion. Ms. Tcherneva’s data goes only through 2012, so perhaps in the two years since then things have gotten a bit better for most workers. But in the first three years of the current expansion, incomes actually fell for the bottom 90 percent of earners, even as they rose nicely for the top 10 percent. The result: The top 10 percent captured an impossible-seeming 116 percent of income gains during that span.
But one consistent finding of research into inequality is that merely cutting things off at the top 5 or 10 percent of earners doesn’t capture all of what is changing in patterns of wealth and earnings. So Ms. Tcherneva also compiled the same data for those in the top 1 percent. (The cutoff there, according to the I.R.S., is $388,905 in 2011 adjusted gross income).
This pattern is, in its way, all the more striking. One percent of the population, in the first three years of the current expansion, took home 95 percent of the income gains.
One percent of the population, in the first three years of the current economic expansion, took home 95 percent of the income gains.

Continuing with Neil Irwin's story:
 Ms. Tcherneva argues that this shift indicates a failure of the approach that governments take to stabilizing the economy. The postwar consensus has been that central bank action to cut interest rates should be the key tool to fight economic slumps, and to the degree fiscal policy ought be used at all, it should be tax and spending policies that boost the economy in the aggregate, such as cutting taxes temporarily.

She argues that this approach isn’t flowing through to broad-based wage gains because it is so untargeted. “Conventional fiscal fine-tuning measures ensure that when government increases its total demand for goods and services, it first improves the conditions of the skilled, employable, highly educated, and relatively highly-paid wage and salary workers,” she wrote. “It is hoped that after those workers increase their own demand for products and services, the fiscal stimulus would trickle down to the less skilled and low-wage workers.”

But, she added, “this trickle-down mechanism never quite trickles down far enough to create job opportunities for all individuals willing and able to work.”
In other words, supply-sided economics has failed--again!  We have had 30-plus years of trickle-down, supply-sided economic policy taking place in the U.S.  This has resulted in an ever-increasing inequality taking place between the upper 10 percent--and now especially the upper one-percent--over everyone else.  As the one-percenters take an even greater share of the economic gains, they will have even more money to spend in accumulating political power and control to shape government economic policy to their advantage.  They have the money to spend in lobbying congressmen and presidents to continue this supply-sided economic policy that has benefited them so well.

And the one-percenters will not change.

Saturday, September 27, 2014

Incumbent Kansas senator claims U.S. is heading towards "National Socialism"

I found this Talking Points Memo story through Kevin Drum, and even I can't believe it.  From Talking Points Memo:
"There's a palpable fear among Kansans all across this state that the America that we love and cherish and honor will not be the same America for our kids and grandkids," Roberts said, "and that's wrong. That's very wrong."
He lamented that people are "losing faith in their government" and that the government "is losing faith in our people. That is a bad situation to be in." He said he was running to change that dynamic.
"We have to change course because our country is heading for national socialism," Roberts said. "That's not right. It's changing our culture. It's changing what we're all about."
According to TPM's PollTracker average, Roberts trails independent candidate Greg Orman by 1 point, 39 percent to 38 percent.
You can watch the YouTube video here:

An incumbent U.S. senator is now saying that the United States is heading for "national socialism!"  Excuse me Senator Pat Roberts, but do you know what "national socialism" really is?  From Wikipedia:
Nazism, Naziism,[1] or National Socialism in full (German: Nationalsozialismus), is the ideology and practice associated with the 20th-century German Nazi Party and state as well as other related far-right groups. It was also promoted in other European countries with large ethnic German communities, such as Czechoslovakia, Hungary, Romania and Yugoslavia.[2] Usually characterised as a form of fascism that incorporates scientific racism and antisemitism, Nazism originally developed from the influences of pan-Germanism, the Völkisch German nationalist movement and the anti-communist Freikorps paramilitary culture in post-First World War Germany, which many Germans felt had been left humiliated by the Treaty of Versailles.

German Nazism subscribed to theories of racial hierarchy and social Darwinism, asserted the superiority of an Aryan master race, and criticised both capitalism and communism for being associated with Jewish materialism. It aimed to overcome social divisions, with all parts of a racially homogenous society cooperating for national unity and regeneration and to secure territorial enlargement at the expense of supposedly inferior neighbouring nations. The use of the name "National Socialism" arose out of earlier attempts by German right-wing figures to create a nationalist redefinition of "socialism", as a reactionary alternative to both internationalist Marxist socialism and free market capitalism.
 Or I could put it in more simple terms by saying that "national socialism" was controlled and refined by this guy:

Now Kevin Drum speculates that Senator Roberts is too dumb to realize that "national socialism" really equates to Nazism--even Talking Points Memo questions Senator Roberts' reference.  According to this Washington Post story by Phil Rucker, Senator Roberts did not mean that the United States was heading towards Nazism, but "more like a European socialistic state..."  Okay, so Senator Roberts is too dumb to realize that "national socialism" really means Nazism. 

But is there a deeper story here? Senator Roberts claims that Kansas citizens are "losing faith in their government," while the government "is losing faith in our people."  Senator Roberts is now running to change that situation. 

And yet, what did Senator Pat Roberts do before this loss of faith between the Kansas citizens and government became apparent to him?  According to Wikipedia, Pat Roberts was elected to the U.S. House of Representatives in 1980, serving for eight congressional terms.  Roberts was then elected to the U.S. Senate in 1996, and is currently serving his third term.  In other words, Pat Roberts has been serving in both the House and Senate for a combined 34 years!  And only now Roberts is running to restore the faith between Kansas citizens and the government?  What was he doing for the past 34 years--18 years in the Senate and 16 years in the House?  According to the Washington Post:
Shirley Deege is a proud Republican. For as long as she can remember, the nurse has been voting for Pat Roberts — in the 1980s, when he represented a vast patchwork of dusty plains hamlets in the House; in 1996, when he first ran for the Senate; and every six years after that.

“Looking back over my life, I’m wondering, ‘What major things has he done for Kansas?’ I’m coming up empty,” said Deege, 53, as she sipped coffee while waiting for Roberts to arrive at the county fairgrounds in Kinsley this week.
“He’s spent so much time in Washington,” she added. “I know he has a house in Virginia. Dodge City is supposed to be his home, just up the highway, but I don’t hear of him coming back too much.”
Many Kansans feel the same about Roberts after his 33 years in elected office. Many more want him gone, even if it means replacing him with a political enigma named Greg Orman — a wealthy investor running as an independent who has declined to say whether he would caucus with Republicans or Democrats. 
The backlash against Roberts stems not from any single issue — ideologically, he has followed his party’s shift to the right — but from a widespread feeling that he has grown too insular in Washington and fallen out of touch.
“I’m 78 years old, and I’ve been voting for [Roberts] since the beginning,” Darrel Miller, a retired wheat farmer, said after seeing Roberts in Kinsley. “I don’t wish him any ill will. I just think we need a change.”
 What is especially ironic is that Roberts is running in a close Senate race with an unknown independent, in a heavily Republican state.  What is more, Roberts was seen with former Senate Republican leader Bob Dole in Kinsley, Kansas, where the ailing Dole is in the midst of his own farewell tour throughout his native state.  Bob Dole was a powerhouse U.S. Senator, Senate Majority and Minority Leader, and a former Republican presidential candidate in the 1996 election.  What did Senator Pat Roberts do in his career?  National GOP strategist and former Senator John McCain adviser John Weaver said, "He’s basically furniture in the Senate, and the people in Kansas know that....You could give the average Kansan 24 hours to come up with something Pat Roberts has done in the Senate, and after 24 hours, even the crickets would be standing there befuddled." 

The deeper story here is that Senator Pat Roberts is completely out-of-touch with ordinary Kansas citizens.  Pat Roberts was voted in during the same year Ronald Reagan took control of the Oval Office in 1980.   He has been in Washington for almost 34 years, probably voting a staunchly conservative, pro-business legislation and policies throughout his political career.  I'm also guessing Senator Roberts also supported Reagan's supply-sided economic theories and probably did not try to stop the 30-plus years of growing inequality between the extreme one percent rich and everyone else.   Pat Roberts' career was hobnobbing with the powerful political, business, and ubber-rich elites in Washington D.C. to the point of becoming an elitist himself.  He  ignored what's the matter with Kansas for years--decades even, as he played the elitist lifestyle..  Now that Kansas voters are waking up to this piece of furniture in the Senate, Senator Roberts is fighting for his political life in the tired, hard-right conservative meme of fear-mongering among the Tea Party activists in Kansas.  According to the WaPost article, Roberts has brought in former Alaska governor Sarah Palin, Senator Rand Paul (KY), Senator John McCain (AZ), and former Florida governor Jeb Bush to campaign for him.  In addition, the national Republican Party has forced Roberts to replace his campaign staff with out-of-state political operatives, who are now attacking independent Greg Orman, and attempting to "stir suspicions" among Kansas voters that the potential Republican Senate majority hinges on Roberts' re-election.  It is a classic, GOP fear-mongering technique to keep the voter base in check. 

The question to ask now is will the Kansas voters be swayed by the stale, fear-mongering from Senator Roberts and the GOP, or will they decide to go for an unknown change? 

Saturday, September 20, 2014

Ex-employees warned Home Depot for years on security breach

Last week, Home Depot confirmed that its payment security systems had been hacked, impacting all of Home Depots 2,200 stores in the United States, and possibly Canada.  The Home Depot computers were apparently hit by a variation of the same maleware program which breached Target's computers last year. 

Today, there is this interesting story that came from the New York Times:
The risks were clear to computer experts inside Home Depot: The home improvement chain, they warned for years, might be easy prey for hackers.
But despite alarms as far back as 2008, Home Depot was slow to raise its defenses, according to former employees. On Thursday, the company confirmed what many had feared: The biggest data breach in retailing history had compromised 56 million of its customers’ credit cards. The data has popped up on black markets and, by one estimate, could be used to make $3 billion in illegal purchases.
Yet long before the attack came to light this month, Home Depot’s handling of its computer security was a record of missteps, the former employees said. Interviews with former members of the company’s cyber security team — who spoke on the condition they not be named, because they still work in the industry — suggest the company was slow to respond to early threats and only belatedly took action.

In recent years, Home Depot relied on outdated software to protect its network and scanned systems that handled customer information irregularly, those people said. Some members of its security team left as managers dismissed their concerns. Others wondered how Home Depot met industry standards for protecting customer data. One went so far as to warn friends to use cash, rather than credit cards, at the company’s stores.
Then, in 2012, Home Depot hired a computer engineer to help oversee security at its 2,200 stores. But this year, as hacks struck other retailers, that engineer was sentenced to four years in prison for deliberately disabling computers at the company where he previously worked.
What disturbs me about this NY Times story is the cavalier attitude Home Depot has in regards towards providing such computer security.  Home Depot's managers knew since 2008 that their systems were vulnerable to hackers, yet they did nothing.  Home Depot continued to rely on outdated scanning software, conducted irregular scans on their computer systems,   and even hired a computer security engineer who was convicted of disabling computers from his previous employer. Stephen Holmes, a Home Depot spokesman, said that the company is moving towards improving computer security through an encryption register system, and switching over to a new payment system based on smart-chip cards for all Home Depot Stores.  Holmes claims that Home Depot maintains "robust security systems," and that "Our guiding principle is to do what's right by our customers." 

And yet, according to the NY Times:
Several former Home Depot employees said they were not surprised the company had been hacked. They said that over the years, when they sought new software and training, managers came back with the same response: “We sell hammers.”
What we have here are Home Depot upper-level managers who are completely clueless on computer systems and security.  These managers could have been MBAs, with specialization in bean counting.  They know exactly how many hammers Home Depot has sold, and how much they could save money by cutting  back from employee payrolls, computer software and hardware purchases, or even not running background checks on a security engineer's potential hiring.  These are managers that are concerned with short-term profits, rather than long-term investment in technology infrastructure to secure Home Depot's computer data.  Technology and software infrastructure is expensive and difficult to replace, implement, and train computer professionals to run and monitor the system--you are not going to get your return on such an investment by the next quarter.   The cost on Home Depot's failure to maintain their computerized security systems only becomes clear after the hackers have breached the system, and possibly stole the customer data. It is all about short-term profit and corporate greed.

Then again, I wonder how much Home Depot will pay for the cost of this security breach?

Sunday, September 07, 2014

One-third of American workforce working freelance

I found this Reason Magazine story through the Washington Monthly, with the final source coming from this report Freelancing in America.  Starting with Reason Magazine:
A new report shows some 53 million Americans—or 34 percent of the U.S. workforce—are now working as freelancers in some capacity. "This is more than an economic change," asserts the report, a joint effort from the Freelancer's Union and freelance markeplaces oDesk and eLance. It's also "a cultural and social shift" that will "have major impacts on how Americans conceive of and organize their lives, their communities, and their economic power."
The first and last time anyone looked at the freelance worker population in the U.S. was 2004, in a report from the Government Accountability Office (GAO). Back then the GAO turned up about 42 million "contingent workers," a group that included folks we would normally think of as freelancers but also all part-time workers. "It was a solid, if not particularly nuanced, effort," as the writers of the new report put it.
The Freelancing in America report defined freelancers at "individuals who have engaged in supplemental, temporary, or project-or-contract-based work in the past 12 months," while breaking this group into five categories:
  • Independent Contractors (21 million). Individuals whose work involves a project-to-project basis in the field.  They make up around 40 percent of freelancers.
  • Moonlighters (14.3 million).  Individuals who work a regular full-time job, and do some freelance work on the side.  They make up 27 percent of freelancers.
  • Diversified workers (9.3 million).  Individuals who pull income from multiple sources, including traditional employment and freelance work.  They make up around 18 percent of freelancers.
  • Temp workers (5.5 million).  These individuals work with a single employers, client, job, or project, but on a temporary basis. They may be a temp agency workers, and make up around 10 percent of freelancers.
  • Freelance business owners (2.8 million).  These individuals employ between one and five employees, and who consider themselves both freelancers and business owners.  They make up around 5 percent of the freelance workforce.
Reading through the report, I get the impression that the new freelance workforce will have a rosy-cheek future of deciding what multiple, high-paying jobs they can choose from, to fit their own freedom of schedule, creativity, while not having the stress of being controlled by a corporation or someone else, generating a positive impact in this new work and employment.

However, Dave Atkins at the Washington Monthly, sees differently:
Libertarians, of course, tend to get excited about this trend, seeing it as a pure form of free interactive capitalism in line with the much-ballyhooed “sharing economy.”
However, as a proud freelancer myself for over a decade (I fall into the “freelance business owner” category), I can attest that it’s not really a workable model for society. As with all things in unregulated libertarian capitalism, opportunity potential is high but the downside risk is enormous. It’s often difficult to make long-term plans since you aren’t sure if the freelance work is going to keep coming—and the nature of freelance work itself means that it’s hard to even plan a weekend getaway, much less a vacation, because if there’s a project required to happen at a certain time you can’t pass up the opportunity to take it on.
Beyond that, however, not everyone has the personality to deal with the level of uncertainty involved in freelancing. Most people like to know what they can count on, and don’t want to be forced to constantly be doing business development and singing for their supper every night. Also, a freelance economy reduces the necessary commitment of employers to their employees, whom they can increasingly treat as contractors to be discarded at the earliest convenience.
I can agree with David here, having been a "Freelance business owner" / "Independent contractor" for almost nine years.  Once I got out of the desktop publishing and printing industry in 2005, I've been pretty much making a small living as a defined temp workers and independent contractor for a number of low paying, temporary positions, before I was finally forced to accept that I will be in this freelancing position forever.  Since then, I've adapted to become a Freelance business owner / independent contractor for computer and technology work.  You really do have to hustle around and  sing for your supper.  You do not know how long the freelance work will last, or even how long the downtime will be between two projects.  You do not have the long-term weekly paycheck of a permanent position, where you can plan and budget your expenses.  Instead, you have to count your pennies and save for the basic living costs--again during the downtime between your projects.  Even worst, it that you may not even know when projects will come up and what their pay rates could be.  You may accept a lower paying project first--just as a means to pay the bills.  Two days later, a better, higher-paying project may come along.  What do you do?  Dump the first project to accept the second project?  Of course, there are also the endless paperwork and juggling between W-2 contract work, 1099 contract work, and recording business expenses to reduce your tax burden.  It is a lot easier to go into a permanent 9-5 job for a company.

Unfortunately, companies do not see it that way.  This is especially true in the tech sector of Silicon Valley here.  The two technology companies that I've done computer work for this year have outsourced their entire IT departments to independent contractors for staffing firms.  A couple of these technology contractors were working for the same company in the same job for both five years, and 10 years--but they were independent contractors, rather than regular employees.  There were even software designers and programmers that were hired as independent contractors, rather than regular employees.  The second company that I've done computer work for has outsourced not just their IT Department, but also the Help Desk and customer support workers.  Of course, company cafeterias are outsourced to catering companies, who hire their own contractors to work in the said company cafeterias.  Even when I was working in the desktop publishing industry, the printing company did not hire their own permanent employees to perform local delivery services, but instead hired contractors from staffing firms.

Then there are the folks standing outside the Home Depots?  What are they classified as in this freelance economy?

It is pretty much an easy guess as to why companies are ditching permanent employees for contractors and staffing firms of this freelance economy.  When you hire on a permanent employee, you not only have to pay that employee and hourly wage or salary, but also overtime wages, health insurance, Social Security, 401K retirement matching, vacation time, and other benefits.  Regular employees have got it made.  I started working at an estate sale company on a W-2 basis for a couple of months, before the estate sale company changed me over to an independent contractor position.  Why?  So the estate sale company would not have to pay for my health insurance.  You don't get these type of benefits as an independent contractor.  Companies are now cutting back on full-time employees' hours to part time hours as a means to avoid paying for health insurance and benefits to their former full time employees.  You can bet this type of cutback suppresses employee wages even more, generating more profits to the company.  The worry I have here is that as more Americans are seeing their paychecks stagnate, or are pushed into this freelance economy of uncertainty, how will this labor and wage shift affect their own spending patterns?  Are they willing to go out and buy a new house, car, or big ticket items, if they don't know whether they will have a new project job next week....or next month?  Are they willing to buy even more of the goods and services that companies are trying to sell them, even as these same companies are suppressing their wages?

Monday, September 01, 2014

More companies engaged in employee wage theft

I found this New York Times story via the Huffington Post.  Appropriate for Labor Day:
MIRA LOMA, Calif. — Week after week, Guadalupe Rangel worked seven days straight, sometimes 11 hours a day, unloading dining room sets, trampolines, television stands and other imports from Asia that would soon be shipped to Walmart stores.

Even though he often clocked 70 hours a week at the Schneider warehouse here, he was never paid time-and-a-half overtime, he said. And now, having joined a lawsuit involving hundreds of warehouse workers, Mr. Rangel stands to receive more than $20,000 in back pay as part of a recent $21 million legal settlement with Schneider, a national trucking company.

“Sometimes I’d work 60, even 90 days in a row,” said Mr. Rangel, a soft-spoken immigrant from Mexico. “They never paid overtime.”
The lawsuit is part of a flood of recent cases — brought in California and across the nation — that accuse employers of violating minimum wage and overtime laws, erasing work hours and wrongfully taking employees’ tips. Worker advocates call these practices “wage theft,” insisting it has become far too prevalent.

Some federal and state officials agree. They assert that more companies are violating wage laws than ever before, pointing to the record number of enforcement actions they have pursued. They complain that more employers — perhaps motivated by fierce competition or a desire for higher profits — are flouting wage laws.

Many business groups counter that government officials have drummed up a flurry of wage enforcement actions, largely to score points with union allies. If anything, employers have become more scrupulous in complying with wage laws, the groups say, in response to the much publicized lawsuits about so-called off-the-clock work that were filed against Walmart and other large companies a decade ago.

Here in California, a federal appeals court ruled last week that FedEx had in effect committed wage theft by insisting that its drivers were independent contractors rather than employees. FedEx orders many drivers to work 10 hours a day, but does not pay them overtime, which is required only for employees. FedEx said it planned to appeal.

Julie Su, the state labor commissioner, recently ordered a janitorial company in Fremont to pay $332,675 in back pay and penalties to 41 workers who cleaned 17 supermarkets. She found that the company forced employees to sign blank time sheets, which it then used to record inaccurate, minimal hours of work.
David Weil, the director of the federal Labor Department’s wage and hour division, says wage theft is surging because of underlying changes in the nation’s business structure. The increased use of franchise operators, subcontractors and temp agencies leads to more employers being squeezed on costs and more cutting corners, he said. A result, he added, is that the companies on top can deny any knowledge of wage violations.

“We have a change in the structure of work that is then compounded by a falling level of what is viewed as acceptable in the workplace in terms of how you treat people and how you regard the law,” Mr. Weil said.
There certainly is a change in the structure of work in America.  Where once, American companies would hire their own employees to perform company work and pay them wages and benefits, these same companies are now hiring independent contractors to do the same work for less pay, and are able to avoid paying health care costs and benefits.  Case in point--I worked as a subcontractor for a temporary staffing company, which was hired by a big Silicon Valley technology firm to replace computers.  This temporary staffing company paid a lower wage for the job, paid no benefits, and refused to pay over 8 hours per day, or any overtime--although the company did offer "comp time."  The question I would ask here is how many independent contractors even fully understand comp time--especially if the staffing company does not fully explain such compensation before contractor signs the contract?  And if the contractor doesn't understand the comp time and does not take it, well the staffing company just made extra money with free labor.

 The labor laws here have been diluted, weakened, and changed to the benefit of big companies--enticing them to commit such wage theft.  You have the long-term shifting of American workers from W-2 employees to 1099 contractors, the change from overtime pay to comp time, and the relentless suppression of wages.  The staffing company that I worked for replacing computers had a large number of contractors performing computer replacements, help desk support, and customer service.  I know that the Silicon Valley technology company contracts out for running their employee cafeterias and food service, security services, facilities maintenance, and possibly programming work.  Does any company hire their own employees anymore--aside from the CEO and Board of Directors?A previous Silicon Valley company that I contracted for did hire independent contractors to perform programming work.  It is all about endless cost cutting, with employee wages and compensation being a huge factor for companies bottom line--never mind about the employees' moral and benefit.  Both the big Silicon Valley firms and even small start-up businesses have done this--and I've worked in both as a contractor.  This is a trend I've been watching over the last ten years, but have not fully understood it until now.  The American worker is no longer and employee, but a small business contractor who now has to work for himself or herself.  That contractor is forced to negotiate with larger firms and staffing companies that hold all the cards and have all the resources to either offer jobs on their terms.  Here is a temp contractor job offer that requires a bachelors degree, five years experience, with specialized software training, that pays $10 per hour--and you'll be performing the work and responsibilities of what was three full-time positions that were cut last year!   Don't like that the job pays 10-20 percent less than the market rate?  There are ten more workers willing to take that job at that lower pay.  Of course, I haven't gotten into the unpaid intern positions with duties and responsibilities that should be paid positions! Have a complaint against working conditions?  You get fired and ostracized by that company--probably all the companies.  Government budget cuts on Labor Department investigations of wage thefts mean that companies can engage is such wage thefts against their own employees and contractors, and pretty much get away with it.  If such companies are caught, they get a slap on the wrist of paying for back wages--the managers and decision makers who agreed to conduct such wage theft are never thrown in jail!

The sad thing about this endless company cost-cutting, suppression of wages, transfer of employees to independent contractors, and endemic wage theft is that companies are slitting their own throats.  Because it is the employees that are also the consumers for whom these same companies need to sell their products and services.  We have had thirty years of supply-sided economic policies crammed down the American people, with stagnating wages and huge corporate profits being posted.  Are American consumers buying more products and services now?  Am I rushing out to buy more cars, clothes, appliances, and stuff on a stagnated wage that I used to be making 20 years ago--not counting for inflation?  I'm trying to avoid buying things.  We have a lack of demand in this country within the poor, working, and middle class because wages have been suppressed--companies are happy to sell luxury goods to the extreme rich and ubber-rich, who have all the money.  How long will this last?  How long will it be before nobody has any money to buy anything, and the ubber-rich have all the luxury goods they will ever want to buy?  How long will we, as workers and independent contractors, be told by the corporate-paid PR and media firms be endlessly told that we are the company's most valued asset, but then be screwed by the same companies through wage thefts, cost-cutting efforts, and forced to perform work of three jobs for a single minimum wage pay, coming from dysfunctional, narcissistic, and incompetent managers? 

How much longer will this last before everything comes crashing down?