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?

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