Posted on 07/11/2016 11:14:51 AM PDT by 2ndDivisionVet
As we enter the final stretch of the presidential election season (Hallelujah!), the rhetoric around jobs — how to create good paying ones, minimize income inequality and bring opportunities back home — is sure to heat up.
But what about the challenges facing the growing number of Americans who don’t work in traditional jobs, but are instead gig economy workers — like freelancers, consultants, and contractors — who lack the benefits and legal protections typically provided by employers? Where do Donald Trump and Hillary Clinton stand on them?
It matters because millions of Americans — the U.S. Government Accountability Office says perhaps as many as 30 percent of workers —have contingent jobs. Some willingly choose this, to have a more flexible lifestyle. But many others would prefer full-time employment.
The 1099 Workers
Even if you’re presently employed in a full-time job, at some point, you, too, could wind up joining the gig economy as an independent contractor (these workers are sometimes referred to as 1099s, for the tax form they use instead of an employee’s W-2). A recent Deloitte survey found that 42 percent of U.S. executives expect to use more contingent workers in the next three to five years.
The candidates seem stuck on discussing traditional 9-to-5 jobs, while ignoring the financial challenges of independent workers.
As a result of globalization, technology and the emergence of new business models (like those of Airbnb and Uber), 9-to-5 jobs are on the decline and the contingent workforce is here to stay. Yet the presidential candidates seem stuck on generally discussing jobs in the context of the traditional 9-to-5 model, while largely ignoring the financial challenges of independent workers who rely on a patchwork of income streams to make a living.
5 Downsides to Being an Independent Contractor
Although the freelance economy frequently affords workers flexibility on where and when they work, there are five serious downsides:
1. Independent workers must purchase benefits on their own. This includes unsubsidized health care, life insurance and disability coverage and retirement plans with no employer match.
2. Freelancers miss out on employer-sponsored perks such as training, elder care benefits, wellness programs and trips to educational conferences. They’re also excluded from holiday and sick pay and are responsible to pay for their on-the-job expenses. For example, Uber drivers — who the company views as independent contractors, though that opinion is now a legal tussle — must pay for their own vehicle maintenance and gas.
3. Payroll taxes are higher. Independent workers must pay the full 15 percent rate for FICA (Social Security) taxes, as opposed to employees who split the burden 50-50 with their employers. The independent contractors can deduct half of these taxes, though.
4. Independent workers often earn significantly less than similar workers who are paid as employees. According to a National Employment Law Project report, one government expert calculated that a construction worker earning $31,200 a year before taxes would be left with an annual net compensation of $10,660.80 if paid as an independent contractor, compared to $21,885.20 if paid properly as an employee.
5. Independent workers are denied a broad range of legal protections. Unlike employees, they aren’t covered by minimum wage regulations, unemployment insurance and overtime pay rules. They also lack the collective bargaining rights and civil rights protections of their W-2 brethren.
The fact is, many gig economy workers live with constant financial insecurity and uncertainty. It’s hard to qualify for a mortgage or a car loan if you don’t have a history of steady income or future prospects for it.
Misclassified as Contractors
While, some independent workers happily accept the limitations in exchange for gig economy flexibility, many are forced into contingent worker arrangements, sometimes wrongly. According to the National Employment Law Project, employers in an increasing number of industries are misclassifying workers as independent contractors, saving the firms as much as 30 percent of taxes otherwise paid for “employees,” plus the costs of unemployment insurance, overtime and even the minimum wage.
Some legal and state government challenges to misclassification have come to the aid of contingent workers. Uber and Lyft have been sued by workers who say they should be treated as employees. A Fortune magazine story on Clinton and the gig economy noted that California’s labor commission, in a non-binding ruling, found that a former Uber driver was not an independent contractor, but an employee. Last year, as the result of legal action, the grocery delivery startup Instacart agreed to reclassify its 1099 workers as traditional W-2 employees, so those Instacarters are now entitled to all the benefits and protections of other employees there.
What Clinton and Trump Have Said
Hillary Clinton has forcefully spoken out against employers who misclassify employees as independent contractors. Last July, she said: “I will crack down on bosses who exploit employees by misclassifying them as contractors or even stealing their wages.” And, she said, “this on demand or so-called gig economy is creating exciting opportunities and unleashing innovation, but it’s also raising hard questions about workplace protection and what a good job will look like in the future.”
While not mentioning freelancers specifically, Clinton has other initiatives on her website that could prove beneficial to them, such as guaranteed paid family and medical leave benefits that would be funded by taxes, instead of by employers.
Donald Trump hasn’t offered any pronouncements on gig economy workers or protections for them specifically, though in a video on his website, he declares, “I will be the greatest jobs producing president that God ever created!”
He has, however, proposed lowering the corporate tax rate to 15 percent for all businesses, which would in most cases, apply to — and benefit — independent contractors.
Under the Trump tax plan, while a worker earning more than $50,000 as an employee would be taxed at either 20 or 25 percent, that same person would owe a 15 percent tax rate as an independent contractor.
The Politician Who Is Speaking Out
One politician who is championing gig-economy policies is Senator Mark Warner (D-Va.). Last June, he was the first lawmaker to propose a slate of recommendations addressing issues created by the rise of the in-demand economy. “Policymakers need to discuss whether government and industry’s 20th Century definitions still work for a 21st Century economy,” he said. “The decision about whether on-demand workers are independent contractors or employees is too important to leave to the courts on a case-by-case, state-by-state basis.”
Warner also called for exploring public-private options for “providing safety net benefits for workers who are not connected to a traditional, full-time employer,” perhaps borrowing the idea of the Hour Bank (used by the building trades for 60 years), which administers benefits for members who work for a series of contractors.
The Brookings Institution think tank has also developed a proposal, (cleverly named The Hamilton Project in a hat-tip to our nation’s first Secretary of the Treasury), with several compelling recommendations.
Clearly, creating the right mix of solutions is no easy task, especially in this contentious political environment. But it’s high time our presidential candidates start asking the tough questions and weigh in with future-focused solutions that will help move all our workers forward — not just those working 9-to-5 (what a way to make a living).
Freedom of individual enterprise, unhampered by government, was America's Founders' solution. The following essay is reprinted with permission. The link provided accesses other essays available for reprint.
"Agriculture, manufactures, commerce, and navigation, the four pillars of our prosperity, are the most thriving when left most free to individual enterprise." - Thomas Jefferson
"The enviable condition of the people of the United States is often too much ascribed to the physical advantages of their soil & climate .... But a just estimate of the happiness of our country will never overlook what belongs to the fertile activity of a free people and the benign influence of a responsible government." - James Madison
America's Constitution did not mention freedom of enterprise per se, but it did set up a system of laws to secure individual liberty and freedom of choice in keeping with Creator-endowed natural rights. Out of these, free enterprise flourished naturally. Even though the words "free enterprise" are not in the Constitution, the concept was uppermost in the minds of the Founders, typified by the remarks of Jefferson and Madison as quoted above. Already, in 1787, Americans were enjoying the rewards of individual enterprise and free markets. Their dedication was to securing that freedom for posterity.
The learned men drafting America's Constitution understood history - mankind's struggle against poverty and government oppression. And they had studied the ideas of the great thinkers and philosophers. They were familiar with the near starvation of the early Jamestown settlers under a communal production and distribution system and Governor Bradford's diary account of how all benefited after agreement that each family could do as it wished with the fruits of its own labors. Later, in 1776, Adam Smith's INQUIRY INTO THE NATURE AND CAUSES OF THE WEALTH OF NATIONS and Say's POLITICAL ECONOMY had come at just the right time and were perfectly compatible with the Founders' own passion for individual liberty. Jefferson said these were the best books to be had for forming governments based on principles of freedom. They saw a free market economy as the natural result of their ideal of liberty. They feared concentrations of power and the coercion that planners can use in planning other peoples lives; and they valued freedom of choice and acceptance of responsibility of the consequences of such choice as being the very essence of liberty. They envisioned a large and prosperous republic of free people, unhampered by government interference.
The Founders believed the American people, possessors of deeply rooted character and values, could prosper if left free to:
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Such a free market economy was, to them, the natural result of liberty, carried out in the economic dimension of life. Their philosophy tended to enlarge individual freedom - not to restrict or diminish the individual's right to make choices and to succeed or fail based on those choices. The economic role of their Constitutional government was simply to secure rights and encourage commerce. Through the Constitution, they granted their government some very limited powers to:
Adam Smith called it "the system of natural liberty." James Madison referred to it as "the benign influence of a responsible government." Others have called it the free enterprise system. By whatever name it is called, the economic system envisioned by the Founders and encouraged by the Constitution allowed individual enterprise to flourish and triggered the greatest explosion of economic progress in all of history. Americans became the first people truly to realize the economic dimension of liberty.
All the more reason why Trump's tax plan is great. Not only is it fair that independent contractors should pay less than employees to make up the difference in FICA taxes, but encouraging more employees to become ICs to take advantage of the benefit makes good sense in encouraging employers to treat their help better by tightening supply.
Hitting the gig economy jobs is sort of like a yellow light. You can go, but you can bet it won’t last long. What will help jobs is to lift regulatory burdens which are curtailing new businesses.
“1. Independent workers must purchase benefits on their own. This includes unsubsidized health care, life insurance and disability coverage and retirement plans with no employer match.”
This is where I can’t believe ANY self employed person likes Obamacare. My cheapo catastrophic only plan was in the $150 a month range with 10k deductible. Now.... $480 per month for absolute garbage coverage with the same deductible. I go without. That’s more than half of my shop rent.
Actually, we would be better off if everyone were an independent contractor.
And we would be much better off if we didn’t have public sector progressives, like PBS, preaching to us.
Have you looked at those Christian coops? There have been articles posted about them here.
My sister went for a Christian co-op. It was worse than useless. The people I know who personally used them were all disappointed.
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