Freelancers and the Canadian Election- Who Care About Us?
Recently, the Freelancers Union and Upworks commissioned a study on the State of Freelancing in America. Sarah Horowitz, the founder of the Freelancers Union, makes the case that the number of people working outside of mainstream employment is growing, and politicians aren’t paying enough attention to the changing workforce or the issues freelancers face in the evolving economy.
Just a few days after these comments were made, President Obama responded to a question on the “gig” economy at a town hall meeting in Washington. He said most people in the job market are still classified as employees and have what could be considered traditional working arrangements, and that “we have to not get too distracted as if suddenly everything’s been transformed.”
So which is it? Is the growing number of freelancers enough to warrant political attention, or not? Since we’re in the countdown to an election here in Canada, we thought we’d investigate the three main parties’ positions on matters of interest to freelancers.
We talked directly to Andrew Cash, a Toronto NDP candidate and our local MP, who also happens to be a former freelancer and the MP who tabled the National Urban Workers Strategy (which is currently stalled in second reading). We weren’t able to connect with either the Liberal or Conservative parties, so we parsed their positions from their election platforms.
Issues Unique to Freelancers
Each party’s platform addresses a multitude of issues, from the economy to global warming and international affairs, but our focus is on the policies that impact our specific concerns– ie freelancers, contractors, consultants, and whoever else works for themselves rather than a third-party employer.
So, what are the concerns of freelance workers today? According to the State of Freelancing (2015) study, they are:
1. Absence of a Safety Net
2. Unpredictable Income
3. Finding Clients
4. Saving for Retirement
5. Non-payment of Clients
The NDP, Conservative and Liberal platforms address a few of these issues, and we’ve chosen to focus on the following three:
1. Safety Net:
Canada has universal health care, so thankfully we’re not in the same situation as our U.S. counterparts who have to pay sizeable amounts for basic health coverage. However, even in Canada we’re on our own when it comes to coverage for essentials like drugs and dental visits. While individuals can buy into benefits plans, the rates are much higher than they are for the group plans that many companies offer.
So can freelancers expect an enhanced safety net post-election? Here’s what the parties are saying:
· The Liberals promise to improve access to necessary prescription medications by partnering with provincial governments, with the purchase of buying drugs in bulk. Group buying power will reduce the cost of these drugs, making them more affordable to the public.
· The NDP also promises to improve Pharmacare and has set a target to cut drug costs by 30%. In addition, they promise to provide $2.6 billion over four years to establish universal prescription drug coverage as part of our public health program.
The Conservatives says that health care is a provincial responsibility.
2. Income Security
Most freelancers know the feast and famine cycle of freelance income. For those just starting out, dry periods can make it tough to cover the basic necessities, and even seasoned freelancers admit to having financial ups and downs. Combine this with no income during periods of extended illness or family emergencies and many freelancers find themselves living on the financial edge.
Self-employed Canadians are not eligible for regular Employment Insurance (EI) benefits. By virtue of being self-employed, freelancers are viewed by EI rules as employed, even when there is no work.
Since 2011 we have been eligible for EI Special Benefits, which includes coverage for maternity and parental leave, sickness, and compassionate care. How this works is that you are able to collect a benefit calculated at 55% of your average weekly freelance income. The kicker is that to qualify you have to have paid into the EI fund for the previous twelve months, and once you collect the benefits (even if it’s just once!), you are obligated to pay into the fund for the duration of your self-employed career. Not surprisingly, few freelancers have availed themselves of this program.
Here’s what the parties have to say about income security:
· None of the parties address this critical topic directly. Both the Conservatives and Liberals promise to reduce EI premiums, while the NDP says that they will freeze them for four years.
· The Liberals say that they will “…ensure that the Employment Insurance system is providing real income security to workers, including those with precarious work.” Unfortunately, they provide no details on how they’ll accomplish this.
· The NDP says that they will make it easier for people who move in and out of the workforce to collect benefits by reducing the qualifying hours and length of the waiting periods for EI. They also state that they want to improve income security for self-employed individuals but again, there are few specifics.
Tax policies can be complicated and take many forms — from the direct rate that we each pay to tax credits, incentives, deductions and so on. A good example of just how complex things can get is the policy on income splitting, a new program introduced by the Conservative government earlier this year. This allows couples with children under the age of eighteen to split up to $50,000 of income; and it provides a tax-savings of up to $2,000 (regardless of family income). Both the Liberals and the NDP promise to rescind this program on the basis that it gives money to wealthier families who might not need it and is not a good use of tax dollars.
So what are the tax policies that affect freelancers?
· The Liberals promise to cut the middle-income tax bracket by 7% (from 22 % to 20.5 %) — a reduction that could help many freelancers (especially those with taxable annual income between $44,700 and $89,401). Neither the NDP nor Conservatives are proposing a tax bracket cut.
· Both the NDP and Conservatives propose cutting small business taxes from 11% to 9%, which could help incorporated freelancers.
· The NDP recently announced that they would implement income averaging for Arts and Cultural workers. This would allow people to average their earnings over a few years so that if they have a good year, where they pay higher taxes, followed by a bad year, where they pay lower taxes, they can average these out and get a rebate or credit for the taxes paid. We think this is an interesting idea that would be of great benefit to freelancers — especially if the definition of Art sand Culture workers is broadly defined.
3. Saving for Retirement
A common refrain from many freelancers we’ve talked to is that they will never retire — partly because they like their work but mainly because they’ve never been part of a pension plan or amassed the kind of savings they would need to stop working. Freelancers do pay into the Canada Pension Plan but even for those who have contributed their whole career the maximum benefit is $12,780 per year — not an income anyone can live on without supplemental savings.
· The Conservatives say they will examine ways to allow Canadians to voluntarily contribute more to the Canada Pension Plan.
· The NDP and the Liberals say they will increase Canada Pension Plan contributions and benefits.
· No party directly or indirectly addresses the challenge freelancers have paying their CPP contributions. Attention needs to be drawn to the fact that freelancers are responsible for both the employer and employee share of CPP payments. What this means is that we’re on the hook for 9.9% of net income to the maximum of $4,959.90, while traditional employees and employers each pay half of that amount. Many freelancers find this an unrealistic expense and hard to swallow, especially during those lean times mentioned above.
So what do we take from this review? While we’ll refrain from staking out a firm political position, it’s pretty clear to Living Freelance that the Conservative party is not a friend of freelancers. Some of their platform may serve a selection of freelancers, but overall their economic vision will do little to help those of us who are working outside of traditional employment. Perhaps of more concern than the policy gap is that they don’t seem to acknowledge that we exist as a growing group of Canadians.
The Liberals acknowledge our existence of and seem to be in the early days of developing relevant policies. The NDP has taken this even further with the introduction of their Urban Workers Strategy. This bill explicitly calls for a review of a number of programs that impact freelancers directly.
— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — -Last week a new Jobs Report was released in Canada. It showed that full-time employment has increased by 1.4%, part-time employment by 1.2% and self-employment by 2.5% in the past year. It also reported that in September 2015, public and private employers shed 18,600 jobs while self-employment jumped by 30,800. Whether fewer full-time jobs is contributing to the continued growth in self-employment or whether this is a definite long-term trend, as suggested in the State of Freelancing study, we think that our political parties need to work harder to bring some basic protections to people who work for themselves. We also believe that freelancers need to pay attention to what policy makers are saying and begin to hold them accountable for addressing the issues that are of concern to us.
And, like many others, we urge all freelancers to vote wisely in the upcoming election.