Is Social Stability the Lamb Upon the Altar of Gig Economy?
Assessing the economic risks of freelancing. By Tim Otto
Isn’t freelancing just perfect? Crushing the chains of ordinary work force, abandoning the anxious ubiquity of imperious supervisors, oppressing hierarchies and annoying co-workers, all making your life harder than it should be. Most of us have at least once drifted away in the secret desire of being their own boss, of ending that self-imposed 9-to-5 slavery.
Indeed traditional employment seems to be facing the dawn of a revolution: right in this very moment almost 34 percent of the US labour force are engaged in some kind of freelance work — and numbers are skyrocketing to an estimated share of 50 percent in 2020. The advancements of mobility, connectivity and pro-applications have empowered us to fight back the once inevitable constraints of the Fordist economy. Digital nomads and idealist entrepreneurs have become spiritual leaders of this movement, blog-posting enlightening visions straight to the IE9-Tabs of antiquated office PCs.
Bring on the sacrificial lamb! The price tag of freedom is not just a virtual one…
As with most revolutions, the rise of the gig-economy comes with a price tag–and it’s not just a virtual one. I’m talking of economic security, or better insecurity, that ubiquitous damocles sword constantly swinging above a freelancer’s head. It’s in the moment of decision (or worse: afterwards) that we start appreciating those little benefits we took for granted so long–with health care and social insurance being just the tip of the iceberg. From a more general perspective we’re trading off financial safety, legal reliability and cash flow consistency–or are we not?
Up to now your employer had covered your health care, your social insurance and maybe even your retirement plan. That’s literally your business now. A mandatory one in some countries, take Germany for example, a (partially) voluntary one in others like the US. So one of your first acts of total flexibility could indeed be trading your health insurance for that comforting companion of instant ruin in case anything ever happens. Currently 35% of US freelancers chose the latter–a cheer for freedom! But let’s stay “glass-half-full”: while those fixed costs might relate to your profit margin as the eagle does to Prometheus’ liver, they’re no longer a deal breaker thanks to the Affordable Care Act and individual 401(k)s. A solid rate calculation should do the trick.
Indeed, fixed costs are more like mean little spikes at the tip of a cruel two-tail whip: legal reliability and cash flow consistency. The former addressing nebulous legal frameworks, whether they’re incorporated to your business model or your contracts. The issue is nowadays mostly referenced in context of the sharing-economy, with UBER as its most prominent delinquent. Misclassification can turn your bright dream into a vivid nightmare, triggered by nasty words like “lawsuits” or “insurance inspectors”.
While said nightmare leaves you at least with some personal freedom, there’s an insidious scenario that won’t let you breathe at all: it had not gone unnoticed among employers that you’re neither protected by worker protection laws nor entitled to any social benefits. That makes you a formidable hire for independent contracting, contingent work or on-call-working. Especially in your early career you might be attracted by the idea of a stable cashflow through such kind of assignment. Less pleasant is that you’re close to slipping into this very traditional employer relationship you wanted to escape from in the first place–just without any of the associated benefits. To add insult to injury, some constellations can get you into trouble in terms of bogus self employment.
This leads us to cash flow consistency. Remember when your salary arrived on-time on a given date every month? Well, from now on not only will you have to fight for every dollar on your invoice (Don’t forget to smile while your negotiated salary undermines your break-even rate). You also have to make sure these invoices actually get paid! Generous interpretations of payment deadlines and wage theft will challenge your money spinning skills: in 2015 more than 70 percent of US freelancers reported problems with receiving payment. As average payments of freelancers are still relatively low, and in some places even declining, late and nonpayment might let you skip the queue to rock-bottom.
The fate of the lamb. Where’s Prometheus when you need him?
The sacrifice seems inevitable but then again it’s 2016 and in less than four years we will be speaking about half of the US labour force. So the questions are: Do we really have to kill that goddamn lamb? Can’t we just keep it? Aren’t we somehow even entitled to have one? During the past years various initiatives have formed to mitigate the social sacrifice such as the Freelancer Union, led by modern Prometheus Sara Horowitz, providing freelancers with a powerful political voice to ensure adequate rights and benefits. In New York they recently succeeded in enforcing harsh penalties for delayed or denied payments through the wave theft protection bill “Freelance Isn’t Free”. And whether it’s due to relentless campaigning or due to increasing weight as a voting bloc: the independent workforce slowly fights its way onto political agendas. After all, there seems to be light at the end of the tunnel–not only for our beloved lamb…
