What does the future hold for workers in a freelance economy?
Editor’s Note: In May, a report by the Government Accountability Office alerted us to a new reality: Contingent workers — freelancers, part-time workers, self-employed workers and the like — make up 40 percent of workforce.
The office sharing company WeWork has tried to serve the growing number of contingent workers since in 2010. The company rents out offices and desks to freelancers and entrepreneurs on a month-by-month basis and offers perks — free coffee, foosball and even a 5 o’clock happy hour. Business and economics correspondent Paul Solman takes a closer look at the company as well as the larger trend of contingent work in the latest Making Sen$e segment, which airs every Thursday on the PBS NewsHour.
Paul sat down with Richard Greenwald of Brooklyn College and the author of the forthcoming book, “The Death of 9–5.” As one might assume, Greenwald does not have the rosiest view of this contingent workforce. More independent contractors, he notes, put large corporations into a very powerful position.
Tune in tonight to watch this week’s Making Sen$e report on the topic. The following transcript has been edited and condensed for clarity and length.
— Kristen Doerer, Making Sen$e Editor
Paul Solman: So what’s the problem with this new phenomenon of the contract worker?
Richard Greenwald: We have 40 percent of the workforce working contingently without any safety net. They’re holding all of the burdens, all of the risks that used to be carried by employers or institutions on their own shoulders. They don’t have defined benefits. They don’t have healthcare. They’re working from gig to gig. And the system that we’re operating under is still geared to a nine-to-five, permanent, full-time job economy. Our political system, our economic system hasn’t caught up.
A perfect example is when a freelancer bills a company. If you’re working a nine-to-five job, and you don’t get paid, you can go to the Department of Labor, file a complaint and there’s a process for that. If you’re an independent contractor, and you don’t get paid, you have to go to small claims court, because it’s usually a small amount of money, which means you have to take time off of work, you have to sue, you have to represent yourself. One of the big complaints from freelancers is that there are huge delays in getting paid, and there are many clients who just don’t pay them. Our system is not set up to provide any security for them. So they’re taking on enormous risk without any safety net. And it looks the percentage of contingent workers is going to increase in the next decade. It’s already gone from 30 percent to 40 percent. One could imagine it’s going to 50 percent very soon.
Paul Solman: Thirty percent to 40 percent in what period of time?
Richard Greenwald: About ten years. It’s enormous. And you could see it, because big companies that never would have thought about hiring freelancers are doing it. IBM for example, even NASA, are hiring consultants or freelancers at a large volume.
Paul Solman: IBM and NASA are hiring consultants?
Richard Greenwald: Yes. And NASA is actually using Freelancer.com to crowdsource engineering designs for some of the things for space travel. And they’re not alone. The flood gates have opened. More and more companies are hiring freelancers when they might have hired full-time people. It’s a trend that’s just escalating, and I don’t see it slowing down right now.
Paul Solman: You say that our system hasn’t caught up, but Obamacare, for example, is a way of trying to get the uninsured — those working contingently — insured.
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Richard Greenwald: And that has been very helpful, but it’s still not enough. There are still thousands and thousands of freelancers, many of whom who don’t realize that the economy is permanent this way. And they’re imagining that, “Well, in six months or a year, I’ll get a full time job. One of these clients I’m working freelance for will just hire me full time.” And the trend shows that that’s not going to happen. So we’re in an economy right now where many young college graduates are going to wind up working for themselves. They don’t have the skill set to do all the things that they need to do. This is going to be a permanent position for them, and they’ve got to learn how to operate collectively and figure out ways to strengthen their economic position.
Paul Solman: But then, it would seem like We Work or a company like We Work is a really good solution, because it’s aggregating the freelancers so that they have volume buying power.
Richard Greenwald: I mean their business model is too new to see whether or not it has true lasting power. They’re big, and they grew very quickly. They’re valued about $10 billion right now. They’re in 52 locations, 16 cities and growing. But what they’re doing is providing a needed service to freelancers who don’t want to just work in a desk in their bedroom. The older places, like the Starbucks and cafes, have changed, and they’re not as welcoming anymore. So going to a place that has a social component and that has a reasonable space is useful. They’ve tied a social network and a job board of sorts to that, and they’ve encouraged freelancers to join together so they can bid for larger clients.
Paul Solman: They also get volume discounts, because there are dozens or hundreds of people. For example, on healthcare…
Richard Greenwald: They do. But the real concern I would have is that if you have an economy that’s leading towards more and more independent contractors, it puts large corporations into a very powerful position. If you’re an independent contractor, and you think that you’re worth more than they’re paying you for a gig, you’re not going to renegotiate it, because the price keeps going down, right? One of the possible outcomes is an effort to try to organize whether it’s through a union or guild of some sort.
When you go to We Work, these are white collar creative economy jobs, right? They don’t see that they have much in common with fast food workers, the janitors, the day laborers. But in fact, the economic system they’re operating in is the same. They’re just higher up on their food chain. As more and more people enter that economy, the competition’s going to be fierce. And the wage level is going to drop. Competition will force things down.
This is the new normal. It’s going to only intensify and then the question is: What do you do? What is the political system’s response to that? What’s the economic system’s response to it? Because right now, there’s very little economic incentive or even social or moral incentive for corporations to continually hire, train and invest in full-time employees when they can outsource whole sectors of it.