Temp Worker Nation: Hired, But Not for Long

Steven Wishnia Sep 25, 2012

Almost one-third of U.S. workers are now some kind of freelancers, and they lack almost every kind of economic security that permanent full-time workers have traditionally had. Though exact figures are impossible to find, many experts and labor organizers estimate that about 30 percent of U.S. workers are “contingent.” That means they don’t have a permanent job. They work as freelancers or temporary workers, on contract or on call, or their employers define them (often illegally) as “independent contractors.”

Their ranks include writers and warehouse workers, janitors and business consultants, truck drivers and graphic designers — and their numbers are rising. Richard Greenwald, a sociologist and professor at St. Joseph’s College in Brooklyn, estimates that their share of the U.S. workforce has increased by close to half in the last 10 years. In July, Staffing Industry Analysts, an industry research company, reported that the average share of contingent workers at companies it surveyed had gone up by one-third since 2009, to 16 percent. Last year, a different survey found that contingent workers averaged 22 percent of the workers at 200 large companies.

These workers are often called the “precariat,” a combination of “precarious” and “proletariat,” because the traditional social safety nets for workers don’t support them. They have no job security as they hustle from one gig to the next, and they often don’t know where their next job is coming from or when it will come. They very rarely get paid sick days or vacation. They don’t get paid extra for working overtime. They are usually not eligible for unemployment benefits, and they generally have to pay both the worker’s and the employer’s share of Social Security taxes. They have to pay for their own health insurance, and Obamacare won’t change that. (However, beginning in 2014, people will be able to buy private insurance at group rates, and lower-income and working-class people will get some subsidies to help them pay for it.)

They have few options if an employer cheats them out of their pay. If they are independent contractors, they do not have the right to form a labor union.

“Instability is going to be with us,” says Sara Horowitz, head of the New York-based Freelancers Union. “The truth is that we’re in a period of decline for workers.”

The New Way We Work

Who are freelancers and contingent workers? The federal Bureau of Labor Statistics has not done an official study since 2005, when it estimated that they were 10 to 15 percent of the U.S. workforce. If their income is reported on a 1099 tax form instead of on a W-2 form with deductions, its monthly payroll surveys won’t count them as having jobs. Its household surveys count them as employed, but don’t ask about their job arrangements.

Catherine Ruckelshaus, legal co-director of the National Employment Law Project in New York, counts as a contingent worker “everyone who’s not a W-2 employee,” including people paid on 1099s, franchisees, and people paid in cash, such as construction day laborers. Richard Greenwald arrived at his estimates by counting sole-proprietorship businesses and people who listed more income on 1099s than on W-2s.

The number has risen significantly in the last 15 years, Greenwald says, and the pace has increased since the recession began, with many new “permatemp” jobs. This trend affects workers at all income levels, but the fastest-growing sector is college graduates in “creative” fields. In the last few years, book publishers and advertising agencies have outsourced their graphic designers, hiring them back as freelancers with no benefits. Many publishers now hire editors on a per-manuscript basis.

“As the industry or technology tweaks, it often does so in a way that’s freelance or non-union,” says Justin Molito, director of organizing with the Writers’ Guild of America East. For example, writers on HBO’s scripted shows are unionized, but those on basic cable and reality TV shows aren’t.

Greenwald distinguishes between workers who chose freelancing and those who were “shoved into it.” The most successful freelancers, he says, are information technology, management and finance consultants. They have a specific skill and steady clients, and “think of themselves as entrepreneurs.” Many white-collar freelancers make middle-class incomes, $45,000 to $50,000 a year, he says, but they have to pay for the office supplies, health insurance and taxes that would normally be covered by an employer, and they have no security.

This is not just a recession-induced thing, he says. It reflects a long-term change in the economy. Since the 1980s, management’s philosophy has evolved to “look at work as projects.” Instead of keeping employees on staff to perform all work needed, they outsource tasks or hire consultants.

“This gives companies tremendous flexibility without any risk,” Greenwald says. “Flexibility” means they don’t have to keep people on the payroll during slack periods, pay them when they’re sick, pay for their health insurance, or obey workplace regulations. This, he says, has “shifted all the risks that large institutions used to have onto the backs of individuals.”

“It’s a great business model, but as a social model, it doesn’t work,” he explains. Essentially, it means that the world of work is becoming more like the music business, in which a handful of superstars get rich and a minority of professionals have steady work with benefits, but most workers have to scuffle for intermittent, low-paying gigs, and hard work and talent are worthless without marketing skills, clout and charisma. “The bar to get in is low, but [making] a living is harder and harder,” he says.

The overall social change “might be as big as the shift from farm to factory,” Greenwald says. “I don’t think that many freelancers have thought of this as a permanent way of life. It seems to be a shift back to 19th-century artisanal culture.”

The Casual Working Class

Though the traditional image of a freelancer is a middle-class professional like a magazine writer or computer consultant, this shift affects a huge number of blue-collar workers too, especially in the fast-growing fields of warehousing, delivery and home healthcare. Many of these workers are now either temps or defined as “independent contractors.”

“Often relying on the use of temporary and staffing agencies, outsourcing in these industries has also resulted in comparatively lower wages for work similar to the jobs previously performed in-house,” the National Employment Law Project reported in “Chain of Greed,” a study of Walmart warehouses released in June.

At the Nissan auto factory in Canton, Miss., more than 20 percent of the 4,400 workers are temps, according to the Labor Notes monthly newsletter. The company says it plans to hire 1,000 new workers this year, but all will be temporary. The temps start at $12 an hour, $7-11 less than what permanent workers earn after five years, and workers say no temp has ever been permanently hired at the plant. Even at Ford’s Detroit-area plants, the classic bastion of union industrial labor, local activist Dianne Feeley, a retired United Auto Workers member, says a significant percentage of workers are temps or contract workers.

“A huge problem,” says Catherine Ruckelshaus, is employers illegally defining workers as independent contractors. “Some employers are asking workers to form LLCs (limited liability companies, a form of business that combines features of a corporation and a partnership) before a construction drywall job.”

FedEx Ground, for example, defines its 15,000 drivers as independent contractors, even though they drive company-assigned routes and must drive vans with the FedEx logo and color scheme.

“There are millions of Americans classified as independent contractors by the companies they work for, but [they are] effectively working as employees,” American Rights at Work, a Washington-based labor-rights nonprofit, said in a 2007 report on FedEx Ground. “These workers suffer the worst of both worlds: they toil without the protections and benefits of employees, yet are without the control over their work that true independent contractors enjoy.”

The legal definition, Ruckelshaus says, is whether the person is running an independent business — are they investing their own money, and can they pass on increased costs? The Internal Revenue Service’s general rule is that an individual is an independent contractor if the person hiring them has “the right to control or direct only the result of the work,” while the worker decides “the means and methods of accomplishing the result.”

The scam’s advantage for employers is that they don’t have to pay minimum wage, overtime, workers’ compensation or Social Security, Medicare and unemployment taxes. The result, the American Rights at Work report said, is that FedEx drivers not only make less money than those at UPS, who are permanent workers with a union; they also have to pay for gas and maintenance for their vans. Many lease vans from a company-approved supplier, Ruckelshaus says.

Some employers even define janitors and home healthcare aides as “franchisees” she continues. For example, an office building’s management might hire a cleaning-services subcontractor, whose workers then “buy” the job of cleaning one section of the building, paying in advance in exchange for a piece of the company’s fee.

Coverall, a Florida-based cleaning-services company, calls its more than 9,000 workers “franchisees,” and its more than 90 regional offices are “support centers.” In Boston, says Ruckelshaus, these franchisees might have to pay the company as much as $10,000 to claim a job, recouping that investment from their wages. If they don’t have the money, they can borrow it from a company-recommended lender. In some cases, she says, they have had to work the first month on spec, getting paid for it only if the Coverall boss approves them for the job. They also have to buy cleaning equipment and supplies from the company. But Coverall makes the deals for the jobs, so the workers can’t raise their rates or ask the client for work on their own.

In home healthcare, a field with 3 million mostly women workers that is one of the fastest-growing job sectors in the U.S. economy, for-profit agencies call themselves “registries” of independent contractors. They do this, says Ruckelshaus, even though they hire the workers, train them, assign them to jobs and set rates. It means they don’t have to pay minimum wage or overtime.

“There’s no enforcement,” she says. “It becomes part of the structure of these jobs.”

Warehouse and shipping work is a major area of abuse as well. Walmart and Amazon outsource their massive warehouse and shipping operations to subcontractors, who then use temporary agencies to hire employees. Workers often don’t even know who their actual employer is, says Ruckelshaus.

“They pit these little subcontractors against each other,” says Erin Johansson, research director of American Rights at Work. “To compete and win a contract, you’ve got to pay your workers minimal wages.”

In this system, according to the “Chain of Greed” report, workers are paid piecework, according to the number of containers or trucks they finish unloading on a shift, instead of an hourly wage. They don’t get paid for anything else they do on the job. The result is “rampant minimum wage and overtime violations,” the report said. Workers also have to unload dangerously stacked piles of boxes, some of which weigh up to 200 pounds, says Johansson.

Walmart insists on ever-lower costs, so “workers are the ones getting squeezed and chiseled,” says Ruckelshaus. “This relationship is hurting low-wage women and those at the bottom of the supply chains, and the big corporations aren’t being held accountable for low wages and poor conditions.”

Another issue is that freelancers have almost no recourse if an employer cheats them. State wage-theft laws do not cover freelancers. If a client stiffs them, it’s considered a business dispute, so their only recourse is to sue in small-claims court. That can take months and multiple court appearances, and even if you win your case, collecting the debt is not guaranteed.

The Freelancers Union says 77 percent of its 180,000 members have had trouble collecting money they’re owed. Earlier this year, it lobbied for New York to enact a law that would let stiffed freelancers file wage-theft complaints with the state Department of Labor. But in New York’s gerrymandered legislature, the measure wound up as a “one-house bill”: It passed in the Democrat-dominated Assembly, but never reached the floor in the Republican-controlled state Senate.

“If you have 30 percent of the workforce being exploited, that lowers standards for everybody,” says Johansson.

What Can Be Done?

Traditional union organizing is notoriously difficult with contingent workers. Organized labor’s strongest power over employers is workers’ ability to go on strike and stop production. If freelancers try that on their own, the employer will simply hire someone else. That they have neither a common location nor a collective workforce is also a barrier to organizing collectively.

The Writers’ Guild of America, a union of TV and movie screenwriters, has successfully organized freelancers, winning elections and creating collective-bargaining agreements at studios. In July, it won company-paid health benefits, paid vacation, and a minimum salary for writers at two New York reality-show studios. But its 4,000 members’ status is much closer to permanent workers than that of most freelancers. They usually work on long-term contracts, typically three or four years, and have “professional relationships and solidarity among themselves,” says the Guild’s Justin Molito.

“This is a long-term movement to aid those who’ve fallen through the cracks,” Molito says. “As other industries become more freelance, the labor movement has to develop strategies to create organizations that provide protections and make improvements.” Those strategies include “building a long-term movement, raising standards across the board, trying to organize an entire industry.”

The Freelancers’ Union has largely abandoned the traditional union model, to the point where the organization might be more accurately described as a service and lobbying group than a labor union. Permanent workers are losing security and benefits, says union head Sara Horowitz, so why should freelancers expect them?

“I exist in reality,” she says. “The first step is to admit that something’s changed.”

Instead, she touts what she calls the “new mutualism” — freelancers banding together on the principles of “affinity and solidarity,” such as networking and organizing cooperatives to buy food and health insurance. (The group sells nonprofit health insurance to 23,000 members in New York, and plans to expand that to New Jersey and Oregon in 2014, when the Obamacare insurance exchanges open.)

But how is any of that going to help get freelancers paid sick days? “Good luck with that,” she answers.

Organized freelancers “will be able to make the freelance economy work even better,” she explains in an e-mail, “by influencing the freelance labor market, by continuing to improve the laws that affect freelancers (i.e., passing legislation to give freelancers recourse when they are stiffed) and by continuing to give freelancers opportunities to work together.” On the other hand, she says the Freelancers Union will not be able on its own to “reverse larger economic trends” like declining wages in the media industry.

Workers should speak out about abuses, says Johansson. The bad publicity created by “shining a light on working conditions for large companies” such as Walmart and Amazon might help hold them accountable for how subcontractors and their workers are treated.

Legally, she says, “just enforcing the law” against misclassification would help. In June, the National Labor Relations Board ruled that the 350 taxi drivers at Baltimore-Washington International Airport had been wrongly classified as independent contractors. Their employer, which has an exclusive contract for taxi service at the airport, is appealing the decision.

Sen. Tom Harkin (D-IA) and Rep. Lynn Woolsey (D-CA) have introduced bills to tighten the definition of an independent contractor.

Still, trying to improve conditions for freelancers and contingent workers is difficult in an economic system that has been vampirizing workers’ rights and incomes for a generation.

“The social contract that was part of American society for many years is dead,” says Greenwald. “We need to have a serious conversation about who’s winning and who’s not winning.”

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