Future Friday: The Independent Contractor will NOT rule by 2020

 


    

I and numerous other people have written about the “gig economy”, “free agent nation” or whatever you want to call it, numerous times. As we get into 2016, and 2020 is a mere four years away, the likelihood of there being a major shift in the direction of a high percentage of independent contractors seems less likely to me. Some estimates had 45% of the workforce being part of the gig economy. Unfortunately I see two factors standing in the way of that change.

Workers not really ready

As we have seen in many lawsuits to date many workers are just not ready to be gig economy workers. As people have sued Uber, Lyft, Taskrabbit, and others it is clear there are many people not yet willing to take on independence. Sure they are willing to take on part-time work. People have done that for a long time, but they still see themselves as reporting to an employer and not being self-employed in that endeavor. Many workers are just not ready to embrace something other than the employer-employee model it seems. Too many have already started down the road of working for someone else and don’t see the possibilities of working for themselves as being viable.

There is a barrier to entry to being self-employed. Generally there is no immediate income. You have to have some savings to tide you over while you get started. The unemployment system does not allow you to collect unemployment while you start your business. It also takes sales skills to be able to close deals. Many people do not have the wherewithal to do this nor in many cases the desire to do so. It is just easier to work for someone else.

The government does not want independent contractors

In addition to there being a general lack of desire on the part of a large portion of the population there is a very large resistance to the use of independent contractors on the part of the government. There is a large effort to clamp down on the “misclassification” of workers as independent contractors. The US Department of Labor and the Internal Revenue Service have memorandum of understanding (MOU) to work together, and enlist state governments in the effort, to squelch the independent contractor status.

To this end, in July 2015, they published an Administrator’s Interpretation to explain what the term “employ” means under the law. In this explanation they basically say that some employers purposely skirt the law in order to avoid employment laws. They also say that employees need to be protected from bad employers. However, it is also telling that in their explanation for clamping down on use of independent contractors they say “Misclassification also results in lower tax revenues for government…” What they mean is that it results in “harder to collect tax revenue”. If people are earning they should be paying taxes regardless, but it is harder to collect from individuals than it is to collect from companies. Unions use the same tactic in collecting dues as well.

No incentive to change

The government has no incentive to allow or foster the growth of independent contractors. Instead they, and by they I mean the federal, state, county and municipal governments, will increasingly restrict the use of independent contractors. Unions also have a stake in this fight. It is hard to organize independent workers, though Seattle had passed legislation to allow independent workers to organize.

To have a gig or Uber style economy, the legislative battleship will have to be slowly turned by future generations who accept and embrace the newer way of doing thing. Unfortunately at this time I don’t see this change occurring by 2020 or 2025 or even 2030.

 

 

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