How to Complete the Destruction of America
The following introduction to a longer article was carried by Newsweek, Jan 9, 2024:
The Biden administration is expected to announce a new contractor rule this week, which could impact millions of American workers who are employed in the gig economy and treated as economically independent from the companies they work for.
The new U.S. Department of Labor rule is an answer to the massive growth experienced by the gig economy in recent years. It employed an estimated 36 percent of American workers, or about 57.2 million people, before the pandemic, according to Gallup and Statista. In 2023, the latter estimated the number of freelancers in the U.S. to be 73.3 million. Newsweek contacted the U.S. Department of Labor for comment by phone on Tuesday but did not receive an immediate response.
Freelancing as a Way of Life
I’m taking this personally. In late 2002 I retired as an executive with a Fortune 500 company. I started a boutique consultancy intended to bring high-value management consulting to mid-sized firms. I spent about a third of my time on that, a third on large project management, and a third on helping entrepreneurs begin climbing the ladder to economic freedom. Many were bitter about being trapped in low-paying jobs having nothing to do with their college degrees. Most blamed C-Suite Executives, who were greedy and did nothing but issue orders and cash big paychecks. All agreed they were underpaid. Most had a great solution to all their problems: raise the minimum wage. If the CEOs would just take a pay cut, and taxes were increased on billionaires and the money redistributed, then everything would be OK.
I preached the Gospel of “Create your own job.” That meant first becoming a freelancer. Once you succeeded at that you can begin to hire other people. The biggest obstacle (soon to be replaced by the U.S. Government) was the multiple Freelancing Boards. While I got most of my work from direct calls and word of mouth, I participated on a couple of the boards because I could use small projects to fill gaps and occasionally would find something of interest.
Freelancing Boards
Freelancing Boards have the same faults. They tell clients they can hire world-class experts at pennies on the dollar. They tell providers they’ll be able to do high-paying work for large global companies. Both cannot be true. None of the boards did a good job of educating either clients or providers. Clients were allowed to believe that all providers of a certain service were equal; this is where Animal Farm applies. Some providers are more equal than others. Freelancers were led to believe that their job was to come in with the lowest bid to get work, and to sell themselves throughout the response.
I knew from decades of management consulting that this was not correct. The way to get hired was to ask questions. Questions invite answers. Now you’re in a dialog, where the work you want is won. Asking questions means investing a few minutes, perhaps half an hour, to research the client and the client’s industry. Applicants should ask about the company and its work. Most people would rather talk about themselves than others, and this creates that opportunity. I would ask probing questions that demonstrated my own familiarity with the industry. This worked like a charm.
In my own field, issue-based management consulting, there was rarely much on the two Boards I used, Guru and what became Upwork. Still, there were occasional opportunities that surfaced. As a client, I also worked with freelancers on Fivver for book covers.
There were multiple sectors in which I could work if I was interested. The largest and most competitive was computer programming; after that it was writing and translation. I’m not a computer programmer, although I know more about systems than most programmers. My German and Spanish were better than most of the translators, but I would only translate into English, my native language. If one is being paid to translate in both directions, one must have native fluency in both. I don’t, despite doing medical school in Germany.
Never Had to Meet a Payroll
The proposed new regulation will require that contractors execute employment contracts with their clients, who then are required to pay for the new employees’ health care insurance, unemployment insurance and worker’s comp, and social security/Medicare insurance. Neither Biden nor most of his advisors has ever had to meet a payroll. Money to pay for worker benefits is a cost of employment, which we can assume should otherwise go to the employee. The fact that the employer is paying for it merely means that money that would otherwise go to the employee is sent to one or more levels of government. This does not benefit the employee in any manner.
It does, however, raise the cost of creating a new job. For an administration that congratulates itself daily on low unemployment figures, this is never discussed. The cost of regulatory compliance went up 25% per employee, without considering inflation, during Obama’s eight years. People go into freelancing or other gig economy jobs for a variety of reasons. Rideshare drivers supplement other income by taking driving gigs. Entertainers often run a feast-or-famine cycle, and don’t receive extra money to pay for these things. Small businesses have a particular difficulty; it makes sense to hire part-timers as contractors. One local business owner in Nashville, a former client, may be forced to lay off one of her two part-timers to make up for the new rule. Small businesses create most of the new jobs in America; why do we want to punish the engine of growth?
War on Women and Minorities
Small businesses are often woman- or minority-owned. In the case of minority-owned small businesses, they are often run by families and the extra workers are family members. Their opportunity to build inter-generational wealth is impaired. The record-keeping involved with this new law will raise small business costs. Small businesses bore the brunt of the financial burden during the pandemic.
Woman-owned businesses tend to hire more woman than other businesses. Just what we want to do is reduce female employment. Coupled with nationwide pressure to raise minimum wage to $15.00 an hour, we run the risk of destroying innovation, jobs for women and minorities, and killing the job creation engine. That would have the dual impact of reducing tax collections and increasing costs of unemployment benefits.
I can’t think of a better time to reduce job creation, raise the cost of employment, and rid ourselves of entry-level jobs for youths than when we’re already running a two trillion-dollar deficit and have eight million illegal aliens we can’t identify on parole in the country awaiting deportation court dates eight years from now.
Supporting Wars?
We need extra money to support two overseas wars, and I imagine that was one of the motivations behind the new rule. “Gig workers” are among the hardest working and poorest paid workers on the planet. Joe Biden’s penchant for getting involved in wars in which our interests are obscure needs money to fund them.
One of your best posts in your sterling record of clarifying often hard-to-grasp-for-the-layman issues. Of course I did not "enjoy" it but I certainly appreciate it.
"Never made a payroll" - explains how government fails. We can hope for revisions, removals but need new people in '24, hope...