By Steven Hill, Huffington Post, October 29, 2015
CNBC held a GOP presidential debate that was billed as being focused on the subject of the economy. Instead, we found out that Donald Trump sometimes carries a handgun, that Jeb Bush thinks that fantasy sports betting is like daytrading, that Chris Christie thinks that Social Security is broke (it’s not), and that Ted Cruz wants to go back to the gold standard.
The candidates fell back on their well-worn sound bites (yes Donald, we got it — “only legal immigration”). But Ben Carson had one of the more bizarre statements of the night when, in promoting his 10 percent flat tax, he claimed it would bring in plenty of revenue because we would tax the “$18 trillion GDP” of the US economy which would equal $1.8 trillion in taxes. Earth to Ben: you tax INCOME, not gross domestic product. Mr. and Mrs. GDP don’t earn a penny of income, because they are not people. But average Americans earn plenty of income, and that’s who you tax.
In watching the debate, I kept thinking to myself, “These are the job applicants for the position of CEO of the World.” Yet there was more carnival barking on the stage than insights or observations about the economy or economic policy. Indeed, their performances were distinguished more by what they avoided talking about than what they actually managed to toss into the air for their part in this skeet shooting contest.
Noticeably missing from their discussion was American workers, and what’s happening to jobs and the labor force. In the face of a weak economy, many workers are having to work as contractors, freelancers, temps and part-timers, and as gig-preneurs and Uber-bots, with low pay, no safety net and no job security. The only question of the night contemplating this major labor market shift was offered up to Carli Fiorina, who was asked if the federal government should play a role in assisting “small businesses, and the growing ranks of Uber drivers and other part-timers in the freelance economy,” to set up retirement plans for these workers. Fiorina responded by…ignoring the question, and using it as a moment to launch a diatribe against federal government regulation.
I would like to introduce Fiorina and the other GOP candidates to Chris Young, an assembly-line worker at Nissan’s manufacturing plant in Smyrna, Tennessee. Chris works alongside dozens of other employees, but Chris doesn’t get to wear the coveted Nissan jersey that many of his fellow workers wear–because he doesn’t work for Nissan. Instead, he is what is known as a “perma-temp.” He works for Yates Services, a private contractor who now provides a majority of Nissan’s workers. Chris says, “I build the same Infiniti SUV” as the Nissan workers, but he and other Yates employees receive half the salary, less job security and way fewer safety net benefits.
Nationwide, temps like Chris Young have provided nearly a fifth of the total job growth since the recession ended, according to federal data. And increasingly the temps aren’t very temporary. Some workers originally hired as “temps” have been employed at the same company for as long as 11 years without receiving a full-time position — hence the new term “perma-temp.”
Or how about Frederic Larson, who enjoyed a successful thirty-year career as a staff photographer with the San Francisco Chronicle, during which time he won numerous awards, including being a Pulitzer Prize finalist. He got downsized during the recession, and so needing income he monetized — he turned his house into an Airbnb hotel and his spiffy Prius into a Lyft taxi. Now for 12 nights per month — 40 percent of his life — he shutters himself in a rabbit hole inside his own home while complete strangers have the run of the place. This award-winning professional photographer has been turned into an innkeeper in his own home, and a taxi driver in his own car.
And there’s Leena Chitnis, another scrappy “gig-preneur” and a Fulbright scholar who completed her MBA at Syracuse University. To keep herself afloat while she looked for a permanent job, she set up a bunch of micro-gigs on Fiverr. Fiverr is part of the “sharing economy,” an online job brokerage that connects buyers to sellers of numerous tasks and services, which pay as little as $5 per job (hence, its name). After fulfilling a total of 27 orders, she found that she had made a grand total of $176. “I’ve seen panhandlers get more money outside of the 7-11,” she said.
The advantage for any business to use 1099 wage-earners over regularly-employed (W-2) workers is obvious: an employer can lower its labor costs dramatically — by 30 percent or more — since it is no longer responsible for paying for a 1099 worker’s safety net. Corporate America is increasingly relying on these types of workers as a core part of its business model to cut costs and maximize profits. As one new economy booster put it, “Companies need a workforce they can switch on and off as needed” — like a faucet or a TV.
Things have gotten so topsy-turvy that even the most talented workers are not immune from this trend. Tina Brown, the flamboyant media mogul and former editor of Vanity Fair, the New Yorker and Daily Beast, has noticed with disbelief the impact on her own associates and friends.
“Now that everyone has a project-to-project freelance career, everyone is a hustler,” she says. “No one I know has a job anymore. They’ve got gigs,” which she described as a “penny-ante slog of working three times as hard for the same amount of money (if you’re lucky) or a lot less (if you’re not). Minus benefits, of course.” For a while, she added, “the downsized people I know went around pretending they enjoyed the ‘freedom’ and ‘variety’ of doing ‘a whole lot of interesting things.’ Twelve months later, nobody bothers with that cover story anymore.”
For all those Americans who lost their good “New Deal” jobs and have entered the disordered world of “Uber-ized” work, many of them now exist in a whole new universe. They don’t get paid for the many hours it can take to search for the next job, and attending meetings or gabbing around the water cooler with co-workers while “on the clock” is history. It’s all piecework today, practically dialing back the labor clock to the 19th century. It’s as if Tom Brady only gets paid for those moments when he throws a touchdown pass, and everything else is on his time and dime.
The accelerated use by employers of the independent contractor loophole is causing a rapid erosion of the safety net for workers and families, one that was forged over many decades. Under the current system, employers actually have an incentive to fire their entire workforce if they can get away with it and dramatically reduce labor costs by using all 1099 workers. And now the apps and websites of “sharing” economy companies like Uber, Instacart, Task Rabbit, Upwork and others make it easier than ever to do. These perverse incentives are threatening to undercut the U.S. labor force and turn millions of workers into little more than day laborers.
Sounds extreme? The pharmaceutical company Merck sold its factory in Philadelphia and the new owner fired all 400 Merck employees and rehired them as independent contractors–Merck then contracted with the company to continue making the same antibiotics for them.
So the problem created by the new digital economy is not merely one of income inequality. We must also re-establish a degree of economic security for the broad swath of American workers. Here’s how we can do that.
A multi-employer safety net for the new economy
Fortunately there is pragmatic policy solution that would create a new kind of safety net for this new economy. The key is designing “portable benefits,” which would stay with a worker who moves from job to job. We could assign to each worker anIndividual Security Account, and every business that hires that worker would pay a small amount of “safety net” premium, prorated to the number of hours worked for that business. That “hours bank” system would be used to pay for that worker’s safety net.
Such “multiemployer plans” have been used for many years in industries like construction and mining, and among some Silicon Valley companies. Innovative policies like that would allow the US to launch a new kind of deal so that technology and innovation would enrich all Americans, instead of just a handful. Yet we heard no discussion — zero, zip, nada — about any of these challenges facing everyday Americans from the GOP candidates angling to be CEO of the World.
Steven Hill (www.Steven-Hill.com) is a Senior Fellow with the New America Foundation and the author of the recently published book, Raw Deal: How the “Uber Economy” and Runaway Capitalism Are Screwing American Workers. You can follow him on Twitter, @StevenHill1776.