Worker Classification is Going to be a Huge Issue

There is a clear, long term shift in the U.S. economy towards contingent employment.  This is the hiring of workers on a non-permanent basis, including the hiring of freelancers, temps, part-time workers, contractors, outsourcers and others who don't have full-time employment status.  

It is a trend with profound implications for workers, families, businesses and the U.S. economy. 

And whether you think this trend is good or bad, contingent workers will likely be a major part of next decade's labor force.  The drivers behind this shift - lower costs, increased business flexibility, growing worker interest in contingent employment, technology, etc.- are simply too strong to easily reverse. 

The New York Times article U.S. Cracks Down on "Contractors" as a Tax Dodge covers one of the major disputes around the growing use of contingent workers - money. 

Federal and state governments claim they lose billions of dollars in payroll taxes due to under-reporting by contractors.  They also claim they collect less in unemployment insurance and worker compensation taxes.  Because of this, they are aggressively going after companies they feel mis-classify full time employees as contingent workers.

This issue has huge implications because: (1) companies of all sizes are increasing their use of contract workers; and (2) a growing number of people are choosing to work as independent contractors. 

This used to be much simpler issue from the standpoint of the contingent worker - they almost always wanted to become full-time employees.  But that has changed.  A growing number of people are seeking the flexibility and work/life balance advantages contract work brings. 

Many of these folks believe their contract wage rate, coupled with additional work freedom, more than make up for lost benefits.  They also feel that being independent is actually more secure these days than full time employment. 

With businesses and some workers on one side, and government and other workers on the other side, this is an issue that's not going to be easily resolved. 

Comments

[Trein naar Parijs]

Now that the economy is slowly but surely improving again, we see contracting changing. The US announced that 5% unemployment will be reached around 2015, so we have a long way to go. But good things are done to stimulate.

[Schiphol parkeren]

Contracting is following the economic upturn and downturns.

[Smart Parking Schiphol]

Informative. We can see a trend coming. The so called current of new economy shows signs of contracting being more valuable.

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I don't think this will head in the right direction. Worker classification. Nice post and interesting info that makes you think.

[Trein naar Londen]

Thanks for the information. This is indeed a huge issue, and we see it here in Europe too.

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Goods, but not many services, and not much decline in those quoted. The declining cost of babysitting is presumably part of the generally increase in wage inequality since it's unlikely there has been much productivity growth. How about college education and health insurance?

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[Holidays with New York Tours]

Good points. In the "new" economy, contracting will be mighty more important than it has been in the past few years. The dawn of the consultant is here.

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Live told us don’t struggle so much,best things happen when not expected. Did you agree with me?

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Don't know what is wrong what is rite but i know that every one has there own point of view and same goes to this one..

[Gehoorbescherming]

I completely agree with the above comment, the internet is with a doubt growing into the most important medium of communication across the globe and its due to sites like this that ideas are spreading so quickly.

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Thanks for posting this article. I'm unquestionably frustrated with struggling to search out germane and brilliant commentary on this topic. Everybody now goes to the very far extremes to either drive home their viewpoint that either: everyone else in the planet is wrong, or two that everyone but them does not really understand the situation. Many thanks for your succinct, relevant insight.

[LR]

To be a contingent worker, especially an older worker, the wage would have to be astronomical.
I would like to see a poll using age as a factor of who wants to work independently with skyrocketing insurance, fees associated with services and being in a higher tax bracket.
My company for my position as a temp or contractor pays Apple One $25/hr., while the worker sees $15/hr. meaning Apple one is pulling in $80/Day for each temp it gets hired. As a permanent position my company pays $16 – 18/ hr. and I have a hard time believing that it’s losing money by having me on full time, especially considering I now pay more out of pocket for less benefits. For instance I used to pay 2 – 5 dollars for prescription drugs that I now fork over 10 – 70 dollars for. Since all the Enron financial folks at the top seemed
to not know what they were doing I wonder now if any large companies financial people really understand
how benefits work and affect both the employer and employee.

[Eric]

Good points. In the "new" economy, contracting will be mighty more important than it has been in the past few years. The dawn of the consultant is here.