FREELANCING

A Freedom We May All Lose

How many of you have heard about California’s AB5?  This bill basically made it illegal to work as a consultant, contractor or otherwise freelance in the state.  A few carve-outs were made for the politically connected (aka Lyft and Uber).  But the work that supported me after getting laid off would not exist.  The company would have to hire me.  During tough economic times, companies love to have freelance workers, as they can readily add or subtract hours or cancel the contract.  Firing someone is much harder.

The reality is that many people prefer to work this way.  Offered jobs after my layoff, I realized I liked the chance to set my own hours, work as much (or as little) as I wanted.  The downsides were that I had to find my own health insurance and manage vacations and illness without payment, but for many jobs, you get paid more by the hour/job than you would as an employee.

I spoke to a lot of Uber and Lyft drivers over the years and they all have their own reasons for choosing this lower-paid gig.  Some are in school and need some extra cash.  Others work this job on top of another one.  Retirees choose this for money, but also to talk to people.  Some can’t find a better job in the area in which they live.  And there are a lot of people in the freelance class, over 60 MM last year.

What’s Happening to Freelancing?

Biden is excited about a new Department of Labor rule which would (as AB5 did), classify workers arbitrarily as contractors or employees, based on rules that so far, sound a lot like California’s restrictive policies.  The politicians want to ensure that people get salaries and benefits which sounds like a good thing.  But in many areas, it will eliminate a lot of jobs.  But how can this be, you ask?  Isn’t the work needed?  Won’t employers simply hire people?

The answer is “no.”  If you’ve ever worked in an office, when someone is sick for a while, quits or is laid off, how often does your manager hire a replacement?  Instead, we’re asked to take on more work, sometimes to a ridiculous extent.  Companies prefer freelancers when the workloads fluctuate and sometimes, just because they can’t afford a new hire.  Once that option is closed, companies will pile work onto existing employees and outsource some work globally where these rules don’t apply.

Freelancers usually come with a lot of skills, which is how we get selected.  The run-up time, (time to value), is often much shorter than new hires.  We’re usually expected to bring our own devices—PCs and phones--, so we cost less to start.  And many of us prefer this arrangement.  Writers and other creative artists often feel this way, but would be left out if this new policy comes to fruition.

Politicians think that freelance means underpaid, but less than 9% of freelancers are gig workers.  And the companies hiring gig workers don’t really want them as employees, nor do the “employees” really want the strictures of employment. They would have to work when the company wanted them to and go to the locations where they were needed.  That’s not the “freedom” Lyft and Uber offer its drivers.

In California, costs for rides would have doubled if the rideshare companies hadn’t been bailed out of AB5.  Many workers were terminated in a large number of industries due to the law.  Truckers are hard-hit, as they are mostly owner-operators who drive for others. 

Better Solutions

The Biden administration is particularly noted for finding the least good solution for every problem and this is true here.  We stand to see a lot of people lose their jobs under this ruling which is due out early next year.

Instead, let’s look at a better way to solve the perceived unfairness of people who prefer to be on their own.  The most critical one is the unfairness in health insurance.  Employers get tax benefits from ensuring their workers, but as a self-employed person, I do not get this.  I’m paying the full cost.  And that cost became dramatically higher under Obamacare.  If the government wants to help, they can first allow freelancers to deduct the cost of their insurance and second, let them form pools so they can qualify for the discounts enjoyed by companies.  I’d prefer to just get rid of Obamacare, but these changes would help.

We need a way to make saving for retirement easier for the self-employed through private financial companies probably can step in.  You’re not going to get stock options or 401-K matching, but there could be ways to ease the challenge of putting money away.  And the government could help by getting rid of the caps.  You should be able to save as much as you want for retirement after-tax or pre-tax-free, depending on how you want to take it out later.  Everyone would like that.

Vacation and sick leave?  In some companies, you have a pool of days that you can use for any purpose.  For those of us on our own, that’s a risk we take and when you price your services, consider that you should get a bit more to compensate.  No government intervention need apply.

Why don’t we try a free market way?  By now, we should know that pretty much every new trend California tries is wrong.