Millions of Americans who have lost their full-time jobs amid the Great Recession have struck out on their own, creating do-it-yourself careers by becoming freelance or contract employees.
Companies, of course, love it. Freed from the expense and obligation of providing key benefits such as health care and unemployment insurance, businesses are able to attract the talent they need on the cheap, while selling a lifestyle that offers flexibility and allows many to work from home.
But when full-time jobs go away, so does the safety net that helps so many Americans survive dire economic times. The lack of a fail-safe for the nation's 42 million freelance workers, accounting for 30% of the U.S. workforce, has left them vulnerable to financial ruin, says a report released Tuesday by Freelancers Union, a Brooklyn, N.Y.-based advocacy organization.
Working Without a Safety Net
In what the group calls the first study of its kind, its report found that more than 80% of the 3,000 freelancers surveyed were unemployed or underemployed last year. Further, without access to any of the same benefits or protections as traditional employees, a growing number of independent workers, temps, consultants, freelancers and independent contractors "are forgoing health insurance, racking up credit card debt, and draining savings to weather painful periods of underemployment and joblessness."
In the absence of an employer-based safety net, workplace standards like jobless benefits, health care and wage protections were sorely lacking, it noted. Thirty-three percent of survey respondents said that at least once a client failed to pay for work performed last year, resulting in the loss of an average $6,000 in wages. Thirty-nine percent reported they had to cancel or cut back on health coverage. And 37% relied on savings, credit card debt and food stamps to get through lean periods.
The report exposes what Freelancers Union says are real blind spots in government safeguards. It notes, for example, that the American Recovery and Reinvestment Act, which President Obama signed into law in February 2009, largely excluded independent workers from government assistance programs such as job training and unemployment insurance.
Also, much of the data that track the state of the U.S. workforce, including the Labor Department's monthly employment survey, fail to include independent workers. The only tracking of these workers in any comprehensive way was contained within the Bureau of Labor Statistics' Contingent Work Supplement -- and that was discontinued five years ago, Freelancers Union says.
A Series of Recommendations
What's needed, the report says, is reform of the nation's employment laws that affect contract workers. Among the report's recommendations are calls for changes that would allow freelancers to pool together as a group to buy health insurance, which would reduce the cost and provide better coverage, and to expand worker protections to include independent workers.
Further, the report calls for establishing tax-advantaged savings accounts that would allow the self-employed to set aside money for periods of unemployment and for the future inclusion of contract workers in new programs designed to help unemployed workers get back to work.
Lastly, Freelancers Union says freelancers need to be included in national labor statistics and other economic measures. Also, state and federal agencies should quantify the impact independent workers have on the economy and assess the impact of including or excluding them from proposed labor policies.
Both Sides Would Benefit
"As America inches toward economic recovery, it's clear that the jobs of the new economy do not fit into the old New Deal model of work, which tied basic protections and benefits. . . to employers," the report says.
A more stable framework would benefit not only the fortunes of rising numbers of self-employed workers but also those of employers, which increasingly rely on independent contractors for short-term, specialized projects in the contemporary economy.
People@Work: Why America's 42 Million Freelancers Need Help