Submitted by Michael Snyder via The Economic Collapse blog, [6]
In this day and age it seems like almost everything is disposable, and many employers have found that they can make a lot more money if they have a workforce that can be turned on and off like a faucet. In America today, there are more than 17 million [7] “independent workers”, and they represent a bigger share of the workforce than ever before.
Federal laws give a lot of protection to “full-time workers”, but for temporary and contract employees it is a much different story. Temp workers don’t get health insurance, vacation time or retirement benefits. They are simply paid for the limited amount of time that they are needed and then they are disposed of immediately. There has always been a role for such workers in our economy, but these days some of the biggest corporations in the entire country are getting rid of “full-time workers” and replacing them with temp workers just so that they can make a few extra bucks. As a result, the ranks of the “working poor” continue to expand, and the decline of the middle class is accelerating.
Steven Hill, a senior fellow with the New America Foundation and the author of “Raw Deal: How the Uber Economy and Runaway Capitalism Are Screwing American Workers [8]“, says that the rise of the “1099 economy” is fundamentally shifting the balance of power between employers and employees [9]…
This practice has given rise to the term “1099 economy,” since these employees don’t file W-2 income tax forms like any regular, permanent employee; instead, they receive the 1099-MISC form for an IRS classification known as “independent contractor.” The advantage for a business of using 1099 workers over W-2 wage-earners is obvious: an employer usually can lower its labor costs dramatically, often by 30 percent or more, since it is not responsible for a 1099 worker’s health benefits, retirement, unemployment or injured workers compensation, lunch breaks, overtime, disability, paid sick, holiday or vacation leave and more. In addition, contract workers are paid only for the specific number of hours they spend providing labor, or completing a specific job, which increasingly are being reduced to shorter and shorter “micro-gigs.”
Yes, there have always been temp agencies. And there has always been a need for workers that can come in and do a job on a short-term basis. But today, many of the largest and wealthiest corporations in America are purposely getting rid of “full-time workers” and instead are bringing in “independent contractors” to do the exact same jobs.
In some instances, the full-time workers that get fired are actually brought back as the new “temp workers” [9]…
Merck, one of the world’s largest pharmaceutical companies, was a vanguard of this underhanded strategy. When it came under pressure to cut costs, it sold its Philadelphia factory to a company that fired all 400 employees—and then rehired them back as independent contractors. Merck then contracted with the company to carry on making antibiotics for them, using the exact same workers.
An Arizona public-relations firm, LP&G, fired 88 percent of its staff, and then rehired them as freelancers working out of their homes, with no benefits. Even Outmagazine, the most-read gay monthly in the U.S., laid off its entire editorial staff and then rehired most of them as freelancers, without benefits and with salary cuts.
All of those companies should be absolutely disgusted with themselves.
How can the executives responsible for those decisions even sleep at night?
Don’t they understand what they are doing to people?
When you go from being a full-time worker to being on “temp status”, the changes can be quite dramatic. If this has ever happened to you, then you know what I am talking about. Having to pay “the other half” of the payroll tax or having to find your own much more expensive health insurance are just two of the big negatives [9] that “independent contractors” have to face…
Suddenly I was responsible for paying for my own health care, arranging for my own IRAs and saving for my own retirement. I also had to pay the employer’s half of the Social Security payroll tax, as well as Medicare — nearly an extra 8 percent deducted from my income. The costs for my health-care premiums zoomed out of sight, since I was no longer part of a large health-care pool that could negotiate favorable rates.
The decline in the quality of our jobs is a theme that I have revisited repeatedly in my writing. In order for us to have a thriving middle class, we need lots of good paying middle class jobs.
But our economy is not producing many of those jobs. Instead, most of the growth has been in low paying service jobs. The Middle class in the United States is being slowly but surely shredded, and our politicians don’t seem to care. If you doubt that the middle class is falling apart, just check out the following numbers which come from my previous article entitled “Sayonara Middle Class: 22 Stunning Pieces Of Evidence That Show The Middle Class In America Is Dying [10]“…
#1 This week we learned that for the first time ever recorded, middle class Americans make up a minority of the population [11]. But back in 1971, 61 percent [11] of all Americans lived in middle class households.
#2 According to the Pew Research Center, the median income of middle class households declined by 4 percent [12] from 2000 to 2014.
#3 The Pew Research Center has also found that median wealth for middle class households dropped by an astounding 28 percent [12] between 2001 and 2013.
#4 In 1970, the middle class took home approximately 62 percent [13] of all income. Today, that number has plummeted to just 43 percent [13].
#5 There are still 900,000 fewer middle class jobs [14] in America than there were when the last recession began, but our population has gotten significantly larger since that time.
#6 According to the Social Security Administration, 51 percent [15] of all American workers make less than $30,000 a year.
#7 For the poorest 20 percent of all Americans, median household wealth declined from negative 905 dollars in 2000 to negative 6,029 dollars [16] in 2011.
#8 A recent nationwide survey discovered that 48 percent [17] of all U.S. adults under the age of 30 believe that “the American Dream is dead”.
#9 At this point, the U.S. only ranks 19th in the world [16] when it comes to median wealth per adult.
#10 Traditionally, entrepreneurship has been one of the engines that has fueled the growth of the middle class in the United States, but today the level of entrepreneurship in this country is sitting at an all-time low [18].
#11 If you can believe it, the 20 wealthiest people in this country now have more money than the poorest 152 million Americans combined [16].
#12 The top 0.1 percent of all American families have about as much wealth [19] as the bottom 90 percent of all American families combined.
#13 If you have no debt and you also have ten dollars in your pocket, that gives you a greater net worth than about 25 percent [15] of all Americans.
#14 The number of Americans that are living in concentrated areas of high poverty has doubled since the year 2000 [20].
#15 An astounding 48.8 percent [21] of all 25-year-old Americans still live at home with their parents.
#16 According to the U.S. Census Bureau, 49 percent [15] of all Americans now live in a home that receives money from the government each month, and nearly 47 million Americans [22] are living in poverty right now.
#17 In 2007, about one out of every eight children in America was on food stamps. Today, that number is one out of every five [23].
#18 According to Kathryn J. Edin and H. Luke Shaefer, the authors of a new book entitled “$2.00 a Day: Living on Almost Nothing in America [24]“, there are 1.5 million “ultrapoor” households in the United States that live on less than two dollars a day. That number has doubled since 1996.
#19 46 million Americans [25] use food banks each year, and lines start forming at some U.S. food banks as early as 6:30 in the morning because people want to get something before the food supplies run out.
#20 The number of homeless children in the U.S. has increased by 60 percent [26] over the past six years.
#21 According to Poverty USA [27], 1.6 million American children slept in a homeless shelter or some other form of emergency housing last year.
#22 The median net worth of families in the United States was $137, 955 [28] in 2007. Today, it is just $82,756 [28].
So is there a solution?
Is our transition to a “1099 economy” inevitable?
