Friday, October 22, 2010

Free Agent Workers: "Everyone is going to be self-employed"

The title of the article was "Everyone is going to be self-employed." For someone who has been that way for almost 20 years it was an instant eye-catcher. I am a big fan of 'free agents" in the workplace so I read the article with interest. It was an interview in the October 17, 2010 issue of the Atlanta-Journal Constitution (no link available) of Jagdish Sheth, a consumer psychology expert and Emory University professor. When asked about his forecast for the future of the economy his response was :
"I forecast that by 2020 we will have 5 million employees in a 'company' which I have dubbed Self Inc. Everyone is going to be self-employed.... people want to work on contracts or free-lance, be their own boss. At that same time, companies are going to switch over from employees to contractors because the biggest expense becomes health care benefits. So, it is not that jobs are going to be revitalized, but the work is going to be revitalized."
I like the idea. I have liked the idea for a long while, ever since Fast Company and Tom Peters have been talking about Me Inc. and You, Inc. and a free-agent nation. I am not sure everyone would like to be self-employed however, but a large number might be. The roadblock that I see to this occuring is a little organization called THE FEDERAL GOVERNMENT. Both the Internal Revenue Service and the U.S. Department of Labor both have rules and regulations that make it extremely difficult for businesses to use independent contractors on a widespread basis. And in fact they are currently stepping up the efforts to make this even more difficult. (If you want to know more I have written about it several times. Put in independent contractor in the search window to the right and you will find them.) Much of this is driven by revenue. It is easier for the government to collect taxes from companies than it is to collect them from individuals. Of course they will tell you it is for the protection of the worker. But there has been public acknowledgement of the need to generate more revenue.

I asked Attorney-at-Law David Long-Daniels, of Greenberg Traurig LLP, who was presenting, at the SHRM Atlanta conference, on the pitfalls of having contingent workers and independent contractors if he thought we would ever see the Feds allow the widespread use of independent contractors. His answer was a very difinitive "NO." And I agree with him as things exist today.

However, in the online version of Time Magazine from October 29th the following article appeared: Could the Courts Outlaw the Minimum Wage? Written by Adam Cohen, it details the political campaigns of two Republican senatorial candidates, John Raese, the Republican candidate for Senator in West Virginia and Joe Miller, the candidate in Alaska. Both of these men are saying that while the minimum wage is an ok idea it is fundamentally unconstitutional and they want the U.S. Supreme court to rule on the constitutionality of the Fair Labor Standards Act. I am not going to go into the details here because of length, you can read it by clicking the link above. But the conclusion is that would be a major uphill battle to over turn the FLSA.

But the idea has started. And it could gain steam if the forecast of Dr. Sheth starts to materialize. If more people want to be free agents and more companies want to use free agents there may be a drive to unregulate those relationships. And overturning the FLSA would certainly do that. I sincerely doubt that will happen but the move may cause more people to reexamine how we work in this country. Dr. Sheth had an interesting conclusion to his interview that may add some fuel to the movement. He said:
"America is has a survival instinct, and we foster entrepreneurship. It is a nation of ideas, and entrepreneurshisp is the best form of egalitarianism- better than democracy. Entrepreneurship does not discriminate by religion, gender, ethnic backgroun. To me that is the most powerful."
So there is some thought for you to chew on. What do you think? Do we have a chance to become a nation of Free Agents? Will entrepreneurship win over government?


Anonymous said...

Depends on who is in office and the make up of the Supreme Court. I could have seen W liking this idea. With the current President; not only no, but hell no.

Cyndy Trivella said...

Mike--Wow, this is an interesting article! Here is my two cents. I learned a few months ago that small business/contractors/independents actually comprise 85% of the businesses in the USA. I had no idea the percentage was that high. So given this, why does the government want to make it difficult for these folks to do business? IF there are proper rules/regulations/laws in place to insure Uncle Sam gets his cut, (which there may not be and why the government is so uncooperative)why not use this 85%? If people don't work, we don't circulate money. If we don't circulate money, the economy stays put where it is.

Michael D. Haberman, SPHR said...

Much of what is driving the current increase in enforcement and scrutiny derives from two sources. First is just the political philosophy of "business is bad, workers need to be protected." Thus we penalize companies that "mistreat" workers by not paying overtime, benefits etc., as is the case with independent contractors.

The second source is unions. Unions cannot organize independent contractors. No one to organize = no unions. And the unions have given too much money to legislators to allow that to happen.

Dave Ryan said...

Wow Mike, are you some kind of anarchist or what? I find the concept intruiging, although all of the powers that be will never let this happen - in my opinion.

Dave Ryan said...

Wow are you some kind of anarchist or what? In reality, I don't think this could EVER happen, given the powers that be; unions trial lawyers, etc.

Cyndy Trivella said...


Unions had their day, but I don't see them fitting into today's business model. I know they "own" politicians by giving them their unified support. Frankly, I don't agree with this and find it to be certainly disadvantageous to the independent worker.

Michael D. Haberman, SPHR said...

Dave I agree. It would have to be a MAJOR change in the scheme of things for this to occur. Any you hit the nail on the head.. unions and union lawyers. But what might come out of this some day is an "freeing up" of some of the rules and regulations surrounding independent contractors. But that is not headed in that direction. Plus state revenue departments would fight it as well.

Adrianna said...

I have already seen this trend with a place my spouse went and applied for a job. He has over 25 years of experience but the job required that he sign on as a "contractor" not one of the "employees" that worked there, though he would be working for the company.

On the other hand, working in the non-profit arena, we get contracts that provide a salary for a position and then specifies money for contracting out. The money designated is in no way sufficent for us to hire a person so we do use contractors from time to time. But the time limit is specified as well as the results needed are very specific.

We had more people wanting the contract position than interested in a full time position with the company. Ironic isn't it?

Dave Ryan said...

Yeah Mike that is a good way to look at things, i.e. freeing up something things. It is like another other negotiations - if you want to move from 2 to 3, you have to ask for 10 first to get to three. Great Post- very thought provoking.

Wally Bock said...

Excellent post, Mike. Before Tom Peters there was Mike Montoya and Terri Lonier saying similar things. I consistently disagree. You've and the commenters have covered many of the reasons why the "Free Agent Nation" is not likely to happen any time soon. Here are some others.

It's hard to be a free agent. The paperwork burden is far heavier relative to either revenue or transactions than it is for a larger corporations. This looks like it will get worse with the new health care and "financial regulation" laws.

Taxation is usually higher for solopreeneurs. That's because many jurisdictions that do not have a personal income tax do levy a tax on "small businesses." At the very least that includes business or privilege license. And some states have tried to levy taxes on people who are speakers who give a keynote in their state, or coaches who coach people in their state over the phone. This will only get worse because governments are strapped for cash.

There's also the fact than an awful lot of people don't want to be in business for themselves. They want to do what they do (marketing, accounting, whatever) and let their employer do all that messy administrative stuff.

Our laws define two sorts of entities in this regard. There are businesses and there are individuals. We don't have a third entity, solopreneur, for folks who are a bit of both.

Anonymous said...

Following a layoff I was out of work, fortunately only briefly, for about as long as I might have expected to be if I were, indeed, a "solopreneur." It changed my mind entirely about the subject. Although I had much higher than average financial "cushion" saved up, the time off halted money going to retirement and gave me a personal introduction to the huge cost and poor value of non-employee medical insurance. As someone with a firm knowledge of my old company culture, "how we do things," and who's who, I was one of those valuable older employees. I exited into a market where my organizational knowledge had to be rebuilt from scratch and my value was significantly lowered. Like many, my pay was lowered for a couple years while I rebuilt my worth, putting my retirement plan further behind. We had always been frugal but we're much stricter with budget now. While the loss wasn't crushing, when I imagine an economy where such breaks happen to everyone often, and happen to people less prepared than we were, I can't imagine how it would maintain the level of consumerism that a healthy economy needs.

Ben Eubanks said...

I think most people are too lazy and/or ignorant to ever handle the kind of responsibility that that sort of work involves.

Wait, you mean I'm accountable for results, not how long I'm in my chair?

:-) I'd love it, though!