Diane talks with David Winston, president of The Winston Group and a strategic advisor to Senate and House Republican leadership for the past 10 years.
As many as one-third of workers in the United States are freelancers. Between 10 and 42 million people now work outside the traditional 9-to-5 model. Many full-time employees, from graphic artists and construction workers to lawyers, started working as independent contractors out of necessity during the recession. While freelancers enjoy more flexibility and autonomy, working independently comes with challenges. Freelancers receive no pension, no health insurance, no workers compensation and no job security. A discussion about the risks and benefits of the new “freelance economy.”
- Ross Eisenbrey Vice president of the Economic Policy Institute.
- Sara Horowitz Founder of the Freelancers Union and author of the "Freelancers's Bible."
- Fabio Rosati CEO of Elance, a company that connects freelance workers with employers.
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. One of the fastest growing labor organizations in the country today is the Freelancer's Union. With more than 200,000 members the union provides health insurance, 401k's and other benefits traditionally offered by employers.
MS. DIANE REHMWith me to talk about the pros and cons of the new freelance economy, Sara Horowitz, founder of the Freelancer's Union and Ross Eisenbrey of the Economic Policy Institute. Joining us by phone from California, Fabio Rosati, CEO of Elance.
MS. DIANE REHMI hope you'll join us, I know there are many freelancers among you. Give us a call, 800-433-8850, send us an email to firstname.lastname@example.org, follow us on Facebook or send us a tweet. Welcome to all you.
MR. ROSS EISENBREYThanks for having us.
MS. SARA HOROWITZThank you.
MR. FABIO ROSATIGood morning, Diane.
REHMGood to have you all with us. Sara, let me start with you. I think the workplace is shifting rather dramatically. Are there estimates as to how many freelancers there are in our economy now?
HOROWITZYes, you know, that's a great question and, you know, right now there really isn't great data that's been able to measure this. But we've been seeing that it's about a third of the workforce.
HOROWITZThat people are working part-time, self-employed, sole entrepreneurs, as contract and temp workers and that it's really the Wild West in definition but we all kind of know this intuitively that we're just seeing that their jobs are shorter in duration and that people are working on their own increasingly and we're just seeing this across the whole economy right now.
REHMAnd to Ross Eisenbrey, why is this happening? Are people being laid off and therefore taking up freelance jobs? What's happening?
EISENBREYWell, I don't think that the problem or the scope of this is as big as Sara says. The Department of Labor, Bureau of Labor Statistics comes up with a much smaller number although...
REHMBut aren't they always sort of behind the...
HOROWITZAnd it hasn't been studied since 2005.
EISENBREYWell, yes, and the change from 2001 to 2005 was large, about 15 percent, but even if you took 2005 numbers and increased them by 15 or 20 percent you'd get nowhere close to the numbers that Sara's talking about. It might be 20 percent of the workforce, 15 or 20 percent.
EISENBREYBut in any event, the reasons for it are that employees have less bargaining power than they used. The unions are in decline, norms are changing and employers are finding it to their advantage to have a different relationship with their workforce than they had in the past.
REHMAnd that means?
EISENBREYWell, that means that they don't want to be responsible for taxes, payroll taxes. They don't want to be responsible for workers' compensation insurance premiums or the liability when workers get hurt.
EISENBREYThey don't want to pay social security taxes, there are a lot of freight that goes along with having an employee, including that you have to abide the Fair Labor Standards Act. You have to pay overtime for a lot of employees...
REHMAll kinds of things.
EISENBREYYes, all kinds of things that employers would rather shift away from their cost and onto someone else.
REHMAll right and Fabio Rosati, tell me about Elance and how you founded it, why you founded it and who the employees are who belong it.
ROSATISure, Elance is an online staffing platform that connects businesses and freelancers, makes it easier for a small or medium size company to find the right freelancer and then facilitates the collaboration and the payment.
ROSATIWe have about half a million small and medium sized companies using Elance, increasingly some larger corporations are starting to use our model and our database has over 2 million freelancers, not all are active at the same time, but they sign up for alerts for things like interesting jobs and information that may be relevant to them.
REHMAnd Fabio, would you agree with Ross that the reason there is so many employers looking for freelance employees is that they don't want to pay, you know, they don't want to do all the things employers usually have to do with employees?
ROSATII agree with some of what Ross says. I believe that definitely some businesses that don't want to do that but for the most part what we're finding is that the type of hiring and the type of work that happens on an online platform like Elance is the kind of work that you couldn't do, you couldn't hire a full-time employee for.
ROSATIAs an example, many of the small businesses that are using our platform may need a creative freelancer or a marketing freelancer or a technical freelance for a few hours or for a project. And it simply wouldn't be affordable for a small business to hire that person full-time.
ROSATIBut for a few hours or for a few weeks for a very specific project like building a website or creating a brochure or doing some market research, the model makes perfect sense. And as I think everybody knows freelancing has been around forever.
ROSATIIt's a very interesting part of our economy, it is increasingly vibrant and when I was hearing about some of the estimates of the size of the freelance economy there's some interesting data from three organizations, the Staffing Industry Association, the American Staffing Association and the leading labor law firm in the country called Littler that suggests that the industry's about $400 billion in the U.S. and suggests that about 90 percent of businesses in the United States hire contingent workers.
ROSATIAnd I think some of the confusion about the actual size of the freelance economy comes from definitions. A freelancer worker, a contingent worker, could be actually a business. Many of the people that work on our platform are setup as businesses so they're truly self-employed and they don't show up as complete freelancers non-employed.
REHMIt's interesting, Sara, to hear about these various platforms and the idea that many of these freelancers have actually formed businesses.
HOROWITZYes, I mean, one of the things that you really see is that many people, whether they're doing this by choice or not by choice, that this is the work that's available and frequently the work that they love to do.
HOROWITZAnd I think that what we're seeing is that companies are pulling together freelance teams but also freelancers are pulling together their own teams and that to be a very successful freelancer you have to, you live and die by your own network and you are bartering, you're exchanging, you're outsourcing work and that this is how people are putting together a life.
HOROWITZThey're also working full-time jobs, sometimes they're working part-time jobs. Often this has everything to do with declining wages and so it's, I think, a false dichotomy of, is it good, is it bad, it really is, it is.
HOROWITZAnd it's how, what are we going to do to make this so that people can become much more easily successful?
REHMTell me who these freelancers are, Sara.
HOROWITZWell, you know what's interesting is it used to be very heavy in terms of publishing or programming of which, of course an IT, you are seeing this concentration but now it's really across the board that you're seeing people from security guards to graphic designers to people in finance and that this really is a phenomenon of this whole workforce.
HOROWITZYou can't say it's just low wage or high wage and I think that we, again, haven't, this isn't the first time we've seen this. companies always seek to have greater flexibility and the answer is to figure out within the current business context, what does that mean and how do we make it so that it works for people? But not to say we're going to go back and it's all bad because I don't think that's how you build on anything.
REHMBut Ross clearly freelancers have diminished resources like pension plans, like insurance policies, like workers' compensation. So how do you see it?
EISENBREYWell, they're sort of, I see it as being there some good freelance and that the very name is sort of a positive name and then there's a whole world of people who are being turned into independent contractors when they're not really and that, I mean, service employment like security guards.
EISENBREYThat's a low wage job and when you hear that they're being treated as independent contractors it makes me think that it's an employer who has probably decided not to pay payroll taxes and, you know, it's shifting the responsibilities and leaving somebody who doesn't have resources to pay for unemployment insurance when he loses his job or if he gets hurt, what happens to him?
REHMBut at least that employee has something, he is self-employed and that's something.
EISENBREYBut that's something but he'd be much better off if he were included in the social safety net that includes things like workers' compensation and unemployment insurance.
REHMYou bet, you bet. But the opportunities for doing that seem to be on the decrease. Am I right, Sara?
HOROWITZYes, I mean, I think that really what we're seeing is this shift in the workforce and it's not like we are seeing this ability to just turn it around. I think what we really are seeing is that there's a decline in unionization, great income inequality and that these are the new jobs just as the new jobs were the industrial workers in the 1930s and craft workers in the 1860s.
HOROWITZThis is the new workforce and so we want to start to think about what are the new kinds of social things that will help? What are the ways that we can start, you know, the ACA will be one opportunity and there'll be others.
REHMSara Horowitz, she's founder of the Freelancers Union in New York and author of "The Freelancer's Bible: A How-to Book for Independent and Self-Employed Workers." Short break here, we'll talk more and take your calls. Stay with us.
REHMAnd I know many of you would like to join the conversation. We'll get to your calls, your emails in just a few moments. I want to hear though from you, Sara, the fact that you were a freelancer yourself. Tell us why you started the Freelancers Union and the kinds of benefits it provides for freelancers.
HOROWITZYou know, what happened to me was I was actually working as a lawyer and was termed an independent contractor. And it's one of those situations where like the wrong person got misclassified, I suppose you could say. And so I started to say, well what's the thing to do? You can complain or you can start to build something. And that really started me on a road to thinking about what do freelancers need to be successful? And one thing is to come together to start building together in solidarity, an old fashioned quaint but relevant term. But also to really start to mobilize and organize ourselves and have opinion politically as well.
HOROWITZAnd so the Freelancers Union has been in the process of building what we think is a new part of the next labor movement.
REHMAnd how large would you say it is now?
HOROWITZSo we now have over 220,000 members nationally and are growing and are all over the country, and are starting a bunch of projects actually in the next couple months. We're really going to be starting a campaign of counting independent workers and starting to really show that this is a real part of the workforce, as Fabio talked about, with enormous economic impact in our society. And freelancers are a great and scrappy lot, nothing to be ashamed of. So that's what's great about it.
REHMSo when you began this, did you immediately reach out to others or did they reach out to you?
HOROWITZYou know, it was a combination of really having such these local meetings of people coming together and starting to really see what was happening. And, you know, when I started I used to think the only people who understood this were freelancers and career advisors because it was the career coaches who were seeing that once people got laid off they weren't going back. And I think that's the point we have to make. You know, if only there was a land of milk and honey where people had health insurance and pensions and all the jobs came fully loaded, like, tell me where that country is, you know. And it's probably in decline. And that's what's distressing.
HOROWITZAnd so that what we really have to think about is, how do we really get freelancers to start being owners of themselves and of their own institutions? And I think these are going to start being the solutions we're going to start looking for.
REHMAnd Fabio, that's exactly what you've done, isn't it?
ROSATIWell, I completely agree with Sara and I'm a huge fan of the Freelancers Union, of the work that has been done. We focus on another dimension of the freelancing world which is to try to aggregate the demand for freelance work so that a freelancer can find it more easily, access to clients. A freelancer is about productivity. Being a freelancer really is being a business of one.
ROSATIAnd you think about how can you maximize your billing time and minimizing your marketing time and your administrative time? How can you find jobs more easily without having to get in a car or on a bus and spend hours and hours and hours creating proposals and meeting clients? And how can you minimize the amount of time it takes you to collect payment, which is a huge problem for most freelancers. So our focus is in technology. How can technology help a freelancer make more money and be more productive?
REHMAnd here's an email on this very issue from Peter. He's in Huntington Woods, Mich. He says, "Many, perhaps most people are not capable of freelancing. The organization, capitalization, risk and time required are not compatible with people's abilities or endurance levels. This, in my opinion, is another move by the business world to shed the responsibilities that have long been a part of an employer's responsibilities to society. As long as profit is the sole reason for an employer's existence, this will continue."
REHMThat's sort of two very different aspects of the same issue. Talk about that, Sara, what it takes to be a freelancer.
HOROWITZYou know, I actually think Peter really has it right. It really is the two. And I think that many of us would agree that a lot of times this is being generated by employers. And that's just the truth. But I think that what we're seeing is it is very hard to be a freelancer and it doesn't have to be. You know, we have a Small Business Administration to help small businesses. And we have an Agriculture Department to help the rural states. But we do not have one government agency for freelancers.
HOROWITZThe Department of Labor has not even studied independent work or freelancers and is focusing almost exclusively on misclassification. And what we really should be looking at, in addition to those important issues, are things like how is it that you need to market yourself, the capital streams? If we started making this much easier for people, they could focus on doing the work.
HOROWITZOne of the things when I talk to freelancers is I say, some people are great at marketing themselves. Some are terrible. So find the people who are great and start to partner. Start building new kinds of institutions, new kinds of co-ops and mutual aid societies. That's what we're going to start seeing a lot more of.
REHMAnd Fabio, that seems to be exactly what you're doing.
ROSATIIt's certainly a major focus. And I thought I would add to the conversation that we see three different types of freelancers. And all of them do freelancing but they are actually quite different. Three are people who freelance full time. And when you ask them, they really describe themselves as a full-fledged freelancer, they're a business of one.
ROSATIThen there is a third of the population that is active on Elance at least, that actually has fulltime jobs. They work 9:00 to 5:00 but they supplement their income, or they're developing new skills. Or a classic example is a software programmer that works for a bank that doesn't get to use his or her programming skills for new technologies at the bank because the bank is a bit backward. And is actually trying to develop new skills and develop new software capabilities.
ROSATIAnd then there is a third of the population that is actually either retired or is in school or is raising children and is only freelancing a few hours a week, maybe five hours or ten hours. All of these people are part of the freelancing world that we serve and are part of our economy. And every one of them has a different perspective on the kinds of topics that we're talking about.
REHMAnd Ross, to you, what do you make of Peter's point that businesses are really doing as much as they can to shed the responsibilities that previously they had to their employees?
EISENBREYWell, they've been doing it to their employees as well. And they're outsourcing abroad. They're outsourcing domestically, you know. And then they're also abandoning traditional benefit programs. The number of people who are covered by employer-provided health insurance has been in steady decline. The same is true for pensions. Now less than 20 percent of the workforce has an employer-provided traditional pension.
EISENBREYSo they're doing that every way they can. And then on top of that they're turning as many employees as they can into independent contractors. And the government, you know, is in an odd position here. The health care law actually makes this easier and better, I think, for a lot of freelancers. They will be able to get cheaper health insurance on the individual market as a result of the new health care, the Obamacare Program.
EISENBREYYou saw in New York the price for individual health insurance fell for some people from $1,000 a month to $300. That's a tremendous savings and improvement for people who want to freelance. So in the biggest picture, if all of these benefits were -- if you could have the safety net and not have it tied to employment, people would be better off. And it would be a less scary world to be a freelancer or an independent contractor.
REHMDo you agree with that Sara?
HOROWITZYeah, I mean, I think that what is really important is that we start taking away these impediments so that we actually have goals for people to earn enough money to have enough work. That's what we need to be focusing on. And each one of these things has to serve that goal.
REHMHere is an email from Dave and Diana who say, "In the introduction Diane used the term job security in her list of negatives to working as a freelancer. That term has lost its meaning. Who feels today that they have job security? No one. It's a fantasy of yesteryear and no longer exists." Do you agree with that, Ross?
EISENBREYWell, it's a painful subject. I mean, the unemployment rate, you know, right now is still very high. We got up to 10 percent unemployment and tens of millions of people went through a period of unemployment during this last recession. So, you know, the average job tenure, I think, for people is not much more than five years. It's true. The people are not going into a job and having a single career for 40 years the way they might have.
ROSATIIt's an absolute imperative to focus on employability. And one of the things that we love about the freelance movement is that it helps people focus on employability by default. In order to be a successful freelancer you have to have skills that are marketable and current. Otherwise you can't survive. And I think that the theme of employability should really be a much bigger theme for government. How do we make the American workforce employable? How do we make our children employable? What are the kinds of things that they need? It goes back to the earlier theme of the skills that are allowing you to market yourself, but also the skills that are in demand.
HOROWITZDiane, I wanted to say, you know, one thing that I think freelancers are really teaching us is that they're really questioning about the way work is even organized about their own lives and starting to say, if I'm going to freelance I'm going to start looking at my own expenses.
HOROWITZAnd starting to cut down on my own consumerism. They're starting to think about the food they eat, where they live, their local communities. So one of the things is that freelancers are really changing the whole debate and discussion about work. Many people all over America are asking themselves, am I working so much? What about my family, my life, my community? And that's what I think is one of the most promising things for freelancers is, you can start to organize your day. And as you organize your day literally, you organize your week, your month and your life.
REHMAnd I do think Fabio makes such a good point when he talks about looking at one's own employability, the skills one develops as a freelancer. You then, perhaps at some later point, take to an employer and say, this is what I have to offer. And you're listening to "The Diane Rehm Show." We have numerous callers. Let's open the phones now. First to West Palm Beach, Fla. Hi there, Jose. You're on the air.
JOSEHi, how are you?
JOSEWhen I was unemployed in 2008, I started working as a freelancer. And then once I found -- I used to referee basketball in my college years in intramural, so I kept going with it. And it provided benefits for my family but the problem is, like they say, no health benefits or no insurance. And you're depending on your body, how well you keep yourself, to keep working on that.
REHMOf course, Sara.
HOROWITZYeah, I mean, I think that what I hope we come out of today's discussion is the realization that this is moving forward, but that we have to think about how do we make it so it shouldn't be so hard to freelance? There should be support so that Jose can do that kind of work and not have to worry about the benefit. But I think that it's recognizing and thinking about the employability, the strategies for the future and trying to build that together.
REHMAll right. To Wells River, Vt. Hi, there, Bob.
BOBYes. Hello, Diane.
REHMHi there. Go right ahead, sir.
BOBIt's a very timely show. Obviously you've hit on what is to me a great paradigm shift in the sort of American business models. And it doesn't look like it's going to turn around any time soon and probably going to get worse. And what my comment is, is that, I mean, 30 years ago you could hire a high school kid to come mow your lawn. But now with insurance and liability and permitting and licensing and all that stuff that's on the state and local level, it's very onerous. I mean, a kid can't do that. And to be a small independent contractor you've got to jump through way too many hoops.
BOBAnd I'm wondering if this movement or if these organizations are having -- are they getting any traction dealing with the local and the state levels on making those barriers less onerous.
HOROWITZYou know, I think Bob raises a point which is that what we're seeing is that many of the laws and regulations were really designed for a 1930s work life. And so what hasn't happened is we haven't really evolved and caught up with these new realities. So oftentimes people are caught between a bunch of different laws and regulations. I'll give you an example. There's something called the unincorporated business tax which taxes freelancers terribly in certain key cities. It's a dolphins-in-a-tuna net situation. No one intended for it to hit them. And they end up paying thousands of dollars in cities like L.A. and Philadelphia.
HOROWITZBut really what we have to do is say, no, let's stop that but we have to make sure that we have enough taxes to pay for other things.
HOROWITZSo let's reassess. And that only comes about when you have a real mobilization of a constituency. That's a feedback loop for our democracy. And those are the kinds of things we need to build.
EISENBREYI just would like to challenge the notion that kids can't get work. Kids in our neighborhood, here in the nation's capitol are providing pet care services...
EISENBREY...cutting people's lawns and watering people's lawns. I would hate to leave that unchallenged that a kid can't...
REHMBut depending on how much money they make, they may perhaps reach a threshold where some income taxes are due.
EISENBREYOh yeah, for sure. If they're that successful that they, you know...
EISENBREY...most Americans pay income taxes. But 30 or 35 percent of working Americans don't earn enough to pay income taxes. And I think, you know, a high school kid doing lawn care is probably not going to get there.
REHMOr pet care, anything of the sort.
REHMBut, you know, even a young person doing something as simple as carting people around the beach on a golf cart can make a fair amount of money and can do so without hitting any kind of a taxable limit. We're going to take a short break here. More of your calls, your email when we come back. Stay with us.
REHMAnd we're back talking about the population, a very significant portion of our population who now consider themselves freelancers. That portion of the population seems to be growing right along with the unemployment rate, so they consider moving out of the sort of institutionalized employee/employer situation and into taking care of themselves. But Fabio, here's an email from Laura. She's in Cincinnati, Ohio. She's been freelancing for over ten years as a graphic designer, specializing in video animation and editing. She's made thousands of dollars in the field.
REHMShe says, "On Elance you end up competing with people from all over the globe, from India, Pakistan, etcetera who are low balling these lucrative jobs which leaves many people like me unable to compete. I'm not going to spend hours on a complex video and charge only $500 or even less. You cannot be a fulltime freelancer at that rate, not in America anyway." What's your response?
ROSATIWell, I do agree that there is global competition on the internet because the internet is an open platform. And just like a freelancer in New Hampshire can access, with the click of a mouse, a job post that is also available to a freelancer in San Francisco, the same openness applies to people all over the world. A lot of European freelancers, a lot of people in southern Europe that are trying to escape their local economies and see these jobs online and submit proposals. There are people in remote parts of the country, rural American with all kinds of personal situations that are applying for freelance jobs.
ROSATIIt is a reality of today. But what I can say, that we find that the very best clients have a real deep understanding of the skills they look for. They value proximity. They normally would prefer to hire local and people that they can meet in person. But sometimes they simply can't find them. They are prepared to work with people that have, you know, the same cultural affinities. And they're willing to pay for high quality work.
ROSATISo while there is global competition, there is also plenty of clients that are high quality and they're willing to pay a fair price for really good work.
REHMAnd here's a follow-up to that from Dallas, Texas. Hi there, Gary, you're on the air.
GARYHi, Diane. Thanks for taking my call.
GARYI always love your show. Thanks a lot.
GARYI wanted to point out that I'm one of those that lost their job in the great recession. I had a 30-year great career and found myself in the pool of millions of 50 something folks that all of a sudden couldn't get hired because of their age. So I started freelancing. My background is creative marketing. And what I found from the crowd-sourcing sites like Elance and others is what your previous caller mentioned, is the low balling completely made it unprofitable for me to even attempt to find jobs on those types of sites. So I went back to the traditional way and I am finding jobs out there in the traditional manner. But...
REHMInteresting. Sara, how do you see that?
HOROWITZYeah, I mean, I've been going around the country talking to freelancers and really hearing a lot of what both Gary and Laura have said at an accelerated rate. And I think that one of the things that we're going to start to see is there will be regions and cities that really want to invest in their local economy. And that that's where freelancers are going to go. People are going to start meeting each other, having this kind of exchange that has much more of a sustainable wage level.
HOROWITZAnd the places that don't do that are really not going to attract this kind of freelance talent. And so I think we're going to start seeing a movement to much more local economies. And that's where you'll see places like Austin, Portland, Oregon. These are going to be the hubs. And it's not surprising that Austin has something called Sustainable Austin where they really want to invest in local businesses, local freelancers and really make that a place where people can buy those services.
REHMHere's an email from Jonathan in St. Louis, Mo. on a slightly different topic. He says, "I've been a freelancer for almost five years. I love it. I'm curious whether the guests have any thoughts on how to best manage the work life balance. When freelancing my office is in my home. I'm an editor of books, journals and a musician. And I have two small children. Seems I work every day and have trouble over scheduling myself. I've also grown cynical about the fact that I'm pretty much on my own when it comes to health and retirement." What about the scheduling, Sara?
HOROWITZWell, you know, one of the things in the freelancers Bible is to really try and think through how do you start to set the boundaries of what is work and what is not work. But one of the most important things is to start finding other people in your field who you can start exchanging and sharing work. So that when you can't do something, you have somebody who will do it for you. And these are the kinds of coping skills that freelancers are really coming up with all the time.
REHMNow, does a union like the Freelancers Union begin to put people in touch with others so they really can communicate?
HOROWITZYeah, so we always have different kinds of networking events, but are also looking at online strategies to start bringing people together because clearly, that's what they really need is to find one another and to be able to make these kinds of exchanges.
REHMAnd Fabio, what about you and your own organization of time?
ROSATIWell, we find that the most successful freelancers are -- have very many of the same traits of very successful fulltime employees. They set goals, they have schedules, they are extremely disciplined in how they spend their time. They make choices about the types of work that is profitable for them. And the type of clients that they will work with and the clients they will try to avoid. I think that in order to be effective as an independent worker, you have to have some of those traits. And you get better at it over time, as you keep perfecting your style -- your lifestyle and your work style.
REHMAnd Ross, what about that last sentence where Jonathan says, "I've grown cynical about the fact that I'm pretty much on my own when it comes to health and retirement?
EISENBREYWell, you know, Sara's organization has the right attitude which is you're not -- you shouldn't be left on your own. And they're trying to help people network. But ideally I think that you'd have something that made it possible for everybody to have health insurance. And the Affordable Care Act is at least a start in that direction. You'd have some way better than social security at the current level of benefits to plan for your retirement. It's just not right that people are left to try and piece together retirement on IRAs and 401Ks that are clearly not working.
REHMAll right. To Saint Augustine, Fla. Hi, Michael.
MICHAELGood morning, Diane. How are you?
MICHAELGood. I just wanted to comment -- I got in late on the show but I just wanted to comment. I've been self-employed for 23 years now. Went through the ups and downs of after 9/11 and 2008. And I, at any given time, have about 20 or 25 subcontractors now who work with me who actually are self employed. And one of the things I find out when they start working with me is I used to have to sit down and spend some time with them trying to help them understand how to handle tax forms and how to take some of the benefits of being self employed.
MICHAELPart of that I wanted to mention is that, you know, the self employment pension fund that is out there for self employed people, which is beneficial and does give a person an outlet to start building a pension for themselves as a tax break.
REHMWhat a good point.
MICHAELRight. But one of the things that I don't find is some way to help them to health benefits. I mean, when you try to get a health care or an insurance provider, everyone you turn to says well, you have to have a minimum of three employees or two employees. Otherwise you're just paying full out-of-pocket single individual health care programs. And I didn't know there was anything out there, you know, or is there anything in the new plan that I'm not aware of that offers some benefit or some incentive or some break for a self-employed person...
ROSATIWell, it is absolutely something that we are all rooting for. We hope that the availability of health care for individuals with the new legislation encourages more mobility. We talk to a lot of freelancers who are actually holding onto their fulltime job during the day while they would really like to switch to fulltime freelancing, precisely because they're valuing the insurance that they have. And they haven't yet found an alternative.
ROSATIIn addition to the Freelancers Union, which offers health care options, which I'm sure Sara can comment on, there are portals like eHealth that we have made available to our community where individuals can go and easily aggregate and shop for their health care needs.
HOROWITZYeah, you know, so Freelancers Union in New York has our own health insurance, which is going to stay the same blessedly, so people in New York for freelancers have great options. But Freelancers Union has really learned about how to start providing these kinds of benefits and have helped to launch three co-ops that will co-op health plans in New York, New Jersey and in Oregon.
HOROWITZAnd I think what it's really showing us is that you don't have to be alone, but that that's the real priority for this next social sector. That we have to start -- we call it new mutualism, this idea that we are all connected. We can aggregate our own economic power together. We can buy together. We can do things together. And that's how freelancers don't have to figure it all out individually, but come together.
REHMBut do freelancers pay dues to your union?
HOROWITZSo one of the structures that we provide is that people can just join the Freelancers Union and then we provide disability, life, dental insurance, health insurance and other things that helps our institution hire our own experts. And it's all under a nonprofit umbrella. So we have no private shareholders, no individuals who will be getting wealthy. We just keep plowing the money back in. We recycle our own capital.
HOROWITZAnd so that's really our strategy is to start thinking about, let's pull people together so they're not on their own. But let's recognize that it has to be entrepreneurial. We have to go back to the old labor models of, like, the 1920s. There's a whole new world out there and it's a really exciting world, and it's one that the social sector needs to step into.
REHMBut you're not bargaining with employers for your members.
HOROWITZWell, you know, the collective bargaining model is great when you have people who are at one place for a long period of time.
HOROWITZBut as people have all these gigs and projects, it's just not doable.
REHMAnd you're listening to "The Diane Rehm Show." But Ross, you don't think this is quite enough.
EISENBREYWell, this -- we're still talking about a very small part of the economy, even at 400 billion that's less than 3 percent of the economy, if Fabio's number was accurate. So I think we shouldn't lose sight of the sort of slide toward you're on your own that employers are encouraging. And, in fact, a lot of this is being done illegally. And the Department of Labor and the IRS have a joint program to police it and to try to bring back into, you know, the regular economy lots and lots. I mean...
REHMWait a minute. To police what? I'm not sure.
EISENBREYThe treatment of people as independent contractors when they're not really. When they're really employees. They write contracts with them as if they're independent contractors and the person signs it. But, in fact, his work is controlled by an employer and it's really a way to get around paying overtime for 60 hours of work in a week as a delivery truck driver or as a nurse who's sent to a nursing home and works there and works really long hours and then gets basically cheated out of all of her benefits and overtime pay. This is a gigantic problem that affects by some estimates 30 percent of employers.
REHMBut if, in fact, employers are simply not going to take on the responsibility of paying an employee full time giving that person full benefits, and if the government is -- or if employers are simply shedding employees in the interest of -- what's the word -- as they try to increase performance among the few employees that are left, what choice do you have, Sara, but to continue with freelancing?
HOROWITZRight. I mean, I think that Ross would agree that many people, that is the choice. And I think that what we really -- it's a real profound question and I think it is what to do. And I think regardless of whether it's something that you like or you don't like, it's been forced upon you or it's a happy choice, the truth is that we have to start saying, what is this work? How do we make it so that people can do well in this economy? And I think it's focusing on those goals and then figuring out how you get there. And that's our strategy.
ROSATII completely relate to the problem. I think it's a real problem but I don't think that the solution is to force an old model onto what the economy needs. The economy needs flexibility. Individuals want more flexibility in their lifestyle. There are many, many positives with flexibility and with freelancing. The solution is something that enables that in an appropriate way, is not to force that model to become fulltime employment when -- if fulltime employment isn't required or even wanted.
ROSATIThe economies that create too much rigidity eventually lose competitiveness. And there's plenty of examples in Europe of highly rigid economies who have lost global competitiveness and they're sliding away off the global horizon because they're no longer employable. They're no longer competitive.
ROSATIIn our country we must maintain competitiveness. And I'm very optimistic that we'll be able to solve for these new requirements, this new work model while we maintain flexibility.
REHMFabio Rosati. He's CEO of Elance That's a company that connects freelance workers with large and small companies. Ross Eisenbrey, he's vice-president of the Economic Policy Institute. And Sara Horowitz, founder of the Freelancers Union in New York and author of "The Freelancer's Bible." It's a how-to book for independent and self-employed workers. Thank you all so much. Good to have you with us.
EISENBREYThank you, Diane.
HOROWITZThank you so much.
REHMAnd thanks for listening all. I'm Diane Rehm.
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