The issue of worker exploitation refers obviously to the unfair treatment of employees, who are underpaid and given very few or no benefits. That doesn’t only include employees on the payroll, but also refers to workers who are misclassified as independent contractors. According to the Bureau of Labor Statistics, if workers were properly classified, the various additional costs to employers, including paid sick leave, medical coverage, and unemployment insurance, would be about 40 percent more.

But in recent years there has been another unfortunate development, which involves working people who are neither on an employer’s payroll nor misclassified. I am referring to the phenomenal increase in freelance workers. Just in the last four years, the number of freelancers increased by more than 8 percent compared to only a 2.6 percent for the entire U.S. workforce. These workers, rather than being employed by a company, are instead self-employed. This has been viewed by the mass media as a tremendous gain because so many working people have decided to set up their own business.

For a long while, when our economy was expanding in ways that created new opportunities for workers, that perspective was appropriate. But no longer. Too many freelancers earn very little and receive no benefits from their clients. As the climbing number bankruptcies reveal, the chances of becoming a successful entrepreneur are very small.

“According to a study by the Freelancers Union, which represents many freelancers, the average freelancer is stiffed by businesses about $6,000 a year.” 

The advantages to the business community of doing business with freelancers are immense. Instead of maintaining a staff that receives regular, uninterrupted wages and benefits, they dole out work to freelancers at a relative low cost because the freelancers usually compete with other freelancers to obtain work. The lowest bidder typically gets the business.  (Editor’s note: in some sectors, for instance journalism, rates and conditions are set without bidding by the company – in either model all power rests with the client.)

The number of freelancers exceeds 57 million, which is about 35 percent of the workforce. For many it is not their only source of income. But more than 15 million are now freelancing exclusively. The percentage who earn their living only by freelancing rose substantially during the last four years from only 17 to about 25 percent of all freelancers. This trend is likely to continue.

Although many freelancers make a good living most are financially stretched. Two-thirds of freelancers have to dip into their personal savings at least once every month to pay their bills. That is three times more than non-freelancers. Except for very few freelancers, their work situation is unpredictable. They have to endure periods when they do not get any work at all. When work has not come their way, their income is zero dollars. Only their expenses remain.

To obtain contracts for a particular assignment they often bid for jobs that are posted. One commentator noticed that bids could be made as low as one dollar an hour! Since they are not employees, the minimum wage laws do not apply. Obviously the fierce competition for business between freelancers keeps the average income fairly low. In addition, many corporations don’t pay their bills for as long as 45 to 60 days. The long waiting period is a burden for many of these workers. In fact, some business customers violate their contract by not paying at all. In the last year, 40 percent of freelancers reported that at least one of their customers failed to pay them. According to a study by the Freelancers Union, which represents many freelancers, the average freelancer is stiffed by businesses about $6,000 a year. 

Nevertheless, the number of freelance workers continues to increase. If present trends continue by 2027 freelancers will make up a majority of the workforce. A combination of factors including job loss, more employers converting full- time to part- time jobs, and stagnant wages are forcing many workers to strike out on their own. But in this increasingly competitive environment, finding job assignments on a regular basis is very difficult. For most freelancers, their work is intermittent. In short, what is characterized by the establishment as upward mobility is really downward mobility.

Ironically, since freelancers are self-employed, they are not counted as unemployed by the Bureau of Labor Statistics even during those periods when despite their efforts they are not obtaining any work. This anomaly contributes to misunderstating the official unemployment rate.

There is an important lesson to learn from the experience of most freelancers. For the vast majority of working people, individualistic rather than collective solutions do not work in the current economic environment. What gave working people a tremendous advantage in the past was adopting mainly collective rather than individualistic alternatives, particularly by organizing and joining labor unions. Workers cannot generally make major achievements by just working alone. They must continue their collective efforts on behalf of ALL workers — no tribal stuff — to improve their standard of living and quality of life.

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This article originally appeared in Berkeley Daily Planet

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