Are You Really Free to Sell Your Labor in the Market?
States are implementing laws to change how independent workers are classified. While these laws are supposed to protect workers, they could make it harder for you to work for yourself.
A couple weeks ago, I watched a clip of an irate Tim Pool threatening to move his media business out of the state of West Virginia.
I found this incredibly fascinating. West Virginia, is an underrated state. While the state fell on hard times after coal mining went into decline, it has tremendous potential. West Virginia has a ton of outdoor recreation, is close to major cities like Washington, DC, and because of its economy, it has an abundance of affordable housing. The fact that Tim Pool has a business in West Virginia in the first place shows what’s possible for entrepreneurs and remote workers.
But what really caught my attention was his take on how employment laws in West Virginia affect freelancers like me. According to Pool, it’s illegal for his company to contract with individuals unless they are registered as a business in the state of West Virginia. That means if Tim Pool wanted to hire me to write content for his website, it would be illegal for him to do so and his business would be penalized if he did.
While you might not think this has anything to do with you, access to independent work is something you need to begin paying attention to. According to Upwork, 38% of the U.S. workforce is currently engaged in some kind of freelance work. In the next five years, half the workforce is expected to be completely reclassified as independent contractors.
While you might have a normal W2 job right now, that’s not going to be the case in the future. If you aren’t automated out of your job in the next few years there’s a good chance you’ll be reclassified. Instead of collecting a biweekly paycheck, you’ll be patching together projects across different employers.
As the number of W2 jobs declines, you’re going to need to be able to sell your time and talent on the free market. But what Tim Pool reveals is that it could be coming under threat.
In a direct response to gig companies like Uber, states have enacted new laws to protect freelance workers. While there are obvious benefits to these kinds of laws, that doesn’t mean they’re perfect. In an effort to protect independent workers, states are simultaneously regulating what work is and who gets to access it. Depending on where you live, you might not have the freedom you think you do to sell your labor and, thus, earn an income.
This essay will dive into the future of independent work. Specifically, it will look at how individuals are able to access work. It will show that while efforts to protect workers are noble in the short-term, increased regulation could disincentivize employers from contracting with individuals, making it difficult for people who want to work on their own terms.
Even if you don’t anticipate becoming a freelance worker now, it’s an option you want to make sure is on the table if you find yourself out of work with no other options.
In the past, you worked for one employer your whole life. Today, work is becoming less stable, ad-hoc, and more independent.
A few decades ago, your employer provided you with enough income to live a middle class life and a pension you could live off of after you retired.
Over the years, workers became increasingly responsible for their own benefits. It’s up to you to save for retirement and if your employer doesn’t provide health insurance, it’s up to you to find a plan on the exchange and pay for it yourself.
Because wages no longer keep up with productivity, the costs of employment are increasingly being passed onto workers. I experienced this firsthand when I worked at Waffle House. I was paid $2.92 an hour even though I was expected to do untipped work like cleaning the bathrooms and washing dishes. Every shift I had $3.15 docked from paycheck as a “meal credit” regardless of whether or not I ate anything.
Now thanks to the rise of gig apps like Uber, workers have been reclassified to get the burden off of employer balance sheets altogether. Gig workers are paid per task completed rather than per hour worked. Companies like Uber don’t have to pay payroll taxes or maintain fleets of vehicles. Every cost of the business has been passed onto the worker.
The reclassification of work has been decades in the making. While Uber disrupted the service sector by turning hourly work into gigs, artificial intelligence is about to do the same thing with white collar office work.
Up until this reclassification work was compensated on the basis of time. You were paid based on the amount of hours you put into a job, regardless of the outcome.
Artificial intelligence eliminates the constraints of time which it eliminates the need to pay human workers on the basis of time. With enough capital, you can rapidly produce anything at scale.
Because time no longer matters, work is going to be paid on the basis of outcomes rather than time. You’ll see more and more work being offered on a per project or a per task basis rather than a standard 40-hour workweek.
This isn’t necessarily a bad thing. Instead of being a worker, you’ll be a free agent in the labor market. Just like professional athletes, you’ll be able to sell your skills to the highest bidder. Workers who understand this and capitalize on their skills will make far more than they ever did working for an employer.
Small businesses will benefit too. You might have noticed an uptick in professionals marketing themselves as “fractional” executives. People who have experience working in the c-suite are essentially freelancing with startups. This gives small businesses access to talent and expertise they wouldn’t otherwise be able to afford.
But while there are a number of benefits to independent work – namely flexibility and the potential to earn more money – the nature of independent work is problematic. Freelancers and gig workers are classified as contractors rather than employees. They aren’t guaranteed a minimum wage and they don’t qualify for other benefits like workers compensation and unemployment benefits.
Independent workers take on the full burden of employment while hustling to eke out a living. The reclassification of work makes it easier for employers to exploit laborers. States are stepping in to protect workers but that, too, comes at a cost.