We Should All Be Independent Contractors

We are living through the nascent rumblings of what is referred to as the “on demand” economy. Indeed, it’s setting our service based economy on fire. But until we rethink what it means to be employed in the information age, we’re going to stymie innovation and destroy opportunity.

The definition of “employment” is “the condition of having paid work.” No where in that definition does it mention being provided daycare, maternal/paternal leave, health insurance, life insurance, disability insurance, sick days, relocation assistance, car allowance, housing allowance, pensions, paid vacations, breast pump rooms, tuition assistance or even free breakfast. In fact, it wasn’t until fairly recently that any of those things were obtained through the job. The term “fringe benefits” wasn’t even coined until World War II.

So how did we get this notion that a company that wants to pay me X for doing Y should also provide me with so many extra things?

It’s all about power, control and the ability to legally confuse and obfuscate.

Let’s talk about control. Before we turn 18, who has the power in our lives? Who gives us food, shelter, clothing, healthcare and so many other things? Our parents of course. They control every aspect of our lives in exchange for all those “benefits”. Of course, in most cases, that example is benign and a necessary arrangement. But what about the 23 year old child living at her parent’s home still? Who enjoys the power in that situation? The answer isn’t as easy as you might think. It depends on who is providing more “benefits” in the arrangement. You would think the parent would still retain the power. Indeed, in the case of the child freeloading off their parents with no intention of leaving and providing any “benefits” to the parents in return, the parents retain the power. They can say “You have to be in the house by midnight or the benefits that I’m providing you are going to be taken away.”

Boom. Power exercised.

But what about the parent who is lonely and wants the 23 year old child to live with them? The power structure has changed. Even though both are receiving benefits from the arrangement, the party with the most to lose is the one being controlled. In this case, the child could very well live on their own and she might even want to, but she continues to live with her parent at the parent’s request. The parent might be paying for everything the child needs, but the one who doesn’t want the arrangement to end, loses the power.

Back to the employee/employer relationship. As far as I can tell, “Benefits” can be tracked back to 1875 when the American Express railroad company created the first private pension plan for its employees. Thus began the first instance of companies using benefits to confuse the employee into thinking the company was doing something for their benefit rather than what is actually happening… that is, creating a power structure wherein they retain the power and at the same time, justify lower real wages. The company created something that not all employees could collect on. So they had a great recruiting tool, justifying a lower real wage and didn’t have to pay much to offer that “benefit.” Then as it turned out, due to its stringent eligibility requirements, not many collected on it and the ones that did, didn’t do it for long (due to life expectancy back then.) But that pension “benefit” kept people working at that company, perhaps forgoing other opportunities or regular industry standard pay raises, because they didn’t want to lose that carrot at the end of the long term stick.

Who had the power? Yep, the company.

The above scenario is a classic example of why employee advocates became a thing. Enter the unions. They were designed to pool the power of the employee and reduce the power of the employer. But more on that in a moment.

So how does this translate to today’s employment market? Benefits or the promise of them, still serve to severely obfuscate real wages. Benefits confuse the job searcher as to which jobs offer the best overall value to each employee. How do you quantify and compare all the various benefits that each company offers? It’s very hard to do. Then once you are employed by them, those benefits give the employer power over you in ways that are subtle yet effective. How many times have you or someone you know said they would quit in a heartbeat but need to stay due to X benefit? Happens all the time.

Why do we give employers that power when we don’t need to? Furthermore, why do we allow a separate entity to advocate on our behalf (unions) when we don’t really need that advocacy? What if there was a better way?

We are all our own best advocates. We know what’s best for our life and our situation. Why would we pay a union to advocate for our needs when each person within that union might have vastly different needs? It just doesn’t make sense. (Nevermind being forced to be a part of an organization that might not represent your views politically.) We maintain these legacy job/benefit attachments because no one has called bullshit on it.

Well, I call bullshit. Enough is enough. The free market should be allowed to work in the job market, too. Each person who offers their services in exchange for payment should be able to assess each job opening on a level playing field. We need to completely separate benefits from our jobs or employers. When I say benefits, I mean those that count towards the monetary value of any particular position. I’m not referring to a company’s trivial actions like providing donuts during lunch.

What I propose is, we should ALL be independent contractors. In a free market, we are all our own employers. We contract our services with the highest bidder and/or best working environment. The fact that the job market has been so skewed for so long, is a travesty. The status quo only serves to enrich big corporations over small ones and creates an uneven playing field and squashes small businesses.

Let me illustrate how it would work. Under the current unfair and skewed system, let’s say a large corporation pays you $60K a year plus generous benefits. So you’re working for a company that you have a vested interest in continuing to work for. You get whatever benefits they provide and no more, no less. If you stop working for them, your benefits go away. Talk about power. And to make it worse, you might not even need or want half those benefits.

Let’s enter the world where everyone is an independent contractor. The laws are such that companies are no longer forced to offer benefits. Your interview with IBM and your interview Steve’s Business Machines come down to work environment and pay. That’s it. When we take benefits out of the job hunting equation, we can make a better and more informed decision because we’ve removed the benefit obfuscation from the equation. Do you want to work for IBM at $90K or Steve’s Business Machines for $110K? IBM might have great lunches and free daycare but I can buy my own lunch and I don’t have any kids. On the other hand, Steve is a great guy and he loves to golf and so do I.

But then how do we get benefits if we go with a company that does not offer them? Through the free market, of course. Where there is a need, there is a business willing to fulfill those needs. “Benefit Companies” would launch, offering a menu of benefits from which to pick and choose, based on your individual needs. Insurance companies can even build it into their insurance policies. Then you keep that benefit package, no matter where you work. For employers, it frees them from a host of hassles that come with administering benefit packages and evens the playing field between deep pocketed large corporations and smaller companies that might be able to pay you more in wages but don’t have the large numbers that make benefit packages tenable for such a small company. It would only be a matter of time before the large companies started to offer benefit-less jobs, too. Since they would eventually lose great employees to other companies offering higher dollar wages in lieu of employer provided benefits.

All of this can be done though private companies without the need for government regulation. The time for corporate indentured slavery should be over. It needs to start with our government. We need to demand that they drop benefit requirements which, in turn, would give the private sector an incentive to start offering benefit services that benefit the public and NOT the companies.

A job should be a job and we should be in control of it. Not the employer. As long as they have their benefit packages hanging over our head, we’ll never be truly free to do what we want in the job market. Power rests in the entity that doesn’t need the relationship to continue and without the carrots, that will more than likely always be the employee.

Under this new “everyone is an independent contractor” system, entrepreneurs will be unleashed to create value in places we’ve never dreamed of in the past due to antiquated labor laws. New companies similar to Uber will be able to flourish, without the legal hassles of state and federal labor laws, that were written for the industrial instead of the information revolution.

And unions would no longer be necessary because there would be nothing for them to bargain or fight for. The free market would dictate the hiring and firing and as long as you continue to create value for a company, they will continue your employment. If you’re NOT continuing to create value for the company, no one, not even a union, should be allowed to interfere with your dismissal. In this new age of benefit-less employment, a new job is not too hard to get and your benefits continue because they aren’t tied to your employer.

Free markets work. But only when they are not handicapped from the start. It’s called being “unfettered”. We should try it sometime. It just might create an employment and entrepreneurial revolution.

Entrepreneur, traveler and political junkie.

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