On February 24, 2015, Robert Reich writes on Salon:
GM is worth around $60 billion, and has over 200,000 employees. Its front-line workers earn from $19 to $28.50 an hour, with benefits.
Uber is estimated to be worth some $40 billion, and has 850 employees. Uber also has over 163,000 drivers (as of December – the number is expected to double by June), who average $17 an hour in Los Angeles and Washington, D.C., and $23 an hour in San Francisco and New York.
But Uber doesn’t count these drivers as employees. Uber says they’re “independent contractors.”
What difference does it make?
For one thing, GM workers don’t have to pay for the machines they use. But Uber drivers pay for their cars – not just buying them but also their maintenance, insurance, gas, oil changes, tires, and cleaning. Subtract these costs and Uber drivers’ hourly pay drops considerably.
For another, GM’s employees get all the nation’s labor protections.
These include Social Security, a 40-hour workweek with time-and-a-half for overtime, worker health and safety, worker’s compensation if injured on the job, family and medical leave, minimum wage, pension protection, unemployment insurance, protection against racial or gender discrimination, and the right to bargain collectively.
Not to forget Obamacare’s mandate of employer-provided healthcare.
Uber workers don’t get any of these things. They’re outside the labor laws.
Uber workers aren’t alone. There are millions like just them, also outside the labor laws — and their ranks are growing. Most aren’t even part of the new Uberized “sharing” economy.
They’re franchisees, consultants, and free lancers.
They’re also construction workers, restaurant workers, truck drivers, office technicians, even workers in hair salons.
What they all have in common is they’re not considered “employees” of the companies they work for. They’re “independent contractors” – which puts all of them outside the labor laws, too.
The rise of “independent contractors” Is the most significant legal trend in the American workforce – contributing directly to low pay, irregular hours, and job insecurity.
What makes them “independent contractors” is the mainly that the companies they work for say they are. So those companies don’t have to pick up the costs of having full-time employees.
But are they really “independent”? Companies can manipulate their hours and expenses to make them seem so.
It’s become a race to the bottom. Once one business cuts costs by making its workers “independent contractors,” every other business in that industry has to do the same – or face shrinking profits and a dwindling share of the market
Some workers prefer to be independent contractors because that way they get paid in cash. Or they like deciding what hours they’ll work.
Mostly, though, they take these jobs because they can’t find better ones. And as the race to the bottom accelerates, they have fewer and fewer alternatives.
Fortunately, there are laws against this. Unfortunately, the laws are way too vague and not well-enforced.
For example, FedEx calls its drivers independent contractors.
Yet FedEx requires them to pay for the FedEx-branded trucks they drive, as well as the FedEx uniforms they wear, and FedEx scanners they use – along with insurance, fuel, tires, oil changes, meals on the road, maintenance, and workers compensation insurance. If they get sick or need a vacation, they have to hire their own replacements. They’re even required to groom themselves according to FedEx standards.
FedEx doesn’t tell its drivers what hours to work, but it tells them what packages to deliver and organizes their workloads to ensure they work between 9.5 and 11 hours every working day.
If this isn’t “employment,” I don’t know what the word means.
In 2005, thousands of FedEx drivers in California sued the company, alleging they were in fact employees and that FedEx owed them the money they shelled out, as well as wages for all the overtime work they put in.
Last summer, a federal appeals court agreed, finding that under California law – which looks at whether a company “controls” how a job is done along with a variety of other criteria to determine the real employment relationship – the FedEx drivers were indeed employees, not independent contractors.
Does that mean Uber drivers in California are also “employees”? That case is being considered right now.
What about FedEx drivers and Uber drivers in other states? Other truck drivers? Construction workers? Hair salon workers? The list goes on.
The law is still up in the air. Which means the race to the bottom is still on.
It’s absurd to wait for the courts to decide all this case-by-case. We need a simpler test for determining who’s an employer and employee.
I suggest this one: Any corporation that accounts for at least 80 percent or more of the pay someone gets, or receives from that worker at least 20 percent of his or her earnings, should be presumed to be that person’s “employer.”
Congress doesn’t have to pass a new law to make this the test of employment. Federal agencies such as the Labor Department and the IRS have the power to do this on their own, through their rule making authority.
They should do so. Now.
Robert Reich continues not to get it! EVERY for-profit company seeks to operate at the lowest possible cost in order to maximize the OWNERS’ return-on-investment (ROI). Their objective is not full employment nor paying workers more than the market value of labor.
If General Motors could produce vehicles with less labor, thus saving operational costs, they would. The fact is they are constantly looking and adopting labor-saving robotic machines, more and more so with human-intelligent skills, to manufacture and save costs.
“Independent contractors” is not a new form of for-profit business structure. And this particular form of “independent contractor” for-profit business structure will continue to expand as more and more companies will have less need for full-time workers. And yes, this means as Reich points out that this structural form of providing services and producing products is “contributing directly to low pay, irregular hours, and job insecurity,” and people need to earn income to survive in an economy of business corporations who constantly seek to minimize or eliminate the need for incurring the costs of full-time labor workers.
Reich advocates a band-aid solution, as with all of his proposals related to abating economic inequality. Reich needs to realize that the golden rule of for-profit businesses is to keep labor input and other costs at a minimum in order to maximize profits for the owners. They strive to minimize marginal cost, the cost of producing an additional unit of a good, product or service once a business has its fixed costs in place, in order to stay competitive with other companies racing to stay competitive through technological innovation. Reducing marginal costs enables businesses to increase profits, offer goods, products and services at a lower price (which people as consumers seek), or both. Increasingly, new technologies are enabling companies to achieve near-zero cost growth without having to hire people. Thus, private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role.
Over the past century there has been an ever-accelerating shift to productive capital––which reflects tectonic shifts in the technologies of production and result in the destruction of jobs and the devaluation of the worth of labor. The result is that the price of products and services are extremely competitive as consumers will always seek the lowest cost/quality/performance alternative, and thus for-profit companies are constantly competing with each other (on a local, national and global scale) for attracting “customers with money” to purchase their products or services.
The reality is that most changes in the productive capacity of the world since the beginning of the Industrial Revolution can be attributed to technological improvements in our capital assets, and a relatively diminishing proportion to human labor. Simply, people invent “tools” to reduce toil, enable otherwise impossible production, create new highly automated industries, and significantly change the way in which products and services are produced from labor intensive to capital intensive––the core function of technological invention and innovation.
Because such shifts in the technologies of production are constantly advancing, many forms of labor are unnecessary. Because of this undeniable fact, free-market forces no longer establish the “value” of labor. Instead, the price of labor is artificially elevated by government through minimum wage legislation, overtime laws, and collective bargaining legislation or by government employment and government subsidization of private employment solely to increase consumer income––all of which is advocated by Reich and other conventional economists.
Reich should understand all of this as a “professor of economics” and past Labor Secretary under President Clinton, but his focus is always on full employment and job creation. Reich fails to connect the dots and therefore does not see that productive capital is increasingly the source of the world’s economic growth and, therefore, should become the source of added property ownership incomes for all. As simple a concept that it is, Reich should postulate to himself that if both labor and capital are independent factors of production, and if physical capital’s proportionate contributions are increasing relative to that of labor, then equality of opportunity and economic justice demands that the right to property (and access to the means of acquiring and possessing property) must in justice be extended to all. Yet, sadly, Reich and other academia still pretend to believe that labor is becoming more productive and should reap more of the profit produced business corporations, and ignore the necessity to simultaneously broaden personal ownership of wealth-creating, income-producing capital assets of the dominant business corporations growing the American economy.
Unfortunately, ever since the 1946 passage of the Full Employment Act, economists such as Reich and politicians formulating national economic policy have beguiled us into believing that economic power is democratically distributed if we have full employment––thus the political focus on job creation and redistribution of wealth rather than on full production and broader capital ownership accumulation. This is manifested in the belief that labor work is the ONLY way to participate in production and earn income. Long ago that was once true because labor provided 95 percent of the input into the production of products and services. But today that is not true. Physical capital provides not less than 90 to 95 percent of the input. Full employment as the means to distribute income is not achievable. When the “tools” of capital owners replace labor workers (non-capital owners) as the principal suppliers of products and services, labor employment alone becomes inadequate. Thus, we are left with government policies that redistribute income in one form or another, as Reich advocates.
Thus, Reich sees the need for the government to continue to discharge its responsibility for the health and prosperity of the economy through coerced trickle-down; in other words, through redistribution achieved by the rigging of labor prices, by taxation to support redistribution and job “creation,” or subsidization by inflation and by all kinds of welfare, open and concealed.
If Reich really wants to abate economic inequality then he needs to advocate reform of the system. Presently the system supports the ability of greedy rich people to manipulate the lives of people who struggle with declining labor worker earnings and job opportunities, and then accumulate the bulk of the money through monopolized productive capital ownership. Our scientists, engineers, and executive managers who are not owners themselves, except for those in the highest employed positions, are encouraged to work to destroy employment by making the capital “worker” owner more productive. How much employment can be destroyed by substituting machines for people is a measure of their success––always focused on producing at the lowest cost. Only the people who already own productive capital are the beneficiaries of their work, as they systematically concentrate more and more capital ownership in their stationary “1 percent” ranks. Yet the 1 percent are not the people who do the overwhelming consuming. The result is the consumer populous is not able to get the money to buy the products and services produced as a result of substituting machines for people. And yet you can’t have mass production without mass human consumption made possible by “customers with money.” It is the exponential disassociation of production and consumption that is the problem in the United States economy, and the reason that ordinary citizens must gain access to productive capital ownership to improve their economic well-being.
