Last year, the official unemployment rate fell to 4.6%–its lowest level in nine years. Wages were up across the economy. (October saw the fastest growth since 2008.) And things got better for many people: The economy basically had a good year. But beneath the macro-statistics lies a more troubling picture. Many jobs being created aren’t “jobs” in the full, traditional sense, and the nature of employment is changing dramatically, often to the detriment of worker security and protection.
In his 2014 book, The Fissured Workplace: Why Work Became So Bad for So Many and What Can Be Done to Improve It, David Weil describes a process by which corporations are increasingly contracting out “non-core” workers, including janitors, hotel workers, cable installers, and construction workers. These people wear the same uniforms as payroll employees, and drive the same trucks with logos on the side. But actually they’re tied to contract firms, and their relationship to the mother brand is tenuous at best. According to economists Lawrence Katz and Alan Krueger, 15% of the workforce is now made up of agency workers, on-call workers, contract workers, independent contractors, and freelancers, and almost all net job creation between 2005 and 2015 was in “alternative work arrangements,” not in traditional types of work.
Weil says this often benefits consumers and allows companies to be more efficient and flexible. (For one thing, they no longer have to contribute payroll taxes and social security.) But at the same time, it has the effect of dampening wages, reducing benefits, and driving down labor standards. For example, Weil found that franchisees–like your favorite fast-food chain–are more likely to violate laws on overtime and minimum wages than when workers are directly employed by parent corporations.
In 2015, Weil, an economist, swapped his job at Boston University to become the U.S. Department of Labor’s wage-and-hour enforcer. The position has let him see fissuring up close, and he says the process is more extensive than ever. He’s seen restaurants fire kitchen staff only to rehire them through a third-party firm. He’s seen construction companies compel workers to become “member/owners” of their own limited liability companies, thus losing federal and state protections. And he’s seen the retail industry increasingly shift from paying workers in stores to contracting e-commerce deliveries to outside firms.
“This holiday season, so many people will receive packages delivered within hours of ordering, and those services are being provided by [people who ultimately] are independent. In all likelihood, they’re misclassified,” Weil says. “Given the size of the retail [sector], that could be a lot of jobs and a lot of further undermining of wages . . . and more workers being exposed to risks.”
Amazon is facing lawsuits from drivers who say they should be considered employees, rather than contractors. And Fedex last year settled $240 million worth of misclassification lawsuits in 20 states. There’s been a general rise in misclassification claims in the last few years, including from Uber and Lyft drivers, which the companies treat as independent contractors.
Weil doesn’t think the “platform economy” should be treated much differently from the rest of the economy when it comes to enforcing labor standards. Apps, like Uber’s, may fill in for human managers, but they’re still directive in a way a traditional employer would be, setting prices and service standards, he says. “I think it’s terrific we have agile new businesses on the web. However, if in all other respects the people who are providing the services are what we would call employees, I don’t get the argument that we’re not treating them . . . as we would if they were in a brick-and-mortar setup.”
Some have called for new classifications of workers beyond the W2 and 1099 tax designations. But Weil says there were gray areas in the law long before the internet came along, and that rewriting labor law may be an overreaction to what is still a relatively small and young phenomenon. Katz and Krueger say on-demand workers currently make up only 0.5% of the workforce.
But he does support “portable” benefits systems that could make switching between jobs and projects easier, allowing workers flexibility while prorating contributions based on hours put in. (New York politicians have been exploring such ideas and could bring proposals to vote this year.)
With Trump appointing Andrew Puzder, a fast-food CEO and critic of minimum wages, to head the Labor Department, a springtime for labor standards doesn’t seem in the offing. But Weil says portable benefits could win bipartisan support in Congress, and could even help President Trump with his base.
“If the president-elect is serious about fighting for these workers, I would hope he and his appointees would take on these causes in a creative way that ultimately gets back to the principles of protecting workers in a way our laws have always stated,” he says.