‘The Gig Economy’: A Euphemism for 19th-century Style Exploitation

‘Freelancers have no protection – neither legally nor socially,’ says lobbyist – and they are on their way to being the majority in the workforce

Commuters walk through a corridor in the World Trade Center Transportation Hub in New York, on June 21, 2019.
Mark Lennihan,AP

Sharon learned she’d lost her income during a chance hallway conversation. She’d been working as a producer for a large financial company for years – organizing events, working with suppliers, attending meetings, and coming to the office a few times a week. She’d never been considered an employee, just a supplier – she’d send the company an invoice for her services. She didn’t receive the benefits of salaried employees, and definitely not those of the unionized employees of an earlier generation. She was used to not receiving holiday gifts, or attending office outings, but she also enjoyed not having to come into the office every day.

Still, she didn’t think that after years of work, the company would drop her over the course of two weeks and she’d find herself without an income – and just because they’d decided to issue a tender for her work in order to “start working with a proper company.”

At that moment, Sharon said she felt “invisible” – as if everything she’d done for the company over the years was meaningless. No one thought about her during the decision-making process.

Likewise, Adam, a researcher for a TV program, lost his income with no prior warning. He learned by chance from a news website that his TV program was going to be ending. A day later, the company told him the staff was being disbanded. Even though he was used to switching projects every few months, the announcement wasn’t usually so sudden, so in the past he’d had time to arrange a new project. This time, he suddenly found himself with no way to pay rent.

A report studying freelancers published by consulting firm McKenzie in 2016 described the growing phenomenon as one that does away with workers’ rights achieved through decades of activism and legislation. Freelancers face labor conditions similar to those of workers before the industrial revolution, McKenzie stated.

The advantage for employers is clear. Much like hiring employees through a subcontractor – a method that was popular in Israel until the state stepped in and legislated that subcontracted employees are employees by any measure, and forbade exploitative subcontracting practices – working with freelancers also offers companies “managerial flexibility.” Instead of hiring a worker, the company pays for the services of a person as if he or she were an entire company, without any obligation of providing social benefits or fulfilling labor laws. It turns the employer-employee relationship into a customer-supplier one – one that sounds equitable, but in practice can be very unequal. Often, the freelancer is entirely dependent on the company.

Members of the Fiverr Management at the stock exchange opening on Wall Street, New York.
Fiverr

It’s true that there are sometimes benefits for the freelancers – they can choose to vary their work, and supplement their income if need be. The so-called gig economy is growing along with platforms such as Airbnb, Uber, Fiverr and Wolt, which offer services without actually employing the service providers. But in other cases, people become freelancers due to a lack of choice, after they fail to find work as a salaried employee, or because their day job doesn’t pay enough.

Dana recounts how a major communications company where she worked gave employees a choice – be laid off, or switch over to being freelancers who can give the company an invoice. “They were trying to save on all the expenses such as vacation pay, convalescence and pension deposits,” she said. Some of the workers had no choice, and accepted being downgraded to freelancers, at least until they found new jobs.

According to forecasts, in the not-so-distant future freelancers will be an even more significant portion of all workers. A report by the Upwork and Freelancers Union forecasts that by 2027, some 50% of all U.S. workers will be freelancers. According to OECD numbers, freelancers currently make up only 6.3% of U.S. workers – the highest percentage among OECD member nations. But that figure may understate the phenomenon, says McKenzie – it includes only people who exclusively freelance, and not those who supplement a salary with freelance work; the total figure may be closer to 20-30% in the U.S.

In Israel, in comparison, as of 2018 some 12.4% of all workers were exclusively freelancers – people without a salary and without their own employees. As of 2013 the figure was only 7.6%.

The percentage of freelance employees or others working in “nonstandard” arrangements often has an inverse relationship to that economy’s health, found an OECD report published in April, “The Future of Work, Employment Outlook 2019.” These kinds of employment are becoming increasingly common; on average, one in seven workers in OECD member states are self-employed. These workers are the first ones to lose their incomes in response to corporate changes. The rate of self-employed is a reflection of countries’ workforces – in Colombia the rate is 50%, and in Greece, it’s 34%.

Sign of weak economy

Despite the tendency to tie the increase in freelancers to the rise of the gig economy, the countries with the highest percentage of self-employed are actually those where technology adoption is lagging. The high percentage of freelancers is due to the unstable nature of the workforce in those countries.

Wolt delivery service
Tomer Appelbaum

A growing number of countries have started addressing the issue of how labor laws apply to freelance workers. Israel isn’t quite there yet, says attorney Roy Cohen, president of Lahav, the Israel Chamber of Independent Organizations and Businesses. “In European nations, it already seems obvious that the self-employed should have social security. Nineteen countries offer them unemployment pay.”

Several U.S. states have also started addressing the issue. California, for example, passed a law in September obligating ride-share companies such as Uber and Lyft to recognize their drivers as employees, in keeping with a 2018 legal ruling addressing whether workers were truly self-employed. In order to be considered self-employed, workers needed full control over their working conditions, such as their hours, but also over their wages. Notably, the companies’ drivers don’t set their own rates.

In Israel, however, “freelancers have no protection – neither legally nor socially,” says Cohen. Israel has a law mandating that all workers – including the self-employed – make pension deposits, but that’s about it. The problem is only getting worse, as this sector of workers is growing, says Cohen.

“Employers prefer workers who can give an invoice without having an employer-employee relationship. This saves them on pension payments, among others, and reduces the salary cost. We need to prepare for this, and redefine the relationship between companies and service providers so that freelancers aren’t like fax machines that can be dropped from one day to the next. At least mandate that they get a 30-day warning before being laid off,” he says.

However, the government isn’t treating the matter as urgent. The Welfare and Labor Ministry stated in an April 2018 report that “the significant decrease in the percentage of employees in traditional employment arrangements is expected to have broad implications for employment and social policy, as currently a significant portion of legislation, from the rights and social benefits (like vacation days and sick leave) are based on the assumption that the large majority of workers are salaried employees.” However, the report states that the percentage increase in freelancers in Israel is “minor” and not a trend that necessitates immediate policy changes.

Cohen disagrees completely. “Some 300,000 Israelis are self-employed, and the figure is increasing,” he says. “These are workers without social benefits, they receive no coverage if they’re out sick and can’t work – and the state also doesn’t recognize them for health insurance purposes, doesn’t recognize their work costs such as transportation. The way they’re treated resembles how workers were treated in the 19th century, when people received hourly wages and worked morning to night with no rights. If they got injured or couldn’t find work, they had no security network and they were paid only for the hours they worked. Many of these people offer services that are entirely dependent on the employer.”