Welcome to the New Gig Economy

There was a time when we thought the difference between employees and independent contractors was merely a matter for the IRS. If you were an employee, you’d file a W-2; if you were an independent contractor, you’d file a 1099.  End of discussion.

Then we became persuaded the distinction had more to do with the increasingly complex and nuanced needs of American business. Yes, Acme Widgets had a full-time IT department; but if a unique security problem cropped up, and the regular employees couldn’t solve it, Acme would hire a consultant or independent contractor.

The arrangement would make sense for the employer if he or she only could offer the contractor part-time or temporary work.  It would make sense for the contractor if he preferred to control his own hours, craved higher pay or more variety than one business could offer—and didn’t mind the lack of benefits and Social Security contributions.  So life is sweet for both employer and independent contractor?

Well not quite.  Former Secretary of Labor Robert Reich offers the provocative contrasting examples of GM and Uber as part of his argument for the Department of Labor and IRS to enact a stricter and more precise definition of an employee.  GM is a sixty-billion-dollar organization with more than two hundred thousand employees. Uber is thought to be a forty-billion-dollar organization with eight hundred and fifty employees.

GM’s front-line workers average between nineteen and almost twenty-nine dollars per hour, and receive a very comprehensive range of benefits and the right to collective bargaining. Uber drivers have to pay for their own cars and any needed maintenance. Because they’re independent contractors, hard-won U.S. labor laws don’t protect them.

One California politician, Assemblywoman Lorena Gonzales, would change all that in her home state.  She’s introduced Assembly Bill 1727, known as the California 1099 Self-Organizing Act, which, if enacted, would offer collective bargaining rights to independent contractors who perform their work via a web hosting platform.

Unlike Robert Reich’s proposal for tighter regulation, Gonzales’ bill doesn’t mandate specific benefits, working conditions or retirement for independent contractors. It simply gives them the right to bargain collectively for these provisions and obligates companies to do the same without retaliation.

Before you pooh-pooh the idea consider this: Would you rather be driven on busy and dangerous streets by someone who’s healthy and contented, or a disgruntled medical wreck?  It’s hard to argue that forty-billion-dollar Uber can’t afford to throw a few dollars their drivers’ way in the interests of both their contractors and us, their paying customers.

It’s a question that will only grow more insistent as web-based services proliferate, and businesses increasingly try to shed financial obligations to their workers.  It may not be an issue for you today, but it will likely affect someone you know, from friends and family to grandkids just starting out in the working world.  And since one of the first obligations shed by employers has been the pension, even if you’re an employee with full perks and a 401(k), you’re going to have to do something extra to ensure an ample and secure nest egg.

The blunt truth is both employees and independent contractors are compensated in dollars.  By the time inflation and taxes are deducted from either your salary or contractor fees, you don’t have a fortune left to save for your future.  And if you can see retirement on the horizon, you’re not going to have enough time to recover if your entirely dollar- and market-dependent 401(k) or IRA takes another recessionary hit, like the one many experts are predicting for 2016-2017.

However you earn your dollars, you can protect more of their value and buying power by securing part of your portfolio with physical gold through a gold IRA. While it won’t give you collective bargaining rights, it will protect you against an eroding dollar, secure the value of your assets and provide you with peace of mind. You’re going to need it.