The so-called gig economy, in which temporary positions are common and organizations contract with independent workers for short-term engagements, is slowly changing the face of American business — and forcing employers across the Las Vegas Valley to adjust.
A study by Intuit predicted that by 2020, 40 percent of American workers would be independent contractors. A number of forces are behind the rise in short-term jobs. For one, the workforce in this digital age is increasingly mobile, and work can be done from virtually anywhere, decoupling job and location. Freelancers can choose among temporary jobs and projects around the world, while employers can choose the best people for specific projects from a larger pool than is available in any one area.
The issue is especially relevant in Southern Nevada, because many casino dealers and others work as independent contractors, and scramble to scrape together enough shifts to pay the bills, without benefits. As timeshare veteran and independent contractor Stuart Strauss put it, “It’s like collecting enough pieces of a jigsaw puzzle to form a recognizable picture — and that picture is my life.”
Declaration of Independence
Research shows Americans tend to change jobs several times throughout their working lives, and so the gig economy can be seen as an evolution of that trend. In it, businesses save resources in terms of benefits, office space and training. They also have the ability to contract with experts for specific projects who might be too high-priced to maintain on staff.
For the employee, a gig economy can improve work-life balance over what is possible in most jobs. Ideally, the model is powered by independent workers selecting jobs that they’re interested in, rather than one in which people are forced into a position where, unable to attain employment, they pick up whatever temporary gigs they can land.
Indeed, Intuit found that career freelancers liked being in control and were not concerned with the risks associated with independent work. They generate a larger proportion of their total income from their independent work than the other groups. Their motivation and characteristics include:
• Controlling decisions about when, where and how they work (91 percent).
• “I feel more secure working independently than if I had a traditional job” (69 percent).
• “Working independent is less risky than traditional employment” (52 percent).
• Being satisfied working in the on-demand economy (82 percent).
That said, there are issues that businesses working with independent contractors face, beginning with “ensuring that the person they are contracting with is a bona fide independent contractor and not simply a misclassified employee,” said Thoran Towler, executive director of the Nevada Association of Employers, which advises Nevada businesses on their rights and obligations as employers, including issues surrounding independent contractors. “With an increase in the use of independent contractors, we anticipate Nevada employers will have a great need for our guidance to navigate this complex business relationship.”
The Great Recession caused many businesses to re-examine their options, including utilizing more independent contractors. However, said Towler, relying on independent contractors alone is neither realistic nor sustainable.
“There are certain tasks and positions that require a certain level of supervision and management, which may take the relationship from business-to-business to employer-employee,” he said. “This is where businesses can get themselves into trouble. Nevertheless, there will always be a need for independent contractors to take on temporary or specialized work.”
Contract workers receive no benefits from their employers, leading some to ask an important question: If 40 percent of American workers are headed for that scenario in a few years, isn’t there a looming crisis, especially given all of the uncertainty regarding health care options?
Towler isn’t so sure.
“There are certain inherent risks with being an independent contractor and running your own business,” he said, “including providing for your own health care coverage.”
Rick Roskelley, a Las Vegas-based shareholder who handles all aspects of employee compensation for Littler Mendelson, part of Littler Global’s international legal practice, said that when he started his career, it was uncommon to see the legal industry use temporary workers or independent contractors to supplement their workforces.
“However, this has been a growing trend over the last 10 or so years in the legal industry,” he said. “I expect this trend to continue growing, as it allows more flexibility to both workers and companies.”
Roskelley emphasized that he viewed it as a potentially positive trend.
“The gig economy allows some individuals, whose individual circumstances do not permit permanent or full-time employment, to participate in the economy on their own terms,” he said. “It also allows others to have their own business.”
Roskelley said he did not think the workforce would see a correction once economic conditions stabilize.
“While part of this trend may be a result of less than stellar economic performance, a substantial contributing factor is the desire of workers to have flexibility in their work lives,” he said. “My observation is that younger workers and those just now entering the workforce seek a better work-life balance, and are not looking to land a job where they will work for 30 to 40 years full-time before retiring.”
Increasingly, workers desire a flexible work schedule that they can adapt to their needs, Roskelley says: “I see the gig economy as a response to this demand from the market of workers.”
Roskelley said pressure to disassociate health care and similar benefits from employment had been growing for some time. In fact, one of the touted benefits by proponents of the Affordable Care Act was that Americans would not lose coverage if they changed or left their jobs.
“The fact that health insurance is tied to our jobs is really a product of accident,” Roskelley said.
During the Great Depression, the federal government passed the Stabilization Act of 1942, which set salary caps. As production began ramping up during World War II, employers needed to attract new workers.
“To get around salary caps, employers started offering fringe benefits and more generous health plans,”
Because employers received a deduction for the fringe benefits provided, and those benefits were not considered income to employees, the system remained.
“As far as I know, we are the only industrialized nation that provides health insurance primarily through employment,” Roskelley added.
Virtues of Independence
What does that mean for our area going forward?
“Las Vegas’ economy is casinos,” said Patrick Casale, managing partner of the Multicare Group-U.S. Division. “Independent contractors won’t affect these industries in any way. Outside industries will see an impact.”
“Whether we are talking about a business-to-business relationship, which is what occurs when a business utilizes an independent contractor, or an employee-employer relationship, it’s positive for the economy,” Towler said.
People who may have found themselves out of work in the wake of the recession “have found a place in the workforce again as independent business owners, where they choose who to work with, what hours they work, the means by which the work is completed, etc.,” he said.
Strauss called himself a proud independent contractor, and hoped others across the nation would follow his example. He feels that those who follow his employment model are the economic engine of the U.S. economy; in fact, he added, they are the living embodiment of the American dream.