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April 05, 2013

This Outsourced Life

According to Quartz, experts predict that 40% of America's workforce will be freelancers by 2020.

Of course, this is barring the government doing anything to compensate for this trend by -- for instance -- barring companies from hiring contract workers instead of part-time employees, or by forcing them to hire a greater percentage of their worforce as full-time. This would be a collossal mistake. In fact, the current trend toward freelancing is largely representative of the market's adjustment to government mandates on employers. 

How? Let's take a look.

Now that the U.S. Supreme Court has upheld the Affordable Care Act (A.K.A. "Obamacare"), when in full effect, every person will be required to have "health insurance." How they are mandated to pay for that insurance is quite a tangled web, but the end result is that it becomes more expensive to keep a full-time staff onhand. Companies under 50 employees have to think long and hard about the implications of growing beyond 50 employees in a manner commensurate with the risk they're willing to take, simply because they're opening themselves up to higher expenses in penalties or fees.

So what do they do? They have a few options available.

  • They can just not hire that 50th employee and have everyone else work longer hours
  • They can reduce the number of full-time employees and rely on a number of part-time employees (I've heard fast food restaurants already do this)
  • They can farm out much of their work to contractors instead of employees
  • They can hire the extra employees and assume the associated costs

There is nothing "ideal" about any of these scenarios. Each one has an associated benefit and a cost. And here's another newsflash for people who want to tell the companies which one of them they have to pick: You don't know all of their businesses, and therefore you don't know which one they can afford to do and which one they can't. 

When economists talk about the cost of labor, it tends to make workers seem like a commodity. And in economic terms, they may be, but we risk desensitizing ourselves to the very uniquely human needs, hopes and dreams that go along with the people who are affected by these policies. However, this applies both to the workers as well as the people who own and manage the companies that this affects. 

Attempts to demonize companies for doing the best they can under the macroeconomic climate they probably had no hand in creating may win votes for certain politicians, but it is counterproductive to the goals of reaching full employment and increasing prosperity for the whole of the people. 

Postscript:
It's also important to consider the other effects of the increased cost of living such mandates require. This started long ago, but the new law now requires younger people to subsidize the cost of insuring older people, and healthier people to subsidize the care for less healthy people, average families can ill-afford to have only one working parent, which means two-parent families also have to outsource the raising and caring for their children, irrespective of what they would otherwise be capable of doing if only these requirements were never handed down from the rulers on Mount Washington.

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