The Breakdown

Explaining Southern California's economy

Freelance Nation: Differing views on the 'gig' economy

Whenever times get tough, you often hear about how laid-off workers took advantage of their involuntary freedom to get entrepreneurial and start businesses. You also hear about folks who lost their jobs but found themselves. The SoCal economy is struggling with joblessness that's much higher than the national rate — 12.4 percent in L.A. County versus 9.1 in the U.S. — so you might expect the entrepreneur story to be running hot here.

But you have to be careful about these things. There are definitely arguments on both sides. At the Atlantic, Sara Horowitz is kicking off a series on the freelance surge and how it could transform work. She's not holding back:

Jobs no longer provide the protections and security that workers used to expect. The basics ­ such as health insurance, protection from unpaid wages, a retirement plan, and unemployment insurance ­ are out of reach for one-third of working Americans. Independent workers are forced to seek them elsewhere, and if they can't find or afford them, then they go without. Our current support system is based on a traditional employment model, where one worker must be tethered to one employer to receive those benefits. Given that fewer and fewer of us are working this way, it's time to build a new support system that allows for the flexible and mobile way that people are working.

But…just because freelancing is surging, that doesn't mean it's surging pleasantly. Here's what Tina Brown — yes, that Tina Brown — had to say about the gig economy is 2009:

For a while last year, the downsized people I know went around pretending they enjoyed the “freedom” and “variety” of doing “a whole lot of interesting things.” Twelve months later, nobody bothers with that cover story anymore. Everyone knows what it actually feels like, this penny-ante slog of working three times as hard for the same amount of money (if you’re lucky) or a lot less (if you’re not). Minus benefits, of course….The managers of all these disintegrating companies tend to be mesmerized by the notion that everyone can now be hired cheap—that everyone is slave labor. Which, for them, should be great, right? What they don’t take into account is that the Nut is the Nut. If your Gig with them can’t pay it, you still have to make it—which means you‘ve got all these other Gigs boiling along at the same time.

This could degenerate into a contest between the Brownian "Gigs suck" (if she still feels that way) and the Horotwitzian "Gigs are the future!" positions. For the time being, let's give Horowitz the benefit of the doubt, as she's just starting to roll her series out.

However, bear in mind that a freelancer is creating a business, even if it's a business of one. And there can be distinct problems with this, as Scott Shane argued in Businessweek in 2009:

Over the past decade, we have ignored the growing share of non-employer businesses, focusing instead on the total number of businesses.

Perhaps the shift toward non-employer businesses doesn't matter. Maybe people who used to get part-time jobs to make ends meet now sell things part time on eBay (EBAY) toward the same goal. So all this trend reflects is a change in the form of part-time jobs.

But what if people would be more productive in this part-time work if they did it as employees who were part of a bigger organization that could achieve scale economies or other types of efficiency?

What if the shift toward non-employer businesses reflects a belief that building a business with employees has become too much of a hassle? Entrepreneurs don't want to deal with issues of health insurance and managing people and all of the things that come with building an organization. So instead they are tending to start more non-employer businesses, with the result that the firms they establish are less substantial and contribute less to employment than the startups created in decades past.

So all those people with laptops in Starbucks might represent a new type of labor force, or they might be on their way to professional treatment for freelance-induced depression — or they might need to be attached in some way to actual organizations to help solve the ongoing employment crisis. Let the debating begin! Unfortunately, we have enough people out of work to do just that.

Photo: Spencer Platt/Getty Images

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