Redefining Labor

Posted by J. Goodrich, The Nation at 2:41 PM on April 24, 2008.

Did you know that the women employed as seamstresses during the early Victorian era had to pay for the needle and the thread out of their pay packets? They were treated as independent contractors or as risk-taking capitalists. Later on seamstresses had to pay rent for the sewing machines their work required:

The East End seamstress could expect to take home a pitifully low wage. In the Report of the Select Committee of the House of Lords on the Sweating System 1888-1890, Miss Beatrice Potter (a most famous female Fabian socialist reformer) and others, gave evidence of the atrocious working conditions and meagre pay. Mrs. Lavinia Casey made shirts at 7 pence a dozen. She normally worked from seven in the morning to eleven pm at night. After deducting time devoted to her children she averaged twelve hours work a day.

In that time she normally made two dozen shirts. Her total daily wage amounted to one shilling and two pence. From her weekly earnings she had to deduct two shilling and sixpence for the hire of her Singer sewing machine plus one shilling, to one shilling and three pence for sewing machine oil and sewing thread. She could barely keep her family on this income. She was in arrears with her payments to the Singer Company, but her livelihood would be threatened if the sewing machine were taken away.

Sad, isn't it? What is perhaps even sadder is that the very same arrangement is going on right now, in the United States:

"I needed a job," said Jean. "They tell you, 'You'll make all this money working for yourself.' "

She soon discovered that her new employer had embraced a controversial strategy to squeeze down costs by millions of dollars each year: it insisted that Jean and the other drivers were independent contractors, not employees. The I.R.S., New York and many other states are investigating this strategy, convinced that many companies use it to cheat their workers and cheat on taxes.

Jean arrived at the Roadway terminal in Brockton, Mass., at 6 each morning and spent the next 90 minutes loading 100 to 140 packages into her truck. She usually left the terminal around 7:30 a.m. and returned after 6 p.m.

Jean had to leave her job for two years when she suffered a severe back injury while lifting a package. Before she could return to work, FedEx Ground, which had acquired Roadway, required her to purchase a truck. The list price was $37,800, with Jean having to make 60 monthly installments of $781.12 and a final, one-time payment of $8,000.

In Jean's view, it was ludicrous for Roadway and FedEx to call the drivers independent contractors.

"We're told what to do, when to do it, how to do it, when to take time off," Jean said. "You have to wear their uniform. You can't wear your hair certain ways. You have to deliver every single thing they put on the truck."

Jean called it "a great deal for FedEx. They don't have to pay for trucks, for the insurance, for fuel, for maintenance, for tires," she said. "We have to pay for all those things. And they don't have to pay our Social Security."

Such a clever arrangement! It saves the employer money, because firms don't have to withhold taxes or FICA payments for independent contractors. Neither is it necessary to provide them with paid sick leave, vacations, health insurance or workers' compensation insurance.

Note also that renaming workers "independent contractors" transfers some of the firm-specific risks to the workers. It is the latter who are now responsible for providing and maintaining the capital equipment they work with, not the firm.

But these workers are not real entrepreneurs. For instance, they don't have the control over their working hours the IRS requires to regard someone an independent contractor. Rather, they are capitalists in the same sense as those nineteenth century seamstresses in Britain were.

Tagged as: labor, economics

Economist J. Goodrich is the proprietor of the political blog "Echidne of the Snakes".