A new report from the Economic Policy Institute found that anywhere from 10 to 30 percent of employers are essentially stealing thousands of dollars from their workers every year by misclassifying them as independent contractors. In addition to lower pay, those misclassified workers are also deprived of employer-provided benefits like health care and labor rights like basic safety regulations. Returning guest Heidi Shierholz walks us through the report and explains how to figure out if your employer is stealing from you by classifying you as an independent contractor.
Heidi Shierholz is the president of the Economic Policy Institute, a nonprofit, nonpartisan think tank that uses the power of its research on economic trends and on the impact of economic policies to advance reforms that serve working people, deliver racial justice, and guarantee gender equity.
Twitter: @hshierholz
The economic costs of worker misclassification https://www.epi.org/publication/cost-of-misclassification
Shared security, shared growth https://democracyjournal.org/magazine/37/shared-security-shared-growth
Website: https://pitchforkeconomics.com
Twitter: @PitchforkEcon
Instagram: @pitchforkeconomics
Nick’s twitter: @NickHanauer
Heidi Shierholz:
10 to 30% of employers misclassify their workers.
Nick Hanauer:
It’s a huge problem in the United States and accounts for, I think, a really significant shift in income from working people to the top 1%.
Heidi Shierholz:
People lose so much when they are misclassified as independent contractors, you don’t get overtime. And if you get paid less than the minimum wage, they’re not breaking any laws.
Speaker 3:
From the home Offices of Civic Ventures in downtown Seattle, this is Pitchfork Economics with Nick Hanauer. The best place to get the truth about who gets what and why.
Nick Hanauer:
I’m Nick Hanauer, founder of Civic Ventures.
David Goldstein:
I’m David Goldstein, senior fellow at Civic Ventures.
Nick Hanauer:
Well, Goldie, today we’re going to talk about worker misclassification. Because it’s a huge problem in the United States and accounts for, I think, a really significant shift in income from working people to the top 1%.
David Goldstein:
I had been a contractor for much of my professional life, and the difference was big. I’ve had to pay for my own healthcare, and more importantly, I’ve had to pay the full FICA tax, which is 15.3% for social security and Medicare insurance. And when you are an employee, your employer pays half of that.
Nick Hanauer:
Yeah, no, it’s true. And our dear friend, Heidi Shierholz from the Economic Policy Institute, is with us today to share this amazing report they’ve written on the implications, and just the impact of worker misclassification, which is shocking. A lot of money gets transferred from workers’ pockets to owner’s pockets. But with that, why don’t we dive in with Heidi and find out what’s up.
Heidi Shierholz:
My name is Heidi Shierholz, and I am the president of the Economic Policy Institute in Washington DC. And we do a ton of work on making sure that low and moderate income people’s issues are a part of the broader discussion around economic policy, like helping make a fairer economy. One of the things we’ve done recently is a report that looks at the costs of misclassification for workers. That means when workers who should be classified as employees with all the rights that are associated with that are not classified as employees. Instead, they’re misclassified as independent contractors, and they lose a ton as the result of that. And you can see all of that work on our website, at epi.org.
Nick Hanauer:
So Heidi, before you jumped on, Ashley, Goldie and I had a quick conversation about contractors ourselves. Because, Goldie reminded me that when I hired him 10,000 years ago or whatever it was, that he started out as a contractor. And because basically we didn’t have an org that sent out W2s.
Heidi Shierholz:
Right.
Nick Hanauer:
But the dazzling Ashley, who is the producer of this podcast is also a contractor. And we were trying to get to the bottom just in of ourselves of, what is a legitimate contractor and when are people being misclassified?
Heidi Shierholz:
That is a very important question that I think sometimes gets missed.
Nick Hanauer:
Yeah.
Heidi Shierholz:
Because there are certainly totally legitimate uses of contractors and it is a absolutely legitimate sort of business model that can be used very effectively, so I think one useful way to think about what’s a legitimate contractor, is this thing, I mean it that’s come up in various policy contexts, but something that’s known as the ABC test. And it’s just A, B, C, because there are three prongs to this test that all have to be met in order for somebody to be a bonafide independent contractor. And they’re all very reasonable. One is, the work is done without the control of the employer. You’re a contractor, you basically have a set of work to do, and the employer isn’t telling you exactly how to do it, they just hire you to do it.
That’s one thing. Another thing is the work that you’re doing isn’t part of the employer’s core business, so that employer isn’t hiring you to do this stuff that is the heart of their business. They’re hiring you to do the peripheral things that they need to be done that aren’t what their employees are doing. And then the third thing is that, you have your own independent business or trade where you do that kind of work, so you have your business, you’re doing that work for various customers, so you’re a licensed massage therapist, you’re a public accountant, you’re a podcast producer. Like those kinds of things where you’re a professional, you’re working for a bunch of clients, all that, totally legit. And then there’s a whole bunch of cases where those general precepts are violated and people are taken advantage of.
Nick Hanauer:
Interesting, so Ashley, do we hit those three things? Are we in the money there?
Ashley:
Yeah, you’re all good. You’re in the clear.
Heidi Shierholz:
Good, because this would’ve turned into a very different kind of podcast-
Nick Hanauer:
Podcast.
Heidi Shierholz:
If not, right?
Nick Hanauer:
Okay, so we looked at the data and of course it is astonishing how much impact this misclassification has on workers across the spectrum. It’s like 25% to 35% on average, isn’t it? In there, kind of?
Heidi Shierholz:
Yeah. People lose so much when they are misclassified as independent contractors. I mean, one of the things that I think is the reason this is so pervasive is that it’s really kind of easy to hide really what’s going on.
Nick Hanauer:
Yeah.
Heidi Shierholz:
One of the things that happens is, if you’re an independent contractor, you are no longer covered by the Fair Labor Standards Act, which is the thing that sets the minimum wage and sets the overtime provisions. And so if you’re an independent contractor and you have to work more than 40 hours a week, you don’t get overtime. And if you get paid less than the minimum wage, they’re not breaking any laws. Because you’re not required to be paid the minimum wage when you’re an independent contractor.
Nick Hanauer:
Well, and this is how Uber and all those sort of gig economy companies end up paying people so little, right? Is, you sit in that damn car for 10 hours a day or whatever it is, and if you only made six bucks an hour sitting in that car, not their problem, right?
Heidi Shierholz:
Exactly.
David Goldstein:
Especially after your expenses.
Nick Hanauer:
Right, yeah.
Heidi Shierholz:
Yes, so we did a study where we looked at what Uber drivers make after which, just like what you said, Goldie, after you take away Uber fees, you take away vehicle expenses. Other kinds of things like that, so it’s the W2 equivalent hourly wage, and it is at the 10th percentile of all wage and salary workers, so that means Uber drivers on average earn less than what 90% of workers earn. It’s just they, and in a majority of the major Uber urban markets, they’re not even making the minimum wage, the applicable minimum wage.
Nick Hanauer:
Heidi, can you take us through a actual example just from one of your tables or something like that of what the difference is?
Heidi Shierholz:
Yes, It’s, yeah… You know what I’m just going to go with, I can give you an example and why don’t we start with construction workers.
Nick Hanauer:
Yeah, great.
Heidi Shierholz:
They are rampant misclassification now, and it actually, that’s been a problem for decades in this industry, so if you look at BLS data, the typical construction worker had annual earnings, this is in 2021, of around $48,000, so that includes their pay. That’s a W2, that’s an employee. They had $48,000, so that includes them, they’re getting overtime, any vacations, sick pay, other forms of paid time off. That includes all the rights that you have as an employee. But one thing that doesn’t include is that workers who are employees often get some benefits, like some employer-provided health insurance or retirement plans. And employer contributions to things like unemployment insurance, workers compensation, social security, and Medicare, so there’s just a bunch of other things that go in to your kind of total compensation when you are an employee.
And so those things just go away when you’re misclassified. Plus, you’re not going to get overtime provisions, you’re not going to get overtime pay, you’re not going to get paid sick leave, you’re not going to get the host of things that often go with being an employee. And so what we estimate is that the amount that a typical misclassified construction worker loses when they are a misclassified is between 10 and $17,000 a year.
Nick Hanauer:
Wow.
Heidi Shierholz:
That’s annual losses. It’s a huge amount actually, I think for most people. But when you think of the salaries that are involved, it’s just a very high share of salaries. It’s a huge loss and it’s also somehow hidden, and so that contributes to it being a really pervasive problem.
David Goldstein:
And so when you say 10 to 17,000, that as a percentage of their income, what does that come to? Because if it was 10 to $17,000 of a doctor’s pay. Okay, not as big a deal, but a construction worker is typically making…?
Nick Hanauer:
17,000 on 48,000 is a lot, right? That’s what we’re talking about, right?
Heidi Shierholz:
Yeah, so it is 20% to 32%.
Nick Hanauer:
Yeah.
Heidi Shierholz:
That’s what they are losing when they are misclassified. I mean, imagine having your employment status changes and you take home 32% less.
Nick Hanauer:
A lot.
Heidi Shierholz:
It’s a lot.
Nick Hanauer:
Do you have a sense for the percent of workers or construction workers or anything that are misclassified, like how pervasive of a problem is this? Is it 5% of construction workers? Do we have any idea?
Heidi Shierholz:
Yes. I don’t have idea by occupation. And it’s hard to get data on this, because people are nuts.
Nick Hanauer:
Right, no kidding.
Heidi Shierholz:
But there are studies out there and they show in the range of 10 to 30% of employers misclassify their workers.
David Goldstein:
And is that just misclassifying as contractors or does that also include misclassifying as managers?
Heidi Shierholz:
That stat is just about misclassifying as contractors.
David Goldstein:
Okay.
Heidi Shierholz:
But that’s a good question. And I mean there’s a ton of overlap because when you have employers that misclassifying one thing, they are going to be more likely to be misclassifying on other dimensions. But that 10 to 30% is about being misclassified as independent contractors.
Nick Hanauer:
And naturally, the less power a person has, the more likely they are to be misclassified, so people of color, color, women, so on and so forth, are they overrepresented in?
Heidi Shierholz:
Yep, because of things like structural racism, structural sexism. We have women, people of color concentrated in lower wage industries where they are much more likely to be misclassified. And so that’s construction, it’s landscaping workers, it’s home healthcare aids, it’s housekeeping cleaners, it’s nail salon workers, on and on. Those are occupations where misclassification is just really common. And those occupations are where people of color and women are disproportionately working.
David Goldstein:
Do you have historical data on this? Do you know how common this was, say 50 years ago opposed to what it is now?
Heidi Shierholz:
I wish, and I do not. It is that is God bless our government statistical agencies, they are amazing, but they didn’t set up surveys to be able to really get at this, it’s very hard, so the studies that we do have don’t have any sort of longitudinal thing associated with them.
David Goldstein:
Because, I know we know in some industries have been totally transformed over the past 40 years.
Heidi Shierholz:
Yes.
David Goldstein:
And truck drivers is one of them where it went from being a salaried, good paying middle class job to a bunch of impoverished contractors who take all the risk on themselves.
Heidi Shierholz:
Yes, you could definitely actually point to industries where you can see exactly what’s happening. The decent data that we do have on the share of the, it’s not on misclassification per se, but you can get an idea of it if you look at the share of the workforce who are independent contractors, that data only looks at people’s primary job, not their secondary job.
David Goldstein:
Oh, yeah.
Heidi Shierholz:
And so the fact there’s a whole lot of people who have a W2 job for their main job, but that job pays so poorly that they have to get the side gig.
Nick Hanauer:
Exactly.
Heidi Shierholz:
And they’re not counted.
Nick Hanauer:
That’s right. They make eight and a half dollars an hour as an employee working for some exploitive service company.
Heidi Shierholz:
Yes.
Nick Hanauer:
And then they augment their salary-
Heidi Shierholz:
Totally.
Nick Hanauer:
Working for Uber, making $4 an hour.
Heidi Shierholz:
One other thing that I think is so important in this and how it’s just this conversation about flexibility. And I feel like the companies who are misclassifying workers have really sort of pulled one over on all of us and saying, look, these are true decent jobs because they provide flexibility that workers want. And why I say they’ve pulled one over on us, I think in some cases they’ve pulled one over on the workers themselves because when the worker signs up for these jobs, is often not clear just how little they really will be making, just how much they are trading off for that flexibility. Yes, you can work in the evening after your regular job.
Nick Hanauer:
Yeah.
Heidi Shierholz:
But you are trading off so much to have the right to do that.
Nick Hanauer:
Yeah.
Heidi Shierholz:
And the fact that this is so hidden, it has allowed these businesses to really sort of exploit this idea of flexibility that’s actually terrible trade off for most workers.
Nick Hanauer:
Let’s get to solutions, so what is the policy solution for this problem?
Heidi Shierholz:
I would say there’s two key parts of it, it is you have to have a strong standard for saying this is what it means to be an employee. And that, you know, you don’t have people legally having loopholes to call workers, independent contractors, so a strong standard. And then the second prong of it, which is I would say as important is very strong enforcement of that standard. And that second piece is often lost I think in these conversations. People think, oh, we’ll get the good policy and then we’re done. And I think that is not at all the case, especially for the workforce that we are talking about. Wage theft is really, really common. We just need strong enforcement too.
Nick Hanauer:
This is something that we should work hard on, is that somebody goes into a store and steals a candy bar, it’s criminal. If somebody steals wages from a low wage worker, well that’s an oops, right? That’s not okay. But Heidi, what I want to get at is we have worked together for so long on the issue of overtime and raising the threshold. And one of the reasons we love raising the threshold is that then you don’t have to argue about whether the person really is a manager or not, right? The threshold in the overtime case is massively simplifying in terms of enforcement, correct?
David Goldstein:
There’s no test anymore.
Nick Hanauer:
There’s no test anymore. You don’t have to, and you don’t need inspectors to be arguing with people about whether somebody is entitled to the overtime if they’re below the threshold.
Heidi Shierholz:
Yes.
Nick Hanauer:
That’s sort of a clean way to do enforcement on overtime? Is there a clean, is there an analog in this case?
David Goldstein:
Are you suggesting a contractor threshold, Nick?
Nick Hanauer:
Something? I don’t, I don’t know. I’m just saying it’s on a case by case basis. This is obviously hard to manage and complicated, right. And I mean, Goldie, you and I, and Ashley had to give it some thought to decide whether Ashley was a legitimate contractor.
David Goldstein:
Well, we just had to ask, get more information about what-
Nick Hanauer:
But who is going to administer it?
David Goldstein:
That’s right.
Nick Hanauer:
Like come on.
David Goldstein:
It’s complicated.
Nick Hanauer:
It’s complicated.
David Goldstein:
Correct.
Nick Hanauer:
And how many people are you going to need to employ to go employer to employer and talk to every single person who works there and ask those questions? This is a super hard thing to manage given the pressures. It’s on us, I think as people who care about this and want and wanted to develop a policy solution to go farther than just than saying, don’t, and darn you, and here’s clearer language, right? It feels like there should be a policy innovation available that would make this harder to do, I guess. I don’t know. That’s my thought.
Heidi Shierholz:
Yes. No, I get that. And I want to come up. I think you and I, put our heads together and come up with that policy, but in the meantime, you can think of things that will move in this direction. One of the things is actually requiring employers to provide clear statements of their employment status to their workers, that is not required. Employees are not required to get a statement that says, this is how much you earn, this is how much you worked, this is what your status is. And so even just having something like that makes it so that an employee actually knows how they’re being classified. And if it’s wrong, it gives them better documentation to potentially see the situation remedied, so that kind of thing.
Nick Hanauer:
Yeah.
Heidi Shierholz:
Fully funding our enforcement agencies is just a very, very, very simple first step to boosting the enforcement. But I absolutely take your point. This is tricky, but I mean, we can tackle tricky stuff. This is such a fundamental, I mean, this is your fundamental employment relationship.
Nick Hanauer:
Yeah.
Heidi Shierholz:
And so, we have to get it right.
David Goldstein:
I don’t know, Nick, I’m hearing this conversation. I’m not sure if you’re aware of it, but there’s this piece you should read called Shared Security.
Nick Hanauer:
Yeah.
David Goldstein:
That was in Democracy Journal a few years ago.
Nick Hanauer:
Yeah.
David Goldstein:
That-
Nick Hanauer:
It kind of straightened all this stuff.
David Goldstein:
A universal prorated and portable benefit system that gets around all this classification stuff by just saying that work is work.
Nick Hanauer:
Yeah.
David Goldstein:
And whoever is sending the payment to the worker has to contribute into these shared security accounts to provide for these benefits.
Nick Hanauer:
Yeah, that would be how you solve it, come to think of it. Yeah. Who wrote that?
David Goldstein:
Some guy named Nick Hanauer and David Rolf, I think.
Nick Hanauer:
Yeah, maybe David Goldstein.
David Goldstein:
Yeah, so I might have helped out a bit.
Nick Hanauer:
That’s right. Yeah, we should put that in the show notes too.
David Goldstein:
We should, yes. We’ll provide a link in the show notes.
Nick Hanauer:
Yeah.
David Goldstein:
It gets to a lot of these issues and in really explains it not just in nuts and bolts data way, but also has, I think there’s a little emotional pull to the piece as well.
Nick Hanauer:
Yeah, absolutely. It is true though, it is so complicated. And look, anytime something is complicated, the forces of darkness are going to take advantage of that. And to a certain extent, you can’t prevent all of that. But I suppose we could just with more effort and clarity, prevent a bunch of it. Most of it, in fact, probably, so interesting, interesting. And so Heidi, is it really hard to characterize in some like the aggregate number of dollars? Could it be up to 10 or 20% of all workers being misclassified? I don’t know. Is that too much?
Heidi Shierholz:
No, I mean, the studies show that it’s likely somewhere between 10 and 30%.
Nick Hanauer:
Okay.
Heidi Shierholz:
It’s a huge share. And if-
Nick Hanauer:
If 2 in 10 workers were misclassified, and on average it was costing each of those workers, so that’s two in 10 workers is 30 million workers of about 150 million worker workforce, correct?
Heidi Shierholz:
Yeah.
Nick Hanauer:
Plus or minus?
Heidi Shierholz:
Yes, yes.
Nick Hanauer:
I mean, round numbers and 30 million times $15,000 a year could be $450 billion.
Heidi Shierholz:
Yeah. You’re doing this math on the fly much better than I am, but yes.
Nick Hanauer:
Yeah, but that’s-
Heidi Shierholz:
But I think that’s right. Yes.
Nick Hanauer:
Plus or minus.
David Goldstein:
It’s a big chunk of that $50 trillion elephant, Nick.
Nick Hanauer:
Yeah. Well, the two and a half trillion dollars per year,
David Goldstein:
Right.
Nick Hanauer:
Incrementally that flows to the top 1% from the bottom of 90%, misclassification could be 10 to 20% of that for three, four, 500 billion dollars, so it’s a big deal and something well worth taking a crack at.
Heidi Shierholz:
You want to know one stat that I just think is so resonant that’s related to this? We did a study on the cost of wage theft of which misclassification is a big contributor to wage theft.
Nick Hanauer:
Yeah.
Heidi Shierholz:
And we showed that wage theft, the cost to workers of wage theft, outpaces the cost of all other kinds of property theft according to FBI data.
Nick Hanauer:
Oh, yeah, yeah.
Heidi Shierholz:
By a huge amount.
Nick Hanauer:
I saw that.
David Goldstein:
Exactly.
Nick Hanauer:
He had all the bank robberies.
Heidi Shierholz:
Yes.
Nick Hanauer:
And all the burglaries and everything else combined. It’s like 10% of wage.
David Goldstein:
All the shoplifting.
Nick Hanauer:
It’s 10% of wage theft.
David Goldstein:
Yeah.
Heidi Shierholz:
I mean, to your point, this is a-
Nick Hanauer:
Yeah, it’s a big deal.
Heidi Shierholz:
Huge problem.
Nick Hanauer:
Yeah.
Heidi Shierholz:
It is not, I do think people are starting to get more aware of it. And I realize this, when I was watching Abbott Elementary, the Halloween episode, and they had one of the characters dressed up as wage theft, and I was like, yes, this is getting mainstream coverage. I mean-
Nick Hanauer:
Oh, that is so great.
Heidi Shierholz:
Yeah, it was good. Yeah, it was really good.
Nick Hanauer:
Is there any legislation or stuff moving that we can watch or support that addresses this problem that you know of?
Heidi Shierholz:
Yeah, there’s a lot going on both sides, so one thing that is happening, the Department of Labor is putting out a rule. They’re putting out, they have a proposed rule, they’re still have to finalize it, that will reduce misclassification, it will take steps towards reducing misclassification. It’s not the really strong standard. The Department of Labor actually doesn’t have the authority to put in place a new definition of independent contractor, but it’s not the really strong standard.
Nick Hanauer:
Congress has to do that?
Heidi Shierholz:
Yes. The Department of Labor, yeah, they don’t have the authority to redefine independent contractors in the way they couldn’t put in place the A, B, C test that I discussed earlier. But that’s the kind of thing that should be done. But the independent contractor rule that the Department of Labor is working on is an important step. There’s a lot of interesting stuff going on in the states like California passed a law in 2019 that actually codified this very strong standard for what is an independent contractor known as the A, B, C test. That was really, really good news. But almost immediately, actually before A, B, C. Before that law was even passed, Uber and Lyft announced that they were going to be doing a multimillion dollar campaign to pass a ballot initiative that would exempt them from the protections in that new law.
And that was what is known as Prop 22. And that passed because of the unbelievable amount of money that Uber and Lyft poured into that campaign to actually make it so they’re exempt. They are allowed to call their employees who do not in the least pass any kind of strict definition of independent contractor, but under Prop 22, they have found a way to get themselves exempted from that at the expense of their workers and that kind of thing, those Prop 22 like bills, we’re seeing them pop up in other states. When Uber and Lyft realized that it was successful in California of all places, they were like, oh, we can do this everywhere. And so we are seeing that proliferate around the country, so that’s a big set of fights all over the country.
Nick Hanauer:
Yeah. What did we miss, Goldie?
David Goldstein:
I don’t know. I don’t even know why we’re talking about this. My Econ 101 textbook tells me that if there’s a problem, the invisible hand will fix it, right?
Heidi Shierholz:
Yeah.
David Goldstein:
This is just leave it up to a competitive market like Uber and Lyft competing against each other. Oh wait, they’re working together, I forgot.
Nick Hanauer:
Yeah.
Heidi Shierholz:
My solid point. And my favorite way neoliberal economics sort of enters into this is that people say, oh, the market means that if an employer will pay a total compensation package for a worker of this much when they’re an employee, then they will pay that same amount when they are an independent contractor full stop, so the idea is that if you are paying X amount for an employee, that if they are then made an independent contractor, you will fully pay for whatever health insurance you were giving them, whatever retirement benefits you were giving them, like they will, you will-
Nick Hanauer:
Because you just assume perfect efficiency in competition.
David Goldstein:
Yeah.
Heidi Shierholz:
Yes, so if they were-
David Goldstein:
Yeah,
Nick Hanauer:
The models says-
David Goldstein:
They’ll pay your half of your FICA tax.
Heidi Shierholz:
Yes.
David Goldstein:
That extra, 7.65-
Nick Hanauer:
that’s what the models says. Yeah.
David Goldstein:
Whatever.
Heidi Shierholz:
It is. I mean, and you can certainly come up with, I mean, Econ 101 models say exactly that.
Nick Hanauer:
Right.
Heidi Shierholz:
But empirically we know that that is not even close to what happens. And when you ask regular people on the street, it’s like laughable that that’s the thing that happens.
Nick Hanauer:
Yeah.
Heidi Shierholz:
But it used to be that economists typically believed that if the field is changing, that’s not so much the case anymore, but-
David Goldstein:
It’s weird, Nick, right? Because it’s almost as if there was a power imbalance between employers and employees.
Nick Hanauer:
Exactly. Power is the dark matter of economics.
Heidi Shierholz:
Yeah.
Nick Hanauer:
It is very hard to see and characterize, but it is 85% of what’s out there.
David Goldstein:
That’s where most of the gravity is coming from, that’s for sure.
Nick Hanauer:
Exactly, so anyway.
Heidi Shierholz:
Yes, it’s-
Nick Hanauer:
Well, Heidi, thank you so much.
David Goldstein:
Oh, do we get the final question Nick?
Nick Hanauer:
Yes, we do. We’ve asked her before, but we’ll just put her on the slip spot again, go for it.
Heidi Shierholz:
Oh, no, I feel like I should have prepared for this. I have forgotten what the final question is.
Nick Hanauer:
Why do you do this work?
Heidi Shierholz:
That is a good question. I don’t have a origin story around this work. I have ingrained in me a deep commitment to help right wrongs, make the world a more just place. And that is just an absolutely driving force.
Nick Hanauer:
I love it. That’s a good answer. That’s a good answer. Well, thank you, Heidi, for being with us.
Heidi Shierholz:
Thank you so much, this was a real pleasure.
David Goldstein:
You know Nick, we always ask that final question, why do you do this work?
Nick Hanauer:
Yeah.
David Goldstein:
And we get amazing answers across the board. But it occurred to me as Heidi was giving her answer, within the context of the conversation we had, what a privilege it is to be able to give these answers. Because for most people, the reason why they do their work is because they have to.
Nick Hanauer:
Correct.
David Goldstein:
They have to pay the rent, they have to eat, they have to pay their student loans, they have to pay their medical bills, and their credit cards. They don’t have a choice.
Nick Hanauer:
Yeah, that’s right.
David Goldstein:
When you see the breadth of the wage theft that is going on, that people are losing 10, 20, 30% of their income by being misclassified in their job, it is for people who don’t have another choice.
Nick Hanauer:
Yeah.
David Goldstein:
They have to do this work, not because, some of them might like the work. Many people do get gratification from their work other than their pay, but they have to work.
Nick Hanauer:
Yeah.
David Goldstein:
There’s no question of why they do.
Nick Hanauer:
And for most Americans, they have a very narrow set of choices.
David Goldstein:
Right.
Nick Hanauer:
Right. And we’re lucky and have a really broad set of choices. And in fairness, the people that we tend to talk to had an incredibly broad set of choices about what to do with their lives too. And we’re getting a little off track here, but I think it’s worth reflecting on, is I hang out a lot with business people, mostly incredibly successful business people who are always derisive about government workers and the people who frankly don’t grub for money as a occupation in the way that they do. And they’re always somewhat shocked when I tell them that the majority of people that I get to work with are just much smarter and more interesting than they are or the people they work with.
And it does turn out that there is a small cadre of people who are motivated more by making the world a better place than by making their big bank accounts larger. And we’re just incredibly privileged to be among those people because somebody like Heidi Shierholz could make 10 times as much money doing the same work that she does effectively for some soulless hedge fund or as a corporate economist for a big bank or whatever it is. And Heidi, and frankly, most of the people that we talk to who are immensely talented, take a 90% pay cut to do the work that they do. And by the way, that’s true for the entire team at Civic Ventures too, right?
David Goldstein:
Well, except for me, nobody would pay me.
Nick Hanauer:
Exactly.
David Goldstein:
It’s true.
Nick Hanauer:
It’s true with you, with notable exception.
David Goldstein:
Yeah, right. We have a very thin labor market, you and I.
Nick Hanauer:
Yeah.
David Goldstein:
You could not find anybody else to do what I do, and I could not find anybody else to pay me to do what I do.
Nick Hanauer:
Anyway, but it is true. And the wage theft and misclassification thing is just a really terrible thing that we need to find a way to crack down on.
David Goldstein:
And I do want to reemphasize and encourage folks to click on the link in the show notes, both read the EPI report, but also that shared security piece we published several years back.
Nick Hanauer:
Yeah.
David Goldstein:
Really not that complicated.
Nick Hanauer:
No.
David Goldstein:
It requires rethinking the way we think about work, where we just tell ourselves, oh, all work is work.
Nick Hanauer:
Yeah.
David Goldstein:
We don’t need all these classifications. If we just say, all work is work, and that means all work gets benefits and it’s paid by whoever is paying the worker, then all of this complication disappears, and all of the opportunities for misclassification and wage theft disappears.
Nick Hanauer:
Yeah. I think we need to re-up that policy piece, send it around.
David Goldstein:
Yep.
Nick Hanauer:
Well, it was fantastic talking to Heidi as always, and we thank her for shining a light on this incredibly important subject. Hopefully we can get some forward progress through the Department of Labor.
Speaker 3:
Pitchfork Economics is produced by Civic Ventures. If you like the show, make sure to subscribe, rate and review us wherever you get your podcasts. Find us on Twitter and Facebook at Civic Action and Nick Hanauer, follow our writing on Medium @civicskunk.works and peek behind the podcast scenes on Instagram @pitchforkeconomics. As always, from our team at Civic Ventures, thanks for listening. See you next week.