Welcome to Middle-Class Poverty— Does Anybody Know the Way Out?

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The surge in freelancers and the new "sharing economy" are part of a new national movement to reclaim the wages and lifestyle that the Great Recession stole from millions of Americans.

615 american protest middle class.jpgREUTERS

Many years ago, Freelancers Union ran ads on the NYC subway that read, "Welcome to Middle-Class Poverty" - a nod to the fact that health insurance is often prohibitively expensive for the self-employed, who don't benefit from an employer subsidy. We thought we were being provocative, but the last year made us prescient. Since that ad campaign ran, we've seen two trends emerge: significant growth of the independent workforce and growing income disparity. Combined, they have created something that seems paradoxical and should be impossible in the United States: Middle-Class Poverty.

Call it New Mutualism: We need laws that protect the growing swath of independent workers

You've probably seen middle-class poverty, if not experienced it firsthand. It's a young woman a college degree and crippling debt. It's a young man with a dream job but no health insurance. It's owning a smartphone to keep up with clients when you can barely keep up with rent.

About one-in-seven Americans are officially in poverty, but many more find themselves squeezed between rising expenses, stagnating wages, and thin benefits. Currently, close to one-third of the U.S. workforce is not linked to a traditional, 9-to-5 job. While client-to-client work used to be the purview of just the creative industry, it's becoming commonplace in everything from accounting to technology to health care. Though a shifting economy initially set this in motion, the more the workforce trends toward flexibility and mobility, the more attractive and viable freelancing becomes.

In fact, Freelancers Union's survey revealed that the top 5 reasons people work independently reflect personal preferences: the opportunity to work on a diversity of projects with higher income potential and the chance of being one's own boss.

And this workforce is not only potentially happier, it can be a boon to the economy. It's obvious that businesses save when they hire freelancers (since they don't provide benefits and can hire only when they need the work), but what's less obvious is that new jobs are being generated from this sector. In 2010, we reported that 27% of freelancers hire other workers. And whereas Detroit's factory jobs used to be the source and model of secure work -- jobs that no longer exist -- the Motor City is now building a reputation as a hotbed of creative and entrepreneurial activity.

It's time we sit up and take notice: middle-class careers are becoming freelance careers. But freelance careers, at present, cannot sustain a middle class. A college degree and a regular old job used to be your meal ticket. Now you're lucky if you earn enough to eat - and if you want fries with that, or health insurance, you may have to go into the finance sector. If you want proof of where middle-class jobs are headed, look no further than the New York Times, which just reported that median household incomes dropped 2.3 percent last year, from levels that were already 7 percent less than their peak in 1999. With the top 1% of the country controlling 40% of the wealth, we've created such an atrocious distribution of income that we've left the middle class completely vulnerable. In fact, today we have the worst distribution of income in 100 years.

As a result, a photographer can make $500 in one day, but not be able to pay her rent. A graphic designer can count Coke as a client, but still have to choose between health insurance and Internet access at home. No employer-based benefits means you're on your own for health insurance, no 401(k) contributions means you can't plan for the future, and no protection from the Department of Labor means no guarantee of getting paid for your work. If you lose a gig, you've got no income until you find another; if your client pays a month late, too bad for you. And don't forget, you're doubly taxed as both an employer and an employee.

If we want a middle class -- millions of people who support themselves, have families, and buy homes -- they need a support system and a shot at financial security. Left to their own devices, they're already starting to do this on their own by creating informal networks, relying on one another for ideas and support, and becoming experts in as many areas as they can to support their livelihood. They're starting babysitting co-ops, using Craigslist, and relying on Zipcar. This so-called "sharing economy" is helping families low on cash buy access to goods and services without paying the full price for permanent ownership. This is a movement that might have happened without the recession, but it's accelerated in the downturn.

A new set of values and strategies to make ends meet -- I call it "New Mutualism" -- have emerged, and it's communalizing self-reliance at a time when individuals can no longer assume that our jobs or government will provide for them. But as a society, we need to level the playing field. If we don't, the result is that the working individuals who should form a stable middle class won't be able to exercise any purchasing power, and instead end up taxing the emergency and welfare systems.

The short-term way to level the playing field is to update the New Deal so it includes and addresses the current workforce. We need to accept that many people don't work full-time for an employer and that "jobs" no longer mean just W-2 employees, as Douglas Rushkoff explained. Richard Cass, a self-employed technical and business consultant and Freelancers Union member, also puts it well: "Government programs that promote small business generally focus on companies with scores of employees and millions of dollars in annual revenue, which is short-sighted." That has immediate implications for our economic and job policies.

But to really bring a thriving middle class back to life, we need a dramatic shift in thinking, institutions, and assumptions. The role of policy should be to foster newer, more self-sustaining systems that follow this new mutualist paradigm. In the long run, our institutions need to move away from regarding the office as the center of a person's economic life, from business as the provider of benefits, and from government as the provider of social supports. The middle class does not have to be built by focusing on individual wealth. Instead, we can build stable markets and societies where people make a living, communities flourish, and businesses survive -- and not at the expense of others. It's not utopian -- it's a necessity if we want a successful middle class again.


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Sara Horowitz is the founder of Freelancers Union, a nonprofit organization representing the interests and concerns of the independent workforce.

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