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Silicon Valley's Dirty Secret: Using a Shadow Workforce of Contract Employees To Drive Profits (cnbc.com)
An anonymous reader shares a report: As the gig economy grows, the ratio of contract workers to regular employees in corporate America is shifting. Google, Facebook, Amazon, Uber and other Silicon Valley tech titans now employ thousands of contract workers to do a host of functions -- anything from sales and writing code to managing teams and testing products. This year at Google, contract workers outnumbered direct employees for the first time in the company's 20-year history. It's not only in Silicon Valley. The trend is on the rise as public companies look for ways to trim HR costs or hire in-demand skills in a tight labor market. The U.S. jobless rate dropped to 3.7 percent in September, the lowest since 1969, down from 3.9 percent in August, according to the Bureau of Labor Statistics. Some 57.3 million Americans, or 36 percent of the workforce, are now freelancing, according to a 2017 report by Upwork. In San Mateo and Santa Clara counties alone, there are an estimated 39,000 workers who are contracted to tech companies, according to one estimate by University of California Santa Cruz researchers. Spokespersons at Facebook and Alphabet declined to disclose the number of contract workers they employ. A spokesperson at Alphabet cited two main reasons for hiring contract or temporary workers. One reason is when the company doesn't have or want to build out expertise in a particular area such as doctors, food service, customer support or shuttle bus drivers. Another reason is a need for temporary workers when there is a sudden spike in workload or to cover for an employee who is on leave.
From TFA:
>> Contract workers tend to fill more "grind it out type roles" that need manpower or less senior roles
>> workers with jobs in higher wages are more likely to have their services contracted out than jobs associated with lower wages. Such "alternative" work arrangements are becoming more common among older and more educated workers.
_everybody_ does this. It's a quick and easy way to get H1-B workers for one thing. It lowers tech wages too since you don't have long term employment. Plus it dodges taxes.
Thing is, what are we (/. techies) gonna do about it? Nobody wants to vote for strong worker protections. It pisses us off when somebody abuses them. So we'd rather give them up for ourselves than risk somebody else getting them.
If you want this to change you're going to need help from the government. By ourselves we're too weak. We don't have any solidarity for one thing. And there's so much cheap, overseas labor we can't hope to compete. It's Ok to want nice things, and to take steps to get those things. And it's OK if you can't do it on your own.
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Ever want to know what it feels like to be a $20 whore? Get involved in one of these 'contracting' deals. They have no investment in you, you're paid what you're paid, and if you're stupid enough to let them alter the deal so you hang around longer than 6 or 12 months, you'll NEVER get paid another penny more, no matter how much the economy changes in the meantime, and if you complain too much, all it takes is a phone call and you're FIRED, with no consequences for them, they'll get another $20 whore in your place, to be used like a toilet. You wonder what 'capitalism gone bad' looks like? This is part of it. Hire people outright? Give them a reason to hang around? LOL that's so Last Thursday! The NEW HOTNESS is just treating people like the robots everyone keeps talking about taking everyones' jobs. We've truly become a degenerate society when shit like this is going on.
It lowers tech wages too since you don't have long term employment. Plus it dodges taxes.
Hi, consultant here. I don't see it lowering wages, or dodging taxes.
That's because if you want short term help, a company will mostly be paying HIGHER wages than they would real employees. And those employees (or a consulting firm) will be paying all those taxes you think are somehow being "dodged". Which is why the wages are higher...
"There is more worth loving than we have strength to love." - Brian Jay Stanley
The vast majority of the times I've seen a company use contract workers, it's a management problem.
Manger has work that needs to be done, and all existing employees are busy. This work is not some sort of short-term bump in the road, there will be work for years.
Manager asks for another employee.
Executives and/or HR say "No", because it would violate some arbitrary rule on number of employees or number of direct reports or something similar.
However, the manager is allowed to hire a contractor at 150% the cost of an employee, because that doesn't violate the arbitrary rule. Contractor ends up as de-facto employee, and everyone desperately hopes that doesn't bite them in the ass.
Perhaps you could explain why it's a good thing first.
And if you use the words "self-employed", you are disqualified. >90% of these contractors work for staffing firms.
guilty if not proven innocent much ?
I am one of these contract workers. I like it fine. I'm getting a better rate per hour than I ever did in any other job, I work from home, and I have complete control over when and how much I work. I suspect my client is willing to put up with this precisely because I don't cost them anything when I'm not working.
However, I like it fine because I'm disabled. I get government money to help me along when my paycheck isn't enough, and I get (currently) zero copay healthcare from the state I live in.
People worry quite alot that small businesses are dying, because many kinds of them are. The "mom and pop" store can't do shit against Amazon. The thing is, Silicon Valley startups are also small businesses, and the fact they sometimes manage to sucker in venture capitalists sometimes doesn't make them not small businesses. They're 3-5 dudes who know how to code who have an idea about how use code to make something easier or more marketable. Because they're paying Silicon Valley rent, they can't afford real employees until such time as they do happen to land that VC money. Even then, that money isn't theirs to fuck around with, and I'm sure the field is littered with startups that were too good to too many people.
The upshot of this is that the kind and amount of work that is best available today isn't enough to sustain a person by itself, and it's not solely because of exploitative employers. This is why universal healthcare and universal basic income will be important ideas going forward. The commodification of labor isn't going to be around forever, and while it persists, it's going to change alot. More automation means more people who do work at all do it the way I do. I can tolerate this arrangement because I basically already have the benefits of universal healthcare and basic income. I'd like them to be universal. People need to be free of the fear of homelessness and starvation for work to legitimately be anything but slavery. I want other people to be free the way I am, and I'd like them to not need to be some kind of cripple to get it.
I see the gig economy as an opportunity for older tech workers like me. Most companies don't want to hire a near-60-something as a permanent employee, but have no problems with signing me to a contract. I'm not ready to retire yet, but I do have, to quote a movie, "...are a very particular set of skills. Skills I have acquired over a very long career."
Most companies need my particular skills for a big project maybe up to a year, two at the outside. At the end, I train a lower-paid permanent employee to manage things, then I move on having added whatever new skills I picked up during the gig to my resume. Since it's always a short-term gig with a deadline, I can charge extortionate hourly rates and work lots of overtime and everybody's happy. Then I can add another blurb to my resume "Implemented widget sorting system at BigCo" and add another 5 bucks an hour to my rate. Win-win.
I do work for a staffing firm. It's sort of a pimp-hooker-john relationship. They're my pimp and do a good job of finding me another john (job) when I'm done with the current contract.
- Pithy comment goes here.
In my team, it's much easier to hire overseas contractors. It's not about internal office politics; it's that we work with a contracting firm that makes a big effort to screen candidates well. I find that American recruiters are so focused on being salesmen that it's very hard to pre-screen candidates. They work hard to convince us that a candidate is awesome, when in fact the candidate is a poor match. In contrast, when our contracting firms present a candidate, there's a good chance it's a good candidate.
No, I will not work for your startup
More pay, varied work environment/experiences (no golden handcuffs), no repercussion from deciding to take a few months off between contracts (try to arrange a 2-3 month sabbatical at most companies), typically you're opinion is respected more (you're the hired gun/expert for the issue, so they will listen to you more - at least, that's been my experience). And easier to work remotely.
Browsing at +1 - no ACs, I ignore their posts. So refreshing!
BOTH parties do in practice. GOP only gives curbing undocumented workers lip-service. Biz bribes GOP to not do anything because they want cheap labor. (Bribery is via campaign donations.) And Democrats tried to hire more border guards roughly 4 years ago and were blocked by GOP, citing debt concerns. (Now GOP doesn't seem to care about debt.)
As far as the "violence", you are cherry-picking incidents and individuals. I can do the same with conservatives.
Table-ized A.I.
The more they pay for an opinion, the more weight they place on it.
Which is why I have the clients best interests at heart when I extort...er...negotiate my rate. It's so they get full value, if I let them get away with paying me less, they'd be liable to ignore my advice.
John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
Precisely! And the more you charge, the more they want you as well...
Browsing at +1 - no ACs, I ignore their posts. So refreshing!
'The U.S. jobless rate dropped to 3.7 percent in September, the lowest since 1969'
Guess Trump gets a second term?
... shares a similar dark secret.
There are more contractors hired by the military than there are actual military headcount.
It little behooves the best of us to comment on the rest of us.
How about RETIREMENT? They're replacing the workers who traditionally earn the most, putting more stress on the already overburdened Social Security system when these people are forced to retire due to illness.
SJW: a person who perceives an injustice, and while correcting it, commits a greater injustice.
And in the meantime, take 50% to 75% of your rate, and provide you with really crappy benefits.
SJW: a person who perceives an injustice, and while correcting it, commits a greater injustice.
It is the H1Bs and these companies are able to get not just contractors, but contractors are some of the lowest rates going.
This is why we need to kill H1B progran and instead increase the greencards. In addition, we need to require that anybody that comes to America on a tech visa, not be allowed to contract out for say 5 years. IOW, they can work for contract shop for 5 years.
I prefer the "u" in honour as it seems to be missing these days.
At most of the places I've contracted for, I know what the employees make and know what I make.
I assure you, I make more than the employees - sometimes am offered a permanent position, but it's always at a lower rate because I would get "benefits".
I don't doubt what you are saying but it really means you should have set contracting rates a lot higher, or increased them through the years.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
It is true there are two different kinds of contracting for sure, and in some cases like the ones you mentioned maybe the wages can be lower for what is kind of unskilled programming work...
However like I said, in those cases taxes are still not being evaded, the consulting firm providing the workers is paying the taxes for them (since that was the original point of discussion).
I have seen some people use that lower platform as a way to actually become more a real worker... but you have to have drive to do so. I don't think it's a good way for someone to try entering programming as a carrier.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
In recent years, I'm more familiar with the UK labor (um...labour) market than the US, and there the situation has really developed into a class-based society. You have the "nobility", who have jobs with benefits. And you have the "serfs" who are technically "temps" - short-term contract positions with no benefits. I know of cases where only upper management are actually employees - everyone else, from middle management on down, is a temp.
The advantages of this are obvious, at least to pointy-haired types: reduced costs and flexible labor - you can hire-and-fire on a whim.
The disadvantages are numerous. For the temps, life is insecure: jobs are short, typically somewhere around a year. They have no benefits, and if they don't manage to hang jobs seamlessly together (and how are you supposed to do that?), they wind up spending their savings surviving the frequent times of unemployment. Or else, this racket get subsidized by the taxpayer, when they wind up on benefits.
There are also downsides for the businesses that the spreadsheet-driven managers don't seem to understand. If you have any business with face-to-face customer service, customer loyalty is seriously impacted, because there's always someone new - you never see the same person for an extended period of time. There is also a lack of loyalty within the business - if you're just temporary, why should you actually give a sh*t? Difficult issue? Just shove it aside - by the time it become critical, you'll be gone anyway.
Lastly, consider training, and errors. The UK is a seriously chaotic place to do business. At least part of this is due to the fact that everyone is always new, always just learning the job. By the time they know what they are doing, they're gone, and next temp is hired.
Sad to hear that the US is going the same way.
Enjoy life! This is not a dress rehearsal.
Contractor vs Employee is about the level of control and independence. Control is: Who sets the hours, who owns the work place and the tools, who decides how a task will be solved, can you work for more than one person.
Uber driver, picking his own hours, driving his own car and even to some extent choosing the route to drive - contractor.
Cube dweller payed $150/hr, working 9 to 5, using a company computer - employee.
Most western governments use degree of control/independence as the measure for employee vs contractor and they can't enforce it because they are often the worst offenders for breaking it.
If you are going to bring back 19th century immigration rules, I want my 19th century social plans and tax rates back as well. Open boarders would be a lot more viable if we didn't have to pay for healthcare, education, housing and food for everyone that shows up. That's why it doesn't work.
a gig is not a job. This percentage is incredibly wrong.
Let's bring land grants back too. Oh, wait, there's no more free land left to give out? Maybe this place isn't what it was in the 19th century. Maybe we're full. I'd like all the basic shit that was cut from public schools added back before we open the flood gates any further.
At least at a couple of those firms mentioned (Alphabet, Facebook), they've boxed themselves into a crazy level of "only the best" multi-day intense interviews hiring. Can't remember every IPv6 header on a whiteboard? Can't rattle your Linux syscalls for a SRE job? Don't fully know the internals of a dictionary in Python? Don't have any TEDx talks? Out the door. Meanwhile, they backfill a lot of those very same roles with contractors who, while they don't last as long, don't go through *near* the rigor in getting in.
The game fails though if you're allowed to say "gig economy" but not "union."
Not really surprising. Google and Co. are large computers with large pieces of software on them - not much more. What are humans supposed to do in that context? Come up with Google Chat App #11? The novelty effect of silicon valley is wearing off and two decades from now the party will be in the far east or somewhere else. This is just how things like this go.
We suffer more in our imagination than in reality. - Seneca
Depending on the industry this can be good, or extremely bad.
It also depends on the long term goals of the individuals, companies, and societies at large.
I work as an engineering consultant. We have an older colleague who does exactly what you describe. He comes in to work on some heavy hitting projects and then he's out the door.
This is great for us as a consulting company, it works well for our clients and solves the immediate problem.
The bigger issue is the other side to my collegues story. He used to be a full time engineer at a chemical plant. They typically hired in a cycle of having one "old timer" and then a middle aged guy, and a young new engineer working all the time. That way they trained up the new people, always having three engineers in any role, one with a LOT of experience, one who did the main work, and a new guy to train and learn the ropes.
As time went on they dropped the new guy-- why waste money training a new guy when they'll have the forty year old around for another 25 years? And who needs the old timer full time when he can go part time? Gotta save those dollars!
Fast forward and you get my colleague, who left his company in the hands of an engineer fresh out of school with no training. When he announced he wanted to go part time they quickly hired someone and told him he had to stay full time and train him. He wanted to retire though, did his best to impart 40 some years of knowledge onto the new kid and then jumped ship for our consulting company where he could work part time (like he expected). When his old company realized they couldn't possibly function without an engineer with intimate knowledge of their plant and systems they reached back out to him. We then billed him back out to his old company... at a higher rate...(part time, of course).
The problem with the gig economy is that while it's great for everyone's bottom line, it isn't usually very good for company or product long term. Sure if you have some unique difficult project work, hire a contractor (or hey! Hire an Engineering Firm like us!), but if your goal is to build and progress knowledge and to make a long term product or company successful, it's a losing proposition.
It's also a losing proposition for anyone NOT in the position to hop job to job making tons of money off their already existing experience. Gigs make sense when you have 20-30 years in a field. When you have 2-5? Good luck bringing in those big dollars, and good luck paying for your healthcare. It's also not a friendly place for someone with any type of continual health costs or disabilities, as gaps in healthcare or high cost care is going to negate the dollar gains from the contracting work.
Even worse is when everyone is fighting for those gig jobs, prices are going to drop, and the tradeoff of "high dollars for unstable work" vs "low dollars for stability" is going to disappear in lieu of just "low dollars for unstable work".
People seem to think their job is immune to this type of thing. If we let it happen we're all just going to be fancy day laborers. It was good while it lasted I guess.
If that is the case, then you either are not good at negotiating your rates/work rules with the contracting house....or you don't know enough about the business to know to move onto the next one.
One thing to do, however, is to incorporate yourself, it is much easier to contract as an individual 1009 if you are incorporated and do corp-to-corp. Contracting 1099 to an individual scares the shit out of companies, as they can get stung like MS did years back by contractors coming back to sue to claim employee-hood.
If you incorporate, even the contract houses will often work with you and take a smaller finders fee cut....sometimes just a cut for first few months of contract, then, the whole bill rate is yours.
This can be a lucrative business, but you have to put on your "big boy" pants, and learn to manage yourself, promote yourself, do paperwork, taxes AND how to budget your negotiated bill rate to cover your pay, time off, and retirement funds yourself.
It isn't rocket surgery, but along with higher dollars and more freedom, comes more personal responsibility.
Light travels faster than sound. This is why some people appear bright until you hear them speak.........
Long term employees can become stuck in a rut and lose their motivation, especially if there are peaks and troughs of interesting work. On the upside they develop unrivalled domain knowledge on that business. Sometimes though you just need an experienced person who will do a solid 3 month stint, enthusiastically. They usually don't get involved in internal politics and will hopefully know their stuff - for a price.
I was a direct employee for a company that rhymes with Hell. During my 5 years there, about half of my team consisted of contract workers on a continuing rotation. These were not telecommuters. By keeping only half staff direct, continuity was maintained, and by rotation of contract workers, benefit costs stayed low. Once a contract was up, the contractor would be shifted to a "sister" company until that contract ended. Rinse and repeat. There are people who have worked years this way without benefits.
And in the meantime, take 50% to 75% of your rate, and provide you with really crappy benefits.
10% - 20% is far more common.
-- All that is necessary for the triumph of evil is that good men do nothing. -- Edmund Burke
This has been common practice at every high tech company I've worked at over the last 30 years. They all had a mix of permanent and contract employees.
There are any number of reasons to do this, some good, some misguided. It's like buying versus leasing a car, or buying versus renting a home. Depending on the circumstances, you might want a temporary relationship.
Illegal aliens. They are doing this to hire illegal aliens. There is no e-verify for illegal alien contractors.
This makes little sense; overseas firms want their consultants staffed on a project just as much as US ones
I'm guessing the headhunters in parent poster's US contractor firm function as something like temporary contractors themselves as well -- the headhunter's goals are much shorter-term than the corporation they work for.
Maybe they even get a commission (which is a terrible incentive structure that ensures their goals don't align with the customers').
I do technical engineering (not SW or IT) and have no problem asking for - and getting $250+ per hour. If it's an interesting project I want to work on, I'll lower my rate to $200 to "buy" the deal. A few clients I really don't like, I quoted $375/hour - and one took it. I may not enjoy the 10-15 hours per week - but at least I earn decent pay.
Browsing at +1 - no ACs, I ignore their posts. So refreshing!
it's a tax/benefits dodge. The 150% cost is still less than paying the various benefits and taxes to the employee. For one thing contractors don't have unemployment benefits. Plus upper management likes being able to fire on a moments notice if they need a quick stock bump. Most jurisdictions require a few months notice.
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not a contractor. Most contractors are really full time employees. They're doing work critical to the business on a routine schedule. Companies hire them explicitly to get out of paying unemployment insurance, health benefits and payroll taxes.
The problem isn't actual contract gigs or consultancies. The problem is when the company hires contractors to do stuff like tech support of key, long running products or monitoring of base systems. That's the bulk of your "contractors". It's the IT equivalent of Uber.
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if he/she's not a contractor. Facts not in evidence. It does not follow from "company A hired a 60 year old" that they wouldn't have hired them without the advantages from contracting.
There is one big advantage to a contract when hiring 60 year olds: You can fire them and hire somebody younger and it's not age discrimination, it's just that their contract was up, and they just happened to give a guy in his 20s the permanent position.
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not when companies can just say "Oh well, we tried, time to get an H1-B" any time they can't find somebody willing to take a job for $20/hr, weekend graveyards, $220/week health insurance and you need a 4 year degree and 8 years experience in tech for this senior position that is somehow critical enough that we get an H1-B but not so critical that we can't have a contract worker do it.
Workers have lost virtually all bargaining power in the global economy. It's why Donald Trump is our president. He ran on fixing that and it resonated for a reason.
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I work in IT for a large manufacturing company that has nearly 100 manufacturing and retail locations across the US. Most of the locations are remote (surrounded by cornfields). The company has been in aggressive growth/acquisition mode since I hired in a few years ago. I have been in charge of IT infrastructure for the new sites we turn-up. We utilize an outsourced contracted company for network cabling. That company employs contract workers. The reason for this is twofold: my company does not want to deal with 1099 forms for every contract worker, and my company wants a single vendor for all sites. In addition to this, my company has an outsourced (in-shore) helpdesk, which I also manage. The reason for this is that my company does not want the helpdesk people to be regular employees with benefits, that burden is shifted to to the outsourced company. As a direct employee for the company, I get the company benefits and perks, so it works for me.
I'm not sure what you think is "hard right" about somebody who advocates for UBI. Is it the fact I don't fuck with identity politics? My apologies for being a socialist with a personality.
I find that when I figure my hourly rate as a 1099 after doing all of that, I fall below minimum wage.
SJW: a person who perceives an injustice, and while correcting it, commits a greater injustice.
When the pimp is making $700/hr, I sure bloody well do.
SJW: a person who perceives an injustice, and while correcting it, commits a greater injustice.
so you rather your kids go hungry just to spite those ev111L capitalist exploiters.....If i can't have it nobody can !