I’ve concluded that my web consulting days are over. And for quite a bit of web consultants out there living in the US the same will be true sooner or later. I am talking web developers, programmers, web designers, web marketers, startup consultants, small business consultants and everybody who is hired at will in this industry. At a time when they are using the term “gig economy” to describe people who move from job to job, nobody is saying the obvious, that the ability to work independent of an employer without creating a larger business or real startup is more and more limited to a small group of US citizens for a short period of time in their careers.
20 years ago, when I first worked as a web consultant, when I left my full time job at Bell Atlantic Mobile (Verizon Wireless) I was able to make a living at it, health care was not a big concern and there was not a ton of overhead and obviously I was single and did not have a family to support. But that was then and this is now. I’ve gone through changes, married with kids, a couple mortgages and quite frankly the world we live in is no longer the same. Globalization, outsourcing, rising health care costs, contributions to our retirement and social security and family issues will make it virtually impossible for most independent consultants to continue as they have.
Yet the system is bent on this Gig Economy. Ultimately “gig economy” is code word for “overseas workers” and 23 to 29 year olds. It only makes sense to me if you are 23 and live with your parents. Yes a few programmers do well enough and make a living as independent consultants. But the truth is, if anybody can refute me is, most of these Gig Economy workers in the US can not afford a mortgage, can barely get one without a pay stub, nor can they often leave their parent’s basement, their friend’s couch or girlfriend’s RV. And remember there is constant competition from overseas, where they are pumping out programmers and marketers semester after semester with piles of degrees. And while you may be paying your bills in this Gig Economy you are ultimately losing out on a ton of benefits corporations still provide, it’s just not that obvious.
And the real wild card here is health care. I have written in my blog articles before that the average family income in the US is around $55,000 per year. Yet health care costs per person in the US per family is actually $26,000 per year. That includes what is spent per family by employers, the government and individuals combined. As we sit waiting for another change in the health care laws, the amount spent will be shifting to the family and less from the government and corporations. So it is inevitable that this one issue will single-handedly end the Gig Economy and independent consultant as we know it.
First let’s define what is a consultant. What I am finding is 90% of outsourced corporate work related to the web is not actually completed by the consultant. It has to be outsourced overseas or to lower cost workers in lower cost areas, because in the end overseas and remote worker costs are by their very nature 30% to 80% lower. One assumption in the Gig Economy is that remote workers will exist in large numbers to cut our costs. That’s great, but many companies have recently cut back on this concept. Automattic (WordPress) is a rare example. To compete effectively the only consulting companies that will be left in the US sooner than later will be outsourced to overseas workers or remote workers. That is just a fact that continues on it’s way.
So, once again what is a consultant? Would you define yourself as a consultant if you are simply a project manager with a team around the world that actually does the work? The most successful consulting firms in the US either have a team of intern or low paid workers, early career workers on the payroll or send the work overseas. They have no choice in the matter. They either find the lower cost or perish. And quite often the quality of the work suffers.
I am talking about the independent consultant that is not working for an agency but are independent and send a invoice to employers every 2 or 4 weeks. We are talking about the kind of worker that is called up and hired project by project. Think about that. If you are constantly looking for work and jump from employer to employer in the Gig Economy, what you are missing could be tremendous. And most don’t know what they are missing, because as younger workers they just accept the Gig Economy as it exists.
Gig Economy workers don’t get a group medical plan. Most are on the Affordable Health Care Act, and have crappy benefits. I know, because I have tried them. They don’t get paid holidays, nor paid sick pay day’s off. They don’t get a 401k. They don’t get about 30% greater benefits that go beyond their salary. They don’t get matching dollars from employers to pay for undergraduate and graduate degrees. When I worked as an independent consultant I never had a day that I did not work for my pay. (it is a surprise to gig economy workers when I tell people some of my employers paid for part of my graduate degree) And because most independent consultants are 1099 and have their own company they survive by writing off everything. Members of the Gig Economy pay less in Tax to the US Government than they should have and they can fall behind in what they are contributing to social security. Guess what, they will not get the same as everybody else when they retire…
Ok, so let’s say you are one of the few who have made the Gig Economy work for you. Do you have a spouse with benefits? If you do, that means you are not really independent. What would you do without those benefits? Do you own your home? Will you be able to save appropriately for your retirement? So the reality is at some point the Gig Economy for US citizens is that we either move to a low cost home in western Costa Rica, Upstate New York State or Montana or live on our neighbor’s couch. But if you get married and have kids, then it all changes.
So, we will see what happens this year. If the health care costs for independent workers grows past that 50% per person threshold, it will be virtually impossible for US workers to be independent. Till then I will be working at an employer.