Economic News

Much of 1099 economy home-based

by Broderick Perkins

(10/26/2011) - One in five work as a '1099er,' helping to support an unsupportive economy

Some of them are reluctant, others entrepreneurial, a third variety is a hybrid of both and many of them work from home.

They comprise as much as one fifth of the workforce, but when it comes to economic policy, they don't get no respect.

Advancing economic development through entrepreneurship, Erik R. Pages, president of EntreWorks Consulting, calls them "1099ers," because they report income with the IRS-1099 Form.

Given their sheer numbers, they should be sitting down on Wall Street and Capital Hill, or Wall Street and Capital Hill should be sitting down with them.

"They remain largely invisible to policy makers and to economic and workforce developers," says Pages in a recent article, "Living and Working in the 1099 Economy," a largely under-reported issue, especially now in these dire economic times.

From big banks to car buyers, Washington D.C. threw recession relief money at virtually every major economic sector, except 1099ers.

"That needs to change. In addition to recognizing the importance of this part of the workforce, we also need to develop a more nuanced understanding of their concerns and needs," Pages added.

Pages said the 1099 Economy emerged somewhat below the radar over the past decade. Today you won't see them bull horning away with economic protestors because they are too busy trying to make ends meet.

Also called "freelancers," "independent contractors (ICs)" and members of the "Free Agent Nation," an estimated 20 to 40 million 1099 Americans aren't eligible for unemployment, they can't buy job-loss insurance and they foot the bill for all their Social Security and Medicare taxes, health care coverage and retirement plans.

The piddling tax deductions they get for business expenses don't amount to a hill of beans and, with the end of "stated-income" mortgages , the hard-working stiffs have the toughest time trying to land a mortgage, get their home loan refinanced or even tap home equity earned the hard way -- by paying down their mortgage.

"Few economic development organizations have devoted much thought or research to the needs of this segment of the economy. And, that's not a good thing if 20 percent of the local workforce is invisible to community leaders," writes Pages.

It's a myth that 1099ers left the "real" work force for a pie-in-the-sky job at home working short hours and few days, doing the laundry while they work and taking TV breaks at their leisure.

Who really are these unseen workers?

Chances are -- one in five -- you know one quite well.

Here's how Pages breaks down the 1099 workforce.

Reluctant 1099ers.

These guys and gals didn't have a choice. They previously worked among the rank-and-file in the traditional workforce but were forced out of manufacturing, finance, investing and insurance often because their bosses screwed up. Collectively, they face a more uncertain and probably less profitable work situation as 1099 contractors, says Pages.

Entrepreneurial 1099ers.

These are the sole proprietorships and the LLCs or LLPs and may have from a few to numerous workers under contract, but show up in government statistics as a self-employment venture. A good portion of these 1099ers generate a significant incomes, but most are sole proprietorships and generate limited revenue. They comprise an invisible portion of many local entrepreneurial ecosystems, says Pages.

"Gig" 1099ers.

These workers perform in industries that typically operate on a project-by-project, or so-called "gig," basis. An example is film-making crews that come together for a film, but then break up for other projects. Similarly groups gather for projects in the arts, theatre, writing, web design, and construction and other sectors that have a long history. More industries are moving in this direction and as a result support industries, such as New York's Freelancer's Union, are emerging.

Pages says to expect to see similar groups popping up.

"At a minimum, providing a stronger safety net—as suggested by the Freelancer's Union and others—makes sense. It's time to recognize that the 1099 economy is here to stay and will be an important part of every community's workforce for decades to come," Pages said.

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