The number of service-oriented freelancers has expanded strongly during the last ten years. Could this be a source of hidden poverty?

In the past I wrote more often about the Dutch ZZP-er (`independent worker without personnel`), aka the service-oriented freelancer.

The number of freelancers in The Netherlands has soared during the last ten years, as I wrote in an earlier article from 2011:

There are 700,000 freelance professionals or ZZP’ers (‘Independents without Personnel’), as they are called in The Netherlands.

People in the building and construction industry, the free professions, the medical world and in the ICT and Consultancy industry that one day, under pressure, decided to make a start-up on their own.

Sometimes people are even pushed into being a freelance professional by an employer that wants to lower its fixed expenses: it dismisses its personnel and hires people back via a freelance contract, with a job-warranty for a certain period. When the period has passed, the people have to find new principals for future jobs. This has happened on numerous occasions in the building-and-construction (B&C) industry.

When there is a good economic climate, all these professionals are finding new jobs and assignments quite easily, just like the freelancers in other industries. And, just as important, they find assignments against favorable hourly rates.

But now the economic situation for the 3rd and 4th Quarter still looks grim and the near future might not be much better, these freelance professionals run a substantial risk of running out of work:

• The RRE and CRE-market is still a disaster in The Netherlands;
  
• The financial industry – the biggest employer of freelance ICT and Consultancy professionals in The Netherlands – is still under heavy fire of the international financial markets and keeps its ICT cards firmly to its chest. (Temporary) hiring stops for freelancers are common practice nowadays;
  
• The medical and caring industry is subject to substantial cutbacks by the Dutch government, in order to slow down the consequences of the aging population;
  
• Freelance lawyers and especially marketeers are people that you can get rid off quite easily in trying times, without harming your day-to-day business.

And even if the freelancers keep their assignments, the hourly rates are often pushed downwards strongly, due to the (very) unbalanced relation between the principal and the assignee in this supply-market. 

Only the best professionals with skills that are unequalled by others and that might even make them unique, can maintain virtually writing their own checks. You could call this the Champions League of the freelance workforce.

All others are earning less and sometimes much less. This is a strong deflationary force.

Today, it is more than two years ago since I wrote the aforementioned article, but the situation didn’t change for the better… at all. Rather to the contrary…

All the aforementioned bullets remained true until today and the number of service-oriented freelancers has been soaring since then, presumably for a considerable part with people at the bottom of the labour market.

You can see this expansion in numbers of freelancers in the following chart: the number of freelancers, who are selling products (f.i. mom and pop stores), remained stable, since the measurement of these separate categories started in 2011. The number of service-oriented freelancers, however, grew equally fast as the total number of freelancers: with approximately 60,000 freelancers in two years.

Freelancers from 2001 – 2013

Data courtesy of:Central Bureau of Statistics (www.cbs.nl)

Click to enlarge

It is very unrealistic to believe that these 60,000 new, service-oriented freelance jobs are of the well-paid kind. The tariffs of all freelance jobs are under heavy pressure currently, and the ones that are most under pressure are the ones in (low-level) healthcare, homecare, mail delivery and transport & distribution:

• PostNL, the Dutch national mail service, has fired many postmen with a fixed contract and instead hired freelancers, who get paid a small fee per delivered letter or package;
   
• Transport companies fire their domestic truckdrivers and instead hire East-European chauffeurs, against unfavourable freelance contracts;
  
• A large supplier of home and health care – Sensire – fired 800 internal and 300 external employees, originally with the purpose of hiring these people back via a much more inexpensive (pseudo) freelance contract: as ZZP’er.

Ultimately, the freelance part of this plan has been abolished by Sensire, under pressure of the media and politics. Instead, a considerable share of the laid off people could start at TSN, a competitor of Sensire, under the same contract conditions.

Nevertheless, also this new company lives under the constant pressure of threatening austerity measures in homecare and healthcare, irrespective whether these austerity measures are forced by the central or local governments. Only when the current conditions for home care subsidies remain unchanged, the Sensire people can remain working at TSN. Otherwise they might be fired or might be forced to work under an unfavourable freelance contract after all. I am convinced that the same situation is also applicable to other freelance contracts, albeit presumably on a smaller scale.

Today, the Dutch society of journalism (NVJ) wrote a tell-tale article about the changing circumstances for freelance (photo)journalists. Here are the pertinent snips:  

Freelancers, who became freelancer a few years ago (and/or out of conviction), are often better off than freelancers, who were forced to become one after their dismissal.

Nevertheless, both categories have to deal with a deterioration of their legal and economic position.

This is printed in the investigation “Tariffs and copyright, negotiations and perspectives of freelance (photo) journalists”, which will be presented today.

The group of freelancers that chose for entrepreneurship out of conviction has commonly a better negotiating position and earns almost twice as much as freelancers, who were forced to become one (often after their dismissal).

For the group that started a freelance practice under pressure, after having a regular job, it is questionable whether their business will remain viable. This is partially caused by the increasing competition and plummeting tariffs, partially by the fact that their entrepreneurship was not their choice.

All  freelancers work more than 37 hours per week in average, but get only paid for 22.5 hours. Their tariffs plummeted in the past years. The drop in hourly rates (after inflation correction) has been 18% under writing freelancers. In 2013, photo journalists received less than 66% of the price of a picture in 2008. This is 38% less, after inflation correction.

When the average income for photojournalists in 2012 is compared with the income in 2002 (indexed to 100%), the income was 94% in 2012.

This whole article is a must-read in my opinion. The article speaks volumes about the deteriorating circumstances and looming poverty among this particular category (and many other categories) of freelancers.

That this looming poverty is no ‘science fiction’ anymore, is proven by an article in Het Reformatorisch Dagblad (a confessional, daily newspaper).

Much hidden poverty at freelancers

Parishes of small reformed churches had to deal with a strongly increasing number of requests for help during the last years. Also in the Roman-Catholic church there is a considerable increase in this number.

The average number of requests for help per parish increased to 15.7 in 2012 from 6.5 in 2009. The total number of requests for help in 2012 was 7000.

‘These data look familiar”, according to Derk Jan Poel of the ‘reformed support point for parishes’. “There is crisis, unemployment rises, people lose their jobs and get more and more choked by their debt”. Poel mentions that especially freelancers are “a difficult category”, as these are not principally unemployed, but don’t ring the alarm bells (as entrepreneurs) when their situation gets tough. “Here is much hidden poverty. This group deserves our attention”.

This discloses one of the main problems of freelancers: while becoming a freelancer (often at gunpoint), these people abolished their built-up rights for unemployment benefit and all kinds of social security subsidies. At the same time, it was almost impossible for these people to earn a decent income, due to the maintaining and even increasing pressure on their tariffs.

As I already predicted in 2011, many of these freelancers are an accident waiting to happen: an accident of looming poverty and despair.