Undercutting Logistics with the Underpaid Independent Contractor
Anyone who has experienced a long road trip knows driving hours on end is tedious, stressful, and tiring. For those employed as drivers, the lifestyle can be physically and psychologically damaging. Professional drivers, therefore, must be dedicated individuals who are willing to subject themselves to unpleasant conditions on a consistent basis and have enough skill to drive in a variety of road conditions while often maintaining a strict schedule. Consequently, they deserve a solid Middle Class pay, but this profession is threatened by cost cutting measures, such as subcontracting, that can be implemented for short-term gains at the long-term expense of driver and client interests.
When contracting out to service providers to save money, the quality of service for critical business functions can quickly become an issue taken for granted by both businesses and individuals. This is certainly true when it comes to paying for shipping and handling. Because shipping charges can easy be reduced by switching to a discount delivery company, businesses and individuals will look for ways to reduce this expense whenever possible. Logistics firms like all businesses will, in turn, seek to cut their costs by targeting large expenditures such as payroll, fuel, and vehicle maintenance. Big companies like UPS have to contend with unions, but other large firms like FedEx, or at least until more recently, simply subcontracted to employees with their own vehicles.
Taking the old FedEx model to an unhealthy extreme, Independent Contracting has become a boom for expanding local and regional delivery businesses. Where FedEx requires drivers to drive and maintain newer, far more reliable vehicles, it had to offer fairly reasonable compensation, yet many other firms, which lean heavily on Independent Contractors, do not. Coupled with a lack of credible regulation and reasonable oversight, the fact that Independent Contractors are not employees and weak representative groups, which do little except take money from drivers and make businesses look like responsible contractors encourage, the abuse of laborers.
Meanwhile, fluctuating gas prices, sky rocketing vehicle costs, and far less cargo volume has only pressured delivery companies to simplify costs by displacing more of them onto drivers. Because Independent Contractors are not technically employees, they are not necessarily protected by labor laws, do not have to make minimum wage, must also pay their matching payroll taxes, and are unlikely to secure healthcare from their companies among other lost benefits. In addition, the fact that Independent Contractors are considered one-man businesses often translates into a need for these individuals to negotiate their own compensation, a reality that forces down compensation as the contracting firm has far greater leverage.
Because logistics is a service provider essentially immune to outsourcing, it is an important industry in terms of maintaining a high standard of living in America. The abuse of Independent Contractors can lower delivery costs, but such discounts come at the expense of Middle Class jobs as well as reliability of service. It also gives employers opportunities to reduce their workforce by pushing non-employees to do the work of many for far less pay. This, in turn, further drives demand for diminished wages. These cost savings make these businesses far more competitive in a very unhealthy way, thus they encourage worker abuse and smaller compensation throughout the industry with profits going more to the delivery firm instead of those doing the actual work.
Independent Contracting is not always a terrible thing, but plenty of horror stories exist due to this business phenomenon, especially in times of high unemployment. The worst of these businesses leave Independent Contractors to absorb so many costs with so little pay that they must work twelve or more hours a day just to make a small profit/living. If they have a family and/or are lucky, these overworked individuals might be able to depend on public assistance programs to simply survive. This means the practice destroys Middle Class wages and lifestyles while burdening taxpayers with a greater need for socialist programs instead of creating capitalist opportunities to expand our tax base and economy.
In terms of logistics, a guy, or gal, barely able to maintain his or her vehicle leads to unreliable service and greater hazards on the road. The business solution is to simply displace legal responsibility onto the Independent Contractors, whether or not that individual can actually fulfill the contract when something does go wrong. Every time a business simply switches to a discount delivery company, i.e. one that offers the lowest bid, it encourages the use of Independent Contractors in a very negative way. From the position of labor advocates and supportive businesses, the unhealthy use of Independent Contractors to deflate wages and displaces costs onto drivers is a rather devastating business practice.