The answer, of course, is that there are transaction costs to using the market. There’s a cost to searching for and finding a trustworthy contractor, which is avoided by keeping me around.
With the internet and fully online on boarding, could be a good way to explain the rise of contracting gig jobs in recent years
No idea about American laws, but in my country it seems the main motivation is cheating on taxes, i.e. the money you save by cheating on taxes exceeds the transaction costs on the market, and because everyone around seems to be doing it, so it seems safe to do.
I call it “cheating”, because the specific laws were made with an intent to incentivize starting a small company, as opposed to being an employee. What actually happened is employers pushing job seekers into becoming technically-not-employees, so we get a growing group of people who de facto work as employees (except with none of the labor law protections), but de jure are entrepreneurs (and bear legal responsibility for the tax cheating). So it is win/win for the employer, mixed outcome for the employee. Also, the pre-tax numbers for non-employees are bigger than the post-tax numbers for employees, and although your System 2 knows that you need to adjust for taxes, the System 1 remains impressed.
That misses the point about transaction costs driving the emergence of the firm in Coase’s argument. As I recall the key transaction cost was was not really search related but that for 100 people to work together with some form of legal agreement each person must contract with 99 other people. Once the firm exists then the majority of those contracts go away and the firm contracts with 100 people and the 100 workers have no contract with one another, just the firm.
With the internet and fully online on boarding, could be a good way to explain the rise of contracting gig jobs in recent years
No idea about American laws, but in my country it seems the main motivation is cheating on taxes, i.e. the money you save by cheating on taxes exceeds the transaction costs on the market, and because everyone around seems to be doing it, so it seems safe to do.
I call it “cheating”, because the specific laws were made with an intent to incentivize starting a small company, as opposed to being an employee. What actually happened is employers pushing job seekers into becoming technically-not-employees, so we get a growing group of people who de facto work as employees (except with none of the labor law protections), but de jure are entrepreneurs (and bear legal responsibility for the tax cheating). So it is win/win for the employer, mixed outcome for the employee. Also, the pre-tax numbers for non-employees are bigger than the post-tax numbers for employees, and although your System 2 knows that you need to adjust for taxes, the System 1 remains impressed.
Let me guess: you’re from Poland?
Slovakia, but I guess the situation is similar.
Like ir35?
https://www.gov.uk/guidance/understanding-off-payroll-working-ir35
That misses the point about transaction costs driving the emergence of the firm in Coase’s argument. As I recall the key transaction cost was was not really search related but that for 100 people to work together with some form of legal agreement each person must contract with 99 other people. Once the firm exists then the majority of those contracts go away and the firm contracts with 100 people and the 100 workers have no contract with one another, just the firm.