Few knowledge-based workers are as familiar with how Canadian corporations are reshaping the way they engage labour than IT professionals. Technology advancement, social media, and cheap computer hardware have impacted the way companies compete and the way IT professionals are employed.
One of the challenges is how governments will advance legislation in response to the reality that some people provide their services as full-time employees, while others do so as contractors.
By 2020, it is predicted that as much as 50 percent of the US work force will be providing services under contract. The Intuit 2020 Report, “Twenty Trends That Will Shape The Next Decade,” refers to contracting as one of the top emerging trends of the next decade.
A portion of contract work is held by job seekers who hope to find full-time, permanent positions. Others are in contract jobs because they simply prefer it that way. They may be in administrative roles or offer physical labour services. For many of these contractors there is a need to clarify government rules, regulations, and offer protection. Nowhere is this more apparent than in recent debates around hiring foreign workers.
Not all contract work is the same. A large amount of contract work requires a very specialized skill set that is in high demand, usually done by the knowledge worker. Many IT professionals fall into this category, often preferring and only pursuing temporary positions because they can actually make more money than as a permanent employee. It is this knowledge worker who commonly wants less government involvement while being free to be the entrepreneurs and innovators that our economy so desperately needs.
It is regrettable that our governments have yet to recognize these differences and accept the reality that the way corporations engage labour is changing. A recent discussion paper by McKinsey Global Institute, entitled "Help wanted: The future of work in advanced economies," contends that companies are redefining how tasks are carried out and driving new employer/employee relationships, with work going where that knowledge can be found. There is an endless number of specialized skills and knowledge that IT professionals can acquire; further enhancing these capabilities as they move from one contract assignment to the next, while creating security for themselves.
Knowledge-based workers who provide their services under contract are good for the economy. Apple estimated that for each knowledge-based worker that they employed, five local service jobs were created. Their claim was that the 100,000 knowledge-based workers they employed created 500,000 service level jobs in the US.
Regardless of whether this observation is accurate or would even apply in Canada, it can not be denied that knowledge-based workers on contract pay more taxes than their full-time equivalents. Government reports on the topic of Personal Service Businesses may suggest otherwise, and there is a misperception that contract workers pay less tax dollars. In fact, although their tax rates are similar, contractors pay more in absolute dollars, in addition to the HST on gross revenues, all flowing into the government’s tax coffers.
These changing employment models require the government to re-assess their policies and practices. They can try to push the penny uphill so to speak, applying a pre-information age mentality, or we can adopt a proactive approach.
Of course we must take steps to ensure that those in need of protection are protected. At the same time, we must revisit our dated government policies and practices that are forcing our best and brightest to over-contribute to the tax base.
Let the market forces reward the entrepreneurs and innovators in our midst while they continue contributing to this country’s economic wellbeing.