How financiers are like illegal construction workers
In the U.S. finance and insurance sector, we estimate that in 2008, 34% of the workers are not covered by unemployment insurance…
Sub-sectors like Central Banks, Commercial Banks, Savings Institutions all had low, single-digit percentages of non-covered workers. However, when we get into sub-sectors like Securities, Commodity contracts and Investments, the majority of workers in the field (66%) are not covered by unemployment insurance.
The further we push into more esoteric forms of finance, the higher the percentage of non-covered workers: Miscellaneous Intermediation (84%); Portfolio Management (80%); Trust, Fiduciary, and Custody activities (81%), and so on. We’ve included the full breakout in .xls here.
So our theory runs like this — in the finance and insurance industry, there was likely a widespread use of the 1099 status, evidenced by the high rate of non-covered employees in the sector nationally. When the financial crisis hit, independent contractors were “laid off” from companies, but because they weren’t employees of the firms, they would not show up as a decline in the Quarterly Census of Employment and Wages.
This is a bit like the way in which construction-sector employment didn’t fall nearly as much as everybody thought it would when the housing bubble burst: because a large proportion of the people working in that sector were undocumented all along, they weren’t counted when they lost their jobs.
The financiers aren’t necessarily illegal, of course, although paying people on a freelance/1099 basis is of dubious legality when they’re working for you full time. But this does help to explain a large chunk of Mike Mandel’s chart, I think.