It simply shouldn’t be possible to enter a contract for less than direct hire wages and benefits, in cases where the contract is obviously a way of circumventing employment. Laws should be written such that circumventing the spirit of the law is also circumventing the letter.

I mean, it's not that the contractor can't get paid less, it's that they can't be contractors at all, even if the employer claims so.

[1] https://www.law.cornell.edu/wex/abc_test

I think this is legally dealt with where I am by ensuring that everyone is an actual employee of someone... if you are a "contractor" you are actually an employee of the body shop. You get paid on a w2, and thus aren't legally a "contractor"

From what i see, the body shops charge the employer 30-50% more than what they pay the employee (the range depends entirely on how good the employee is at negotiating, and tends to start closer to 50%, and move towards 30% as said employee is in the same position for a while)

But working as a contractor demands a substantial premium anyway, because the contractor is responsible for self-employment tax.

That's easily worth a 50% salary bump. It also often comes with tax advantages.

-- you can tax deduct a lot of things, of course, which include day-to-day travel, equipment (phone, internet, laptop), and much more. A part of rent. Let's not even talk about the SEP IRA you can use to further put away money for yourself and lower your tax burden. Unlike an employee 401k, you can decide to put a large chunk of your salary in an IRA at any time, including up until Apr 15 of the following tax year.

-- I'm about to find out, but the lower corporate tax may be a boon here

-- You work 40 hours, or whatever hours. Employees work INFINITE hours. Weekend work, on-call anyone?

I'm not sure what you mean by own HR. For healthcare, you can use the state marketplace or you can look into things like Freelancers Union. For paying tax, you have an accountant. For naughty behavior to report to HR, you have only yourself...

I can see why it is balancing out in general though. More investor money going into companies that prefer to hire full time staff rather than contractors would push up rates for permanent staff.

My perception is that salaries for direct-hire software engineers at top-tier companies have gone way up in the last ten years or so. My impression is that contractor wages are... keeping up with inflation.

Also note, my perception is that contractor interviews have not gotten much more difficult at all, while direct hire interviews have practically become contests of endurance; like you are expected to spend like 5x as much time on a direct hire interview than, say, 10 or 15 years ago, while you can do a contract interview over a long lunch.

Companies also seem to be okay paying Engineers very significant sales-style performance bonuses (in fact, this is where almost all of that increase in pay has come from) and this really helps them keep the gamblers; the people like me who jump every few years 'cause someone offered 20% more. (I mean, the bonus system is another system you need to learn to game, but it's not harder than the interview system.)

My speculation (and I'm totally unqualified to speculate on sociological trends, but you asked.) is that something has changed, and the cultural prestige of the Engineer has gone way up, and that this has changed management's willingness to spend directly on Engineer compensation.

I am a "linux systems administrator and programmer"

in silicon valley, me too. I mean, I'm sure that my lack of a degree gets my resume binned some places, but almost nobody mentions it, and there are plenty of jobs where they clearly don't care; I don't have trouble finding work.

My experience is that if I try to get a job outside of silicon valley (and especially if I try to get a job outside the USA) my lack of credentials becomes a big issue.

Part of this is cultural, I think, though a lot of it has to do with work visas. As a US citizen, I can vacation most places without too much trouble, but I still need to jump through hoops if I want to work elsewhere, and if I want to get a 'skilled worker' visa, they usually expect a degree.

Conventional employers/clients (e.g. your friendly diesel manufacturer) spend money on developers when they have a problem they want solved, they love expensive freelancers: if they could they would fly in a squad of experts, get a solution for a single lump sum payment and then hand it over for maintenance to that underpaid slob they keep in the basement.

Overfunded startups as well absurdly profitable SV success stories are a very different story. Building a talent pool is a core investment for them. In many cases they would rather have one good hire than two good ones and two bad because their immediate needs are already met and low performing hires are avoided not so much because of another head on the payroll, but because talent dilution is impossible to undo. They are not interested in adding quantity, but building quality teams is just the way they spend their money. Offers will be either high or nonexistent, and freelancers not welcome.

YMMV, but the quality of life, at least for me in Phoenix feels significantly better. I may not be making a quarter million or more a year as I might in SV, but I also don't have nearly the level of stress in my life.

I... think you may be mistaken.

I've heard that big companies have a total overhead of 40% for a worker, and that might be true once you factor in the cost of middle management and office space, though again it would vary a lot by pay (I imagine office space costs a large portion of a less well paid salary. Around here, quarter-million dollar a year SWEs get the same tiny desks you'd expect of someone making 1/4 that.)

but I've got a reasonable idea of what benefits cost, and it's nowhere near 40%, at least for a SWE in my jurisdiction, where total comp is so high and the benefits are... comparatively minimal.

1. health insurance

2. stock options

3. so-called "employer's contribution" to social security

4. 401k employer match contributions

5. sick leave

6. vacation

7. maternity/paternity leave

8. stock purchase plan

9. unemployment insurance taxes

10. 2 weeks severance pay

11. holiday pay

12. various legal rights contractors don't have

13. employer provided equipment that a contractor would be expected to provide

Here's the first hit on google:

https://www.bankrate.com/finance/financial-literacy/the-valu...

#1,3,4,5,6,7,9,11 add up to at most 30%

And #2,#8,#12,#13 could be worth 10%. I don’t think #10 is a guaranteed benefit, and usually is in exchange for forgoing any other grievances you might have against employer.

But that would be restricting it to highly paid, in demand professions. For other people (upwards of 80% of the US), many of the items on that list don’t apply to them, so I don’t see how it would cost 40% more for an employee versus contractor.

https://www.mysolo401k.net/solo-401k/solo-401k-contribution-...

A sole proprietorship is almost as easy to file as a 1099, and a good choice when a liability veil would be easily be peirced (as you're representing your own skills)

FICA is 7.65% up to $128k, then 1.45% after that. Health insurance is at most $500 per month (on average). That’s $6k/year, so somewhere around 3% to 12% of wages. Paid time off might be 2 to 4 weeks, so maybe 8% (4 weeks/52 weeks).

I don’t know how to value job security, possible severance, or being able to move up in a company, but it would have to be at least 20% to bump it all up to 40%. US has at will employment, so I don’t think I’d value that too much. Maybe you’re less disposable as an employee than contractor, but does it really matter if you don’t have union contracts stipulating certain processes?

However, I’d still charge at least double the hourly rate of an employed person to be a contractor since you need to cover the risk of not finding future work, but obviously that depends on what your competitors are willing to work for.

https://www.bls.gov/opub/ted/2018/mobile/employee-and-employ...

I suspect that there are 3 classes of people when talking about employee benefit costs (in a employee vs contractor discussion):

1) Private sector, high pay professional - I would agree benefits could be around 40%, but this also only applies to maybe top 20% of non government employee population.

2) Government employees, maybe even more than 40% considering their post employment benefits.

3) The bottom 80% of non government employees, who I doubt approach anywhere close to a benefit value equal to 40% of their pay.