Eli5 How is it cheaper for a factory/company to hire contractors for basic work when there employees they hire are paid less per hr?

Question

I work for a contractor and I’ve always wondered why they hire us when I get paid $30 a hr and obviously my boss is making a cut on top of that. But the company I’m painting for only pays there employees $18 per hr? Wouldn’t it be easier just to hire an extra employee to preform simple tasks like painting, shoveling stone, ect these are all none skilled labor jobs.

In: Economics

Answer 1

Sometimes, rich corporations want to be even richer. But they don’t want to share their riches with peons. So instead they structure their business so other people with fewer resources have to do the messy business of dealing with real human beings, who we’ll call workers for the sake of this explanation.

Now, because the rich corporations and their owners (“hedge funds” and “private equity” and “investment houses” and “rich people”) view other humans as “capital” or “resources” (like buildings or consumables like oil or paper), they also view dealing with real humans to be not only beneath them but a big pain. Humans need things like pensions and healthcare and things that might cause a rich person to have to wait another day to buy that sixth yacht they’ve been desiring recently. So, they have devised a way to use humans like kleenex without having to deal with those messy profit-siphoning things like vacation days or health insurance.

Sometimes smaller companies are hired to do jobs the rich people and corporations don’t want to worry about, and their job entails, among other things, having to worry about those nasty gross poor and middle class people they call “employees.” Now, those smaller companies don’t have as many resources as the big companies, so the benefits they offer to their workers won’t be nearly as nice as the big company can afford. But there’s hope! Some companies have even found ways to make individual workers into contractors, meaning the individual worker is left to seek all those messy benefits like retirement savings, worker’s compensation, and healthcare all on their own. Unsurprisingly this is both inefficient and much more expensive. But it isn’t more expensive for the rich people and their corporations.

tl;dr: it’s a way to get around worker protections workers worked hard to get a hundred years ago, because rich people gotta rich