06/13/2010 05:12 am ET | Updated May 25, 2011

New Deal Safety Net Not Catching Today's Middle Class

The social safety net established as part of the New Deal in the 1930s is missing a huge swath of today's middle class, according to a new report by the Freelancers Union.

"The middle class is no longer made up of those blue-collar factory workers you think of from 50 years ago," said Althea Erickson of the Freelancers Union, a New York nonprofit that provides benefits to members across the country. "The new middle class are software developers, they're bloggers, they're psychologists, they're graphic designers. They're these workers that make up our membership and they really are driving the economy at this point."

According to the Government Accountability Office, there were 42.6 million "contingent workers" -- freelancers -- comprising 31 percent of the total American workforce in 2005.

Eighty-nine percent of the more than 3,000 freelancers who answered the survey said that they faced periods either without enough work or no work at all in 2009. By comparison, in 2006 freelancers found full employment at a 10-percent higher rate than this past year.

Unlike their counterparts with regular jobs, freelancers generally don't have access to group-rate health insurance, instead relying on the expensive individual market. And when freelancers lose work, they can't rely on unemployment benefits to pay for basic stuff like food and rent.

Nearly half of survey respondents said they dipped into savings set aside for other purposes; 37 percent put basic expenses on credit cards.

That's what happened to Jenny Troester, a freelance graphic designer in Glenside, Pa. who said last year was the first time her business ran a deficit. "Two-thirds of my client base is small businesses and I've watched so many of my clients fold," she said. "I've seen clients who've just disappeared who can't afford to pay for the marketing they need to do to keep their business going. And, unfortunately, because of that my business is suffering. It's the first year in 12 that that [my business] actually lost money and as a result I've wiped out my savings and started charging everything on credit cards."

"Even traditional workers who qualify for unemployment benefits can be disqualified by a small amount of self-employment income," the report adds. "Compounding that inequity, independent workers were largely excluded from targeted government assistance for the unemployed in 2009, such as the American Recovery and Reinvestment Act, even though they were unemployed at the same rates as traditional employees."

The Freelancers Union recommends setting up a parallel system where freelancers pay into a "tax-advantaged account" every month in return for help when they're out of work, an idea nearly all survey respondents said they liked.

Nearly half -- 47 percent -- said their foremost concern is losing health insurance coverage. Eighteen percent said they gave up health insurance last year; 35 percent said they had to switch to reduced plans. (A recent report by the Robert Wood Johnson Foundation found that people with yearly incomes between $45,000 and $85,000 are losing health insurance faster than any other income group.)

Forty percent of freelancers who answered the survey said that they have wasted hours chasing deadbeat clients for money owed, a problem the Freelancers Union has been highlighting in New York City.

Click HERE for a PDF of the report.