ETA: I appreciate you taking the time to reply to my post. Thank you.
I think I had my lightbulb moment. People are comparing services like Upwork to a typical contracting arrangement in the U.S.
Amazon hires contract workers for their warehouses and perhaps they do this directly. Many other companies hire contracters through temp agencies.
Imagine walking through the door of Upwork as if it were some sort of temp agency. Imagine you meet with a rep who interviews you and goes over how the temp agency works, but it's actually the Upwork or Freelancer terms.
You would likely tell the rep that he/she is ing nuts and walk out the door. I can't imagine there are temp agencies which work like that. The closest I can think of is day labor, but I'm pretty sure those workers don't have to worry about getting paid at the end of their work day.
I guess I couldn't get this through my head because of how horrible of an idea it would be to me. On the other hand, I think playing slot machines is incredibly stupid, yet people love to do it.
People have a bit of a responsibility to understand the model of what they are dealing with. There are endless ways to make money, but not endless ways in which you will get protection. If you work for an employer, you get looked after and you're likely to get paid. If you try to make money trading, then you're likely to get chewed up and spit out. If you try to join an MLM scheme, then you better know how these things work or you won't get anywhere.
The model of running a business is that you better run your life properly. You better have your adult pants ready to go. Freelance software developers have it easy, most of the solo devs just lose their time when they get screwed. Back before the internet, an entrepeneur might lose everything (like my parents did).
I think there is a reality warp which people go through when they think of freelance software development. It's way too easy to shoot yourself in the foot by going this route and there is little to stop you. It's as easy as walking into a casino and walking out completely cleaned out. Perhaps the government should insist that Upwork places a warning label on its site, like a pack of cigarettes. It should put pictures of homeless people, just as an added scare tactic. Because it's a really bad idea to sign up with a service like this if you don't fully know what you are getting into.
You're right that a business can go bankrupt with one key missed payment or withheld check. But that's exactly why you need to be fully aware and ready for that to happen. You need to know what you are getting yourself into. If it happens, you brush yourself off and figure out what to do next. You don't expose yourself as the reviewer did. You keep it professional because it's going right into your history folder.
You're not going to get screwed like that working for a top 3 temp agency in the space.
NOTE: The above assumes U.S. or similar.