Flexibility Meets Security: The Need for a More Portable Benefits Structure
Twenty-first century innovation is changing the American workplace far faster than our 20th century government and social contract can keep pace. The latest economic age has unveiled exciting new ways for Americans to connect to work, while opening up business opportunities we couldn’t have imagined in previous generations. But while great economic growth comes through creative disruption, the road to a new economy is not without potholes. As jobs disaggregate into tasks and micro-tasks, and firms disintegrate to support core functions with B2B and on-demand services, the relationship between businesses and their workers is changing quickly and dramatically, while our laws struggle to keep up. The result is that a large and growing number of Americans find themselves disconnected from many key workplace benefits and protections often taken for granted in more traditional employment. What we need to do is rethink and reform our nation’s social contract to better meet the needs of workers and businesses in the 21st century — including creating a more portable system of benefits so that Americans can enjoy the flexibility of new work arrangements without sacrificing security.
In the 1950s, when workers planned their future around a single company and line of work, leaders of business and labor built — and policymakers embraced — a safety net of health and retirement benefits provided by an individual’s employer. But employment is different from work — and the traditional definitions increasingly leave out many workers taking advantage of new opportunities and arrangements. For decades we have been shifting away from the paradigm of full-time, long-term relationships between workers and a single employer. The rise of the on-demand economy and other new models for pairing labor supply and task demand make it clear that yesterday’s social contract fails to meet the needs of workers and businesses tomorrow.
On-demand work offers a lot of upside for individual earners and established businesses alike. Never before has it been easier to bring goods to market, or to find and connect with customers interested in the products and services an entrepreneur might provide. Never before has it been cheaper or easier to start, build, and grow a business — with lower costs, higher productivity, and more efficient use of resources and assets. With a few clicks of a mouse, homemade goods can be sold on Etsy, handyman services can be provided through TaskRabbit, ride sharing can be offered through Lyft. If you have a car and a smartphone, you just might have work waiting for you. If you have a laptop and an idea, you can start a small business — no storefront necessary. And with a few million lines of code, an innovative startup with a scant few employees can reinvent an entire industry.
Entrepreneurship is empowering, and independence and flexibility in your worklife is liberating — but with greater distance between a business and its workers comes a shifting of risk. How will workers save for retirement without the simple vehicle of an employer sponsored plan? How will we protect workers against periods of income insecurity and volatility if unemployment insurance — a model designed exclusively to interact with the traditional model of employment — no longer serves a growing population of non-employee workers? How will we pool risk to keep costs low for important insurance products, like disability or workers compensation, without an organizing body like an employer or a union? And how do we protect and promote worker voice? How do we enable hard working Americans to harness the benefits of flexibility in this new age of capitalism, while still ensuring they have economic security?
Earlier this year, we released a survey in which we asked on-demand workers if they like the flexibility and independence of their work arrangement, or if they would prefer the security of more traditional employment — and the responses were split (43 versus 41 percent). But policymakers and leaders from all sides should reject the choice in the first place. In the 21st century, we should embrace the benefits of flexibility, without sacrificing economic security for hard-working Americans. Our mobile and flexible workforce needs more portable and flexible protections — and that challenge is one that workers, businesses, and government need to help solve together. Innovation in industry must meet innovation in policy to design a new system that can work better for more Americans. And it isn’t a left/right political issue — it’s a forward/past issue. The social contract of yesterday isn’t serving the reality of workers and businesses today or tomorrow.
The idea of creating a more modern and portable benefit system has been gaining momentum in policy conversations around the future of work over the past year. Back in November, a bipartisan group of over 40 leaders from industry, worker advocacy, and policy came together to call for a new portable and flexible safety net that can support independent workers in all types of arrangements. Their statement of principles was simple: benefits should be independent of the source of income, universal to cover workers in any arrangement, portable to be taken in and out of a variety of work scenarios overtime, flexible and pro-rated to be contributed to from multiple income streams simultaneously, and adaptive so that innovations in business and in the safety net can go hand-in-hand.
In December, we at the the Aspen Institute’s Future of Work Initiative co-hosted a bipartisan discussion on portable benefits in Washington, DC. In January, President Obama mentioned the need for portable benefits in his 2016 State of the Union, and the President’s budget included a $100 million grant fund to the Department of Labor as well as a $5 million grant fund for the Federal Office of Mediation and Conciliation to support experiments and innovations in new models for portability. Together with the Aspen Institute’s Financial Security Program, we helped host a discussion on portable retirement benefits in April, followed shortly by a Department of Labor convening on the same topic. Just this month, Uber and the International Association of Machinists and Aerospace Workers announced the formation of a new Independent Drivers Guild — which might be the first step toward developing a framework for portable benefits for independent Uber drivers in New York City. And over the coming weeks and months, our Initiative will be releasing a series of papers by authors from across sectors, industries, and parties to preview some of the ideas that could frame out the future of a new social contract for the 21st century.
We don’t have all the answers — and reinventing the social contract to match a new generation is difficult, both substantively and politically. But these are conversations our nation’s leaders need to have, to support workers and businesses alike. The challenges of today are only a glimpse into the challenges of tomorrow — and flexibility in the safety net will be one key element to ensuring that we don’t sacrifice the economic security of hard-working Americans nor the benefits of innovation from our smartest business minds.
