Workplace Benefits to Benefits for Working
By: Dr. Carmen Rojas and Rachel Schneider
Over the early 20th century, workers across the U.S. won a set of workplace rights and benefits, ranging from overtime pay to protections from workplace harassment and discrimination. These protections, along with the use of collective bargaining to set wages, helped spur the greatest distribution of wealth in U.S. history between 1945 and 1979. Workplace benefits helped to create a strong middle class that could purchase homes, afford higher education and, most importantly, raise children knowing that their lives would have greater opportunity and mobility than their own.
Today, we live in radically different times. For the vast majority of workers, existing workplace benefits no longer ensure wellbeing. This is particularly true for workers of color, working women, immigrant workers, and the 50% of all U.S. workers who earn less than $15 per hour.
There are many reasons why today’s workplace benefits do not meet the needs of so many workers. Many professions in sectors across the American economy, from domestic employees to independent contractors, were specifically excluded from these benefits’ protections, and existing labor laws are woefully unenforced. The root cause of these gaps is the fact that many protections for working people in America were added piecemeal to the books. Rather than being codified by a single, comprehensive labor rights law, they were established as the courts righted individual wrongs, Congress introduced new wrinkles to the tax code, and individual legislators advanced pet projects. There has never been a grand unified or coherent plan that ties together the package of benefits that people should expect in exchange for work in the U.S.
Today, as the nature of work shifts in dramatic and uncertain ways, we have an opportunity to imagine, test, and scale a new set of policies to promote workers’ well-being. To do this, we should begin with this question:
What system of social and economic benefits would we create — if we were starting from scratch — to enable all working people to live lives of dignity, abundance, and opportunity?
Instead of half-heartedly supporting what is politically palatable, we should boldly create new solutions that meet the real needs of working people. While some of these solutions may require dramatic changes to our labor law, they do not necessitate a complete restart from zero. Instead, we should use existing policies and practices as points of departure from which to offer complete, coherent, and accessible benefits to all workers. Practically speaking, we should keep what works, lose what doesn’t and add what’s missing.
Keep What Works
Buying in bulk. Optimizing Design. Fair Contributions.
Three aspects of America’s existing workplace benefits work well. First, when employers deliver benefits like retirement savings accounts or health insurance to workers, they are essentially buying these benefits in bulk. Pooling a group of users drives down the cost of delivering services. Under a pooled benefits system, financial service companies can avoid the expensive, time-consuming process of acquiring customers one by one and can instead sell benefits packages to employers directly. The resulting sales cycle can be slow and has its own complications, but it ultimately enables the delivery of higher quality, lower-cost services. Creating universal mandates is a related strategy that similarly helps address providers’ need to achieve critical mass in order to deliver benefits services efficiently.
Second, when employers deliver benefits to workers, there is an opportunity to design structures that make worker well-being an intentional outcome as opposed to an accidental consequence. The most notable example has been the use of automatic 401(k) enrollments that make worker and employer contributions to a retirement account automatic at the moment of eligibility. Employers who design their retirement savings plans so workers save automatically, with the opportunity to opt-out, see far greater savings participation than employers who don’t. Any new benefit structures should continue to put design that leads to well-being front and center.
Another structure that should be kept intact is the expectation that businesses will contribute to worker benefits, including sick leave, family leave, health insurance, or savings. Healthy, financially-secure workers are more loyal and more effective at work. Businesses see a measurable boost in both productivity and profitability when their workers live lives of dignity, abundance, and opportunity. Financially healthy workers are also future customers, with greater buying power, which reinforces a virtuous cycle of economic growth. Plus, it is the right thing to do to share prosperity more broadly. Competitive pressures act as a disincentive here, encouraging a race to the bottom, but in the long run, workers are key to businesses’ success and those firms that tie their fates to their workers’ well-being tend to be more economically successful than those that do not. With all of this considered, it just makes sense for businesses to be required to invest in improving their workers’ lives.
Lose What Doesn’t
Sadly, the majority of working people in the U.S. today are left out of current workplace benefit structures. Only a quarter of workers have a pension,
and only half have money saved in a defined contribution plan like a 401(k) or 403(b). Even after the passage of the Affordable Care Act, 12.2% of Americans still do not have health insurance, and even for those who do, premiums, co-pays and deductibles have been rising. According to the Brookings Institution, 28% of workers have no paid sick leave, leaving them to go to work even when sick or suffer the consequences in the form of unpaid bills.
Making this matter worse, lack of access to paid sick leave is particularly prevalent among low-paid U.S. workers, with 69% of the lowest-paid 10% of the workforce and 81% of food preparation workers having no paid sick leave. Additionally, the Pew Research Center found that 86% of the U.S. civilian workforce (workers in private industry, local-, and state government) have no paid family leave. As a result, far too many U.S. workers are forced to quit their jobs to care for their loved ones.
All of this indicates that the design of today’s benefits fails to reflect the lived experience of workers in the U.S. The system of tying benefits so that they are fixed between one worker and one employer ignores the reality that most working people in America work far more than three jobs over their lifetime and often work more than one job at any given time. For example, younger Baby Boomers (born between 1957–1964) have held an average of 11.7 jobs between the ages of 18 and 48, according to a 2015 Bureau of Labor Statistics study. An increasing number of workers today also traverse different occupational classifications — from W2 to 1099 — with little support from the existing set of rules and benefits governing working relationships.
Establishing universal portable benefits would be a major move forward toward solving this problem. Employers and labor leaders have come together to articulate principles for delivering a stable and flexible safety net for all types of work. They support the idea that work-related benefits, such as health insurance, paid leave, and retirement savings, should be portable, independent, flexible, universally available, and dispensed pro rata so that they can be earned by both full-time and part-time workers.
There are many reasons to move towards a set of benefits for working — as opposed to workplace benefits — by making benefits universally available. A big one is that it levels the playing field, so that employers don’t have a race to the bottom of who can reward workers the least. Benefits for working give workers greater freedom and mobility. Workers who are not tethered to a specific place of work for health insurance are far more likely to seek a different or better job if it comes along. Benefits for working are intrinsically fairer, because they enable part-time workers to earn benefits as well, pro-rated for the time that they work. Benefits for working could also be designed to include caretakers, acknowledging the socially and economically invaluable work done by people when they exit the formal workforce to care for children or ailing relatives.
Add What’s Missing.
Benefits that solve workers’ most pressing problems.
It is true that workers will benefit if retirement and healthcare benefits are portable and universally available. However, their most pressing needs show up earlier than retirement and more regularly than major healthcare emergencies. Benefits need to be created to solve for those challenges, too. That is why The Workers Lab and The Rockefeller Foundation launched the Design Sprint for Social Change to tackle what we are calling the “$1,000 problem.”
One of our first steps in the Design Sprint for Social Change was to talk directly with 1099 contractors — the focus of our initial pilot. The stories that they told us were familiar, echoing themes highlighted in the U.S. Financial Diaries project.
● Savers without Savings: One of the most common solutions offered to workers’ short-term financial needs is savings. The truth is that workers DO save, but their savings do not accumulate enough to meet all of their needs. Almost everyone we talked with has a savings habit. For example, one worker “saves a bit each week,” while another “treats savings like a bill and automatically transfers it.” Yet only a handful of the people we interviewed said they could pull money for a $500 necessity from savings. Given that incomes have failed to keep pace with the rising cost of living for decades, forcing workers to rely on savings alone places an unfair burden on workers who are simply not earning enough.
● “Magic Math”: Everyone has a system to make ends meet. Out of necessity, people find ways to deal with shortfalls, and life’s ups and downs, but many of those ways (e.g. payday loans) overwhelmingly burden poor workers. Everyone, at all income levels, experiences unexpected expenses, but those with no financial cushion are asked to do “magic math” or experience devastating consequences. Almost half of Americans cannot come up with $400 without borrowing or selling something.
When we asked contract workers what they do when they need an amount similar to that, we heard: “I would drive more, as long as could afford gas upfront,” or “first I would work, then I would ask Grandma.” One worker said: “I would take vacation days from my other job and drive on a [ride-sharing] platform.”
● Volatile Cash Flows: Financial volatility is a newly-understood problem. The spikes and dips that come from uncertain earning keep the lives of millions out of balance. Today, many working people experience volatility in hours, volatility in classification, and volatility in earnings from week to week. Spending is just as volatile. Sometimes, this is the normal ups and downs of complicated lives. Workers told us about needing money for “new tires or a new car motor” or a “suit for a relative’s funeral.” But, sometimes, spending is postponed or people go without, because they don’t have the money at the time that they need it. Workers need better ways to access the right money, at the right time, so that they don’t have to postpone or forgo needed spending until their earnings spike upward.
All of the people we interviewed are working, and yet, they do not have secure economic lives. This may help to explain why, when Americans were asked by the Pew Charitable Trust whether they would prefer greater economic stability to moving up the income ladder, 92% chose stability.
We don’t think that’s because people no longer believe in, or want, the economic mobility that is promised as part of the American Dream. We think it is because the ups and downs of the here and now crowd out confidence in achieving that mobility.
Addressing the most pressing needs of workers requires developing new benefits that enable workers to live lives of dignity, abundance and opportunity, even when their underlying financial lives are volatile. Thus, not only do working people need retirement and healthcare benefits that are portable and universal, but they also need new kinds of workplace benefits that help them access small bursts of cash when they need to.
Benefits for Working
The word “benefit” connotes a perk. It means something extra, something special, something voluntary. A benefit is not necessarily something that is expected or required. It’s a “wants package.” But, basic financial security is not a want. It is a need.
In this blog, we start the crucial work of reimagining a set of benefits organized around working people’s real needs. To create these benefits in the real world, we will need a fundamental paradigm shift — one that rearticulates benefits not as a bonus, or a lucky break, but as required for worker well-being — and that shifts from narrowly defined workplace benefits to universally available benefits for working. As we embark on this journey to put essential benefits in the hands of working people, we must recast the term altogether. Benefits should no longer be seen as a privilege for those who can afford them, those with special skills, or those who win the “good boss lottery.” Instead, we should understand that benefits for working that enable workers to live lives of dignity are earned and deserved.
Dr. Carmen Rojas is the Co-Founder & CEO of The Workers Lab, an organization that funds experiments and innovation to build power for working people. Rachel Schneider is Co-author of The Financial Diaries, and the Omidyar Network Entrepreneur-in-Residence at the Aspen Institute Financial Security Program