As the Gig Economy Expands, Our Social Safety Net Shrinks
Within a decade, contractors and freelancers could make up half of the workforce. And most won’t have any work-related benefits.
Company managers have become remarkably inventive at finding new ways to call the people who work for them anything but employees. They’re contractors. They’re contributors. Or freelancers. Or consultants. Or contingent workers. Or self-employed. Or on-demand. Or project workers.
There’s a good reason they do: hiring employees can be as much as 20–30 percent more expensive than hiring independent contractors. Today, one in five jobs in America is held by a contingent worker, according to a new NPR/Marist poll. Within a decade, contractors and freelancers could make up half of the American workforce.
As this part-time piecemeal labor force grows, however, one important component is shrinking: a social safety net for those who make a living as part of the growing gig economy. The past century has seen a dramatic and well-deserved increase of labor laws designed to protect full-time employees, but many of those benefits and security nets — things like sick time, health and dental care, paid time off, maternity leave, unemployment insurance— are not available to the contingent workforce. While one portion of the working population is enjoying increased benefits, a growing part of the labor force sees its protections shrinking, and it’s a group that can least afford their removal. A Pew Research Center study revealed that an estimated 49 percent of online gig workers had an annual family income of $30,000 or less, whereas only 14 percent of those made $75,000 or more. Approximately 56 percent reported their gig income was essential to their overall financial situation.
“I’m not worried the robots are going to eat our jobs and there won’t be work in the future,” said Lenny Mendonca, Chair of New America, in an interview with Reinvent. “The bigger issue is the outdated nature of our social safety net. It’s still dependent on the idea of the full-time employee — who gets health care, a pension, unemployment insurance, and so on from one company. That worked fine in a world of stable employment, but lots of Americans no longer live in that world and plenty more will be joining them. Work is changing. The protection we offer workers should change as well.”
“Work is changing. The protection we offer workers should change as well.”
Safety nets, Mendonca says, have historically been tied to specific employment. This came, he said, “under the assumption that that was going to be where you were going to be for your life whether it was your healthcare, your retirement, provision of training. That’s not the way it happens today, and let alone where it’s going to be in the future. We need to think about decoupling those things.”
A growing problem
Instead, employers are increasingly attracted to the idea of not taking on full-timers. Sometimes, that temptation can land companies in court. Microsoft, for instance, lost a major lawsuit because it had labelled some of its engineers contractors and denied them stock options and other benefits, although they did the same tasks as regular employees. A slew of gig economy companies (like Uber, Lyft, Handy, Homejoy, among them) have faced legal action over the questions of whether their workers are classified as contractors or employees.
One increasingly popular idea that has arisen as a result of this growing problem is the idea of “portable benefits”, which would provide contractors and freelancers with access to many of the social insurance protections typically provided to workers through traditional full-time employment. Senator Mark Warner (D-VA) has suggested that we could use a similar system for benefits like workers’ comp and unemployment insurance that would respond to a dramatic shift in the American economy.
Last year, he and and U.S. Rep. Suzan DelBene (D-WA) introduced legislation designed to evaluate innovative portable benefit designs for the growing independent workforce. The $20 million grant fund within the U.S. Department of Labor encourages states, cities and non-profits to come up with new portable benefit models which provide independent workers with health care, retirement plans, life or disability insurance, sick leave, training and educational benefits. “We need … to ensure we have an economy that works for everyone,” Congresswoman DelBene said.
Fundamental rethinking needed
While the platform-based gig economy has largely been responsible for the lack of safety net, Mendonca sees it as a generally positive development. Gig workers have the opportunity to be self-starters, determining when and where they want to work, he said. Income from contingent work also provides workers the freedom to leave another job or make ends meet if they are laid off.
But while the nature of work is changing rapidly, our worker protection policies largely remain tied to a 20th century model of traditional full-time employment. “I’m worried about the transition,” he said. “I’m worried about whether our political institutions and our educational institutions are up to the scale and pace of the challenge.”
Mendonca compares it to climate change, which leading-edge scientists understood decades before their findings were accepted. “We just said, ‘It’s something that’s a long ways away. We’ll fix it later.’ We can’t let that happen in the same way. We reacted too late to climate change.”
He believes that we need that same scale of thinking in considering worker protections, and that reinvention must come at every level, “from the way we elect people to our higher education and public higher education institutions, to how we think about our responsibility in the social safety net. Those types of things need the same fundamental rethinking.”
