As U.S. states begin to reopen from the economic paralysis of COVID-19, they are beginning to explore recovery plans. The federal government has already implemented the most pressing recovery need: immediate financial assistance. But, when workers come back, the economy will not be the same. More stores will be online, more companies will be offering work-for-home. Of those jobs that are still available, many will be different.
A new economy will require new innovations for workers to earn a stable income. This blog post lists three ideas that I think will help states with economic recovery, using gig work and the safety net as illustrative examples.
One relatively low-lift way for states to experiment with innovative economic recovery ideas is to give companies the opportunity to test out new labor, education, and safety net offerings. For instance, Senator Mark Warner had proposed giving out grants to states to test out “portable” benefits (Portable benefits are things like health care, retirement funds, and workers compensation that stay with a worker no matter where or for whom she works. The benefits are not attached to a company, but to an individual as she moves from job to job).
But, new labor laws, such as California’s Assembly Bill 5, which created more stringent standards for classifying independent contractors, makes testing out a system of portable benefits legally risky for the very companies that could pay to develop them.
Fortunately, over the last decade, governments have discovered bureaucratic ways of opening up safe spaces for companies to innovate without having to worry about violating regulations. So-called “regulatory sandboxes” allow agencies to provide waivers for a limited number of users to test out a new product. According to the Utah-based Libertas Institute, the UK was an early pioneer in regulatory sandboxes with its “Project Innovate”, which has enticed well-funded tech companies to offer novel services to their residents.
Libertas notes that a number of states in America quickly followed up on the early success of the UK’s pilot program and have been active in providing opportunities, especially in the financial services and insurance sector.
Sandboxes can be created with minor legislation or entirely through the executive branch, which asks agencies to create an application process and a set of guidelines for companies to pilot products.
In regards to something like portable benefits, gig companies have been hesitant to offer healthcare or sick leave benefits for fear of violating misclassification laws. California agencies charged with monitoring worker classification could, instead, gather stakeholders from technology, labor groups, and government and agree on a set of guidelines for testing out worker benefits for the self-employed. Such a sandbox may be available for 100,000 workers in a few regions throughout the state and require a published evaluation of the pilot on worker income or other measures of financial stability.
I think a sandbox is a promising solution for pandemic recovery because it is both democratic and scientific. It is democratic because it involves gathering stakeholders to work cooperatively on a novel policy solution. And, it’s more scientific because it allows a period of rigorous evaluation before expanding access or changing laws.
As I’ve written before, self-employment can be an important part of economic recovery, as it allows workers to diversify their income streams. The more opportunity workers have to enjoy both flexible self-employment and also employee benefits, the better they will be able to transition out of the recession.
Worker Voice Through Deliberative Panels
The pandemic unearthed serious trust issues; after protests and large-scale defiance of orders, it was clear that policymakers and mainstream media outlets were going to have to work harder to earn the trust of many citizens.
Fortunately, in the past two decades, there have been a lot of innovations in bringing citizens into the policymaking process, especially in nations that have been racked by disaster or who have faced serious corruption charges.
One of my favorite strategies (that I’ve personally experimented with) is deliberative democracy.
Deliberative democracy is a process of bringing representative (and often randomly selected) citizens together to discuss issues directly with policymakers. Instead of just relying on elected representatives or bureaucrats to make decisions, the process of deliberative democracy pays a group of everyday citizens to become informed about a topic and then express their opinions directly with policymakers after extended discussions with experts and their peers.
The recent controversy over California’s AB5 is a good example of what happens when constituent voices are not intensively included from the process of lawmaking. After the bill passed aiming to reclassify independent contractors as employees, major occupational sectors erupted in protests, such as truckers and independent artists, many who got laid off from companies wanting to avoid the new regulations (the author of the law has since proposed amendments to rectify these issues).
Deliberative panels would probably have avoided some of these initial problems because the lawmaking process would have had to have done intensive outreach to make sure that stakeholders were properly included in the process.
Deliberations are relatively low cost, very well studied, and improve both legitimacy and efficacy of complicated policymaking.
Grants For Outcome-Based Retraining
Finally, I think it’s possible to view the coming recession as an opportunity for worker upskilling. People may be underemployed for many months after states officially re-open. Especially now that many jobs will be online, workers from anywhere in the country can begin taking classes and getting job experience in high-demand fields remotely.
But, the track-record on training programs is mixed. When schools and agencies are simply judged by graduation rates, they end up preparing workers with skills that don’t actually land them jobs. This is why I’ve written about and experimented with an outcome-oriented approach, income shares, where agency and school budgets are directly tied to graduates’ incomes.
There are already a few cities exploring ways of granting funding to schools, who will only get reimbursed for the cost of tuition should a graduate land a high-paying job. Setting aside a portion of the money to pilot these outcome-oriented loans could accelerate the adoption of more successful training.
Overall, there are opportunities for governments to collaborate with companies, nonprofits, and citizens to explore innovative ways to help workers recover from the COVID-19 pandemic.
*My statement of conflict of interest here.