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Gig Economy Companies Reclassify Workers as Employees

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Building a Safety Net for the Gig Economy

Can we design ‘micro-benefits’ for today’s world of on demand work?

The most visible face of computerized logistics is not what big companies do, but rather in a wave of apps that create new markets for small transactions: People sell car rides (Uber), rent out spare rooms (Airbnb), or are paid to do someone else’s grocery shopping (Instacart).

These corporate platforms — though backed by the familiar structure of large scale venture capital — are creating a fundamentally new reality for the people doing the work: Not careers, or even jobs, but flexible and fleeting micro-employment. It’s sometimes called the “gig economy.”

While these new arrangements are making work more flexible, they are also putting workers outside the reach of America’s existing social safety net. Protections like sick leave or family leave, which accrue gradually while someone works a steady job, are designed to be there when a person suddenly needs them so that work and life can stay on track. But those protections are most often given to employees (perhaps only full time ones) rather than to the on demand workers of the gig economy. The platforms for this work want to call their workers contractors, rather than employees, and there’s a courtroom battle over which classification applies. In fact, just today, the Department of Labor offered new guidance regarding the line between employees and independent contractors, noting that “[m]isclassification of employees as independent contractors is found in an increasing number of workplaces in the United States.” But whichever way that battle goes, Uber drivers aren’t likely to get strong protections from the company.

This is becoming an issue in the presidential campaign. Hillary Clinton, laying out her economic agenda in a campaign speech earlier this week, observed that such companies are “unleashing innovation but . . . also raising hard questions about what a good job will look like in the future.”

One option would be to redefine benefits so that they build up in a flexible, incremental way with each hour worked or each dollar of income — regardless of how many hours a person works at a given job, or how much they earn. Nick Hanauer and David Rolf, in the current issue of Democracy, propose this kind of flexible system, which they call Shared Security. They write:

An economy based on micro-employment requires the accrual of micro-benefits, and a twenty-first-century sharing economy requires a twenty-first-century social contract that assures shared economic security and broad prosperity. . . . Shared Security benefits would be earned and accrued via automatic payroll deductions, regardless of the employment relationship, and, like Social Security, these benefits would be fully prorated, portable, and universal.

As little as a decade ago, such a system might have been considered a costly logistical and accounting burden, but the electronic debits and credits of one’s Shared Security Account are nothing compared to the transactional complexity of the fast-growing sharing economy.

Hanauer and Rolf, in proposing this new and portable approach to employment benefits, also outline what they believe those benefits should be: a wishlist of labor movement priorities that includes an inflation-indexed minimum wage starting at $15, federally mandated overtime pay for many more hourly workers than are covered today, and the gender equity provisions of the proposed Paycheck Fairness Act.

Those particular protections may be politically controversial, but it’s hard to deny that we need a new way of providing some kind of safety net for workers in the gig economy. As the authors write, “corporate leaders [demand] certainty from government—usually in the form of lower taxes, smaller deficits, and less regulation . . . [but if] certainty is necessary for industry, then it surely must be true that their customer base, the American middle class, needs some of that certainty as well.”

Several startups are trying to provide income-smoothing and other forms of security for gig economy workers, and can likely play a constructive role. But these efforts are not likely to provide a fully satisfactory substitute for the public policies that protect traditional workers.

The authors conclude, “innovation also brings with it disruption, and if we want to preserve the economic security of the American middle class, then we need to respond with an equally innovative set of labor policies.” It’s a conversation we need to have.

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