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Will Gig-Economy Workers Ever Have Benefits?

Soon, many will lack the social safety net that employers have traditionally provided. What happens next?

Senator Mark Warner (Getty Images/Ringer illustration)
Senator Mark Warner (Getty Images/Ringer illustration)

“You gotta have some level of social insurance. Otherwise, when really bad things happen, people will have to fall back on the government,” Senator Mark Warner (D-Va.) told me over the phone. The raspy-voiced senator is ginning up support for a bill meant to address how the rise of jobs without benefits is leaving a growing swath of American workers at risk for calamity.

American workers have long toiled in conditions ranging from precarious to abjectly shameful. (After all, this country did permit and, indeed, thrive on slave labor as it grew. It does not get any more repugnant.) During the Industrial Revolution, there was no overtime. There was no 40-hour workweek. There were child labor and wildly, fatally unsafe work conditions. By modern standards the history of worker treatment in the U.S. is a log of reprehensible behavior. However, recent history, from the late 1940s to the end of the century, is one in which reforms, New Deal legislation, and a booming economy coalesced to create more favorable conditions for the worker. One improvement was that employers began providing benefits. In certain sectors, like Silicon Valley, employees are now treated to lux perks far beyond basic benefits, shuttled in pristine private vehicles to lavish campuses. And yet, around the country, less fortunate workers have been losing access to even basic benefits as the jobs available to them move from full-time status to that of an independent contractor or a person with another nonstandard work arrangement.

As more people make their livings in this “contingent workforce,” whether they are agency temps, Amazon delivery workers, Uber drivers, Postmates couriers, or adjunct professors, they often do not have ready access to affordable benefits like retirement funds, family and medical leave, and workers’ compensation. There’s also the issue of waning job security, which means they are more prone to financial devastation in the events of injuries, family emergencies, pregnancy, and aging, not to mention if the companies they work for commit wage theft, go bankrupt, or eliminate their position. Warner sees “portable benefits,” or benefits that are tied to a worker instead of to their employer, as a possible fix for this accelerating crisis.

Warner’s Portable Benefits for Gig Economy Workers Act would give the Department of Labor a $20 million budget to award to portable-benefits pilot programs. (As a sidenote, Warner is also involved in the James Comey hearing; as a member of the Senate Intelligence Committee, he’ll be asking the former FBI director questions when he testifies Thursday.) It’d be more of an experiment than anything resembling a major policy change, but the bill, which he introduced May 25, is nonetheless notable as a rare legislative stab at mending the social safety net frayed by the gig economy. (In the House of Representatives, Washington state Democrat Suzan DelBene introduced a corresponding bill.)

This problem is not confined to Silicon Valley’s algorithmically beckoned fleets of chauffeurs and odd jobbers. “While the hot area of focus is the ‘gig’ or ‘on-demand’ worker, we want this to apply to everyone who is in the contingent workforce, which is a much, much bigger number,” Warner said. This means that the bill would apply to temp workers and plumbers as well as Uber drivers and Postmates couriers. The contingent workforce keeps growing. The McKinsey Global Institute found that 20 percent to 30 percent of U.S. and European workers were in the gig economy in 2016. This year management software company Intuit stated that 34 percent of workers are already contingent, and Warner told me that he expects more than 50 percent of the workforce would be made up of “contingency workers” over the next 10 years, a commonly cited statistic.

Some industries that have long relied on contingency workers, like construction, already have forms of portable benefits in place. For example, many construction workers have something called “multiemployer pension plans,” in which more than one employer contributes to a retirement plan. Many of these older iterations of portable benefits are organized by unions, such as the Teamsters’ master freight agreements, which have provided benefits to truck drivers since 1964. But in industries that have more recently switched from hiring traditional employees to hiring on a gig basis, this sort of benefit setup remains a rarity. What’s more, because many of these newly gig-style industries do not have the guild-union muscle that organizations like the Teamsters have, they don’t have the same leverage that’d enable them to persuade employers to participate in this kind of agreement. And in some cases, such as with Uber drivers, unionization efforts have been fraught, as independent contractors do not have federal legal rights to unionize. In Seattle, Uber has fought a landmark law that did permit a section of local drivers to form a union.

So far, Warner’s bill has garnered support from a wide variety of industry players. The Freelancer’s Union is one of the first and largest organizations to offer portable benefits to digital workers, and it plans to apply for pilot-program funding, said its founder, Sara Horowitz. “What Senator Warner is doing is pioneering because he’s starting a national model to kick things off,” she said.

The Independent Drivers Guild, a quasi-union group (it offers representation but no way to effectively collectively bargain) funded by Uber and representing more than 45,000 New York City drivers, is all for it. “We are excited to see federal legislation that will enable innovation and expand opportunities for gig-economy workers to gain access to benefits. Gig-economy workers and their families need benefits and protections just like traditional employees,” founder Jim Conigliaro Jr. said in a statement. “Unions and government officials must not let these workers fall through the cracks. I applaud Senator Warner for standing up for workers regardless of their classification.”

Even Uber itself claims to like the bill. “We’re pleased to see Senator Warner introduce legislation to encourage real-world study of portable benefits,” Uber’s federal affairs head, Niki Christoff, said in a statement provided to The Ringer. Lyft and Postmates also endorsed the bill.

Travis Kalanick’s PR team is one thing, but will Republicans go along with the idea of expanding social benefits? Despite traditional party-line deviations, Warner thinks so.

“There’s real interest in people having something so that they don’t have to fall back on government-sponsored programs like government welfare or Medicaid,” he said.

Another reason Warner expects some bipartisan support is because the bill does not specify which sort of organization can supply these benefits, which means they could be run by private organizations. “Could it be a local government? Yes. Could it be a union? Yes. Could it be a finance-tech company like the Honest Dollar Group? Yes,” Warner said. “I think it’s way too early to tell what exactly is the right model.”

While the bill is open to all sorts of organizations in theory, the pilot programs might end up simply becoming incubators for private benefit brokerage companies without shifting any responsibility for the benefits back onto employers. For instance, the Honest Dollar Group, which is owned by Goldman Sachs, offers different retirement plans for individual purchase. If the majority of the pilot-program funding goes to companies like Honest Dollar, that means they would skew toward programs where people flat-out purchase their own portable benefits. The bill allows for wiggle room when it comes to who pays for the portable benefits. Some programs, for example, may also require employers to pay, or might expect contributions from both parties; but, again, they might demand nothing of companies and everything of their workers. And in that case, the rise of portable benefits might lead even more companies to stop offering traditional benefit arrangements by attempting to shift even more of the workforce into independent-contractor status.

“It’s a very fair concern,” Warner said. “You don’t want people suddenly to reclassify a lot of workers in a way to avoid paying benefits. And that’s something you have to be careful about.”

There’s another sticky element to the concept of portable benefits as provided by Warner’s bill: While it avoids explicitly wading into the issue of labor classification, it is aimed at independent contractors, not employees, which means it doesn’t necessarily line up with the intentions of labor advocates and other organizations hoping for broad reclassification of large groups of gig-economy workers as employees. Uber has faced several class-action lawsuits in which drivers who derive much of their income from the company are arguing that they are employees, not contractors, with some legal battles still ongoing. Meanwhile, several gig-economy companies, including popular grocery-delivery startup Instacart, have preemptively offered employee status to some workers. A few have done away with contractor positions altogether, like NYC-based butler service Alfred.

“You have some old-school labor people saying they want to make this a fight about labor classification, but I just don’t think we’re going to go back to the time where everybody works for the same company for 30 years, for their whole life,” Warner said. “What I would see for now is, let’s try which models work, and try to avoid the labor-classification battle.”

Warner noted that battles of labor classification are likely to be long and drawn out, and that he is looking for a more immediate solution. But critics see this as a concession.

“These types of initiatives [like Warner’s bill] sell the farm before you have to. That is, they give up on the essential question: Are these employees or independent contractors? I think that is a huge mistake, because I think a large section of these people are employees under current employee law,” Marquette University employment law professor Paul Secunda told me, stressing that people who are technically independent contractors but who do “gig” work on a full-time schedule deserve to benefit from employee-protection laws like the Employee Retirement Income Security Act.

Secunda belongs to the camp that would rather see more people in the gig economy reclassified as employees and then treated as such. He cited legislation introduced by Senator Orrin Hatch (R-Utah) that would allow employees with multiple employers (like someone working for Uber and Lyft) to cobble together a retirement plan with proportionate contributions from both companies. (Nothing has happened with the bill since November, though.)

There is also a third camp, one that is looking for middle ground between accepting that gig-economy workers are independent contractors and attempting to reclassify them as full-time employees. Former Obama administration economic adviser Alan B. Krueger and former deputy secretary of labor Seth D. Harris published their own plan for portable benefits through the Brookings Institution in 2015, one that would require the U.S. to create a third category of worker, an “independent worker,” which would “occupy the gray area between employees and independent contractors.” This is similar to Canada’s “dependent contractor” setup, and while it seems like it could be a strong compromise between keeping gig workers as contractors and giving them full-fledged employee status, bringing it to the U.S. would come with a distinct challenge: None of the country’s labor and employment laws are equipped to deal with this category. “We would have to reform all of the law to decide what the appropriate definition for dependent contractor is, and then, once we come up with that definition, who gets benefits and under what conditions. In my view, it would be very cumbersome,” Secunda said. The concept of a third class of worker has also been floated by Warner in the past, although he seemed far less certain that it would work when I spoke to him last week. “At one point, I thought about a third worker classification, but I’m not sure. It may still end up there, but I think it’s way too early. I don’t think that’s the solution I would go to now,” he said.

In 2015 venture capitalist Nick Hanauer and labor organizer David Rolf published a paper called “Shared Security, Shared Growth” in Democracy. The pair argue for a series of changes to respond to the rise of the gig economy, including a specific scheme for portable benefits called a Shared Security System, which they compared to Social Security.

“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,” the duo wrote. In Hanauer and Rolf’s imagining, portable benefits are partly shouldered by the worker, but employers would have to pay a $15 minimum wage, raise the threshold for mandatory overtime pay to anything below $69,000, and be obligated to allow people to use the paid leave they accrued. In other words, portable benefits in their conception is just one part of a much more comprehensive overhaul, one that would be a far tougher sell than allotting the Labor Department some funding money to play around with.

Former labor secretary Robert Reich, who served during the Clinton administration, also laid out an idea for gig-economy benefits in 2015. “Whoever pays more than half of someone’s income, or provides more than half their working hours should be responsible for all the labor protections and insurance an employee is entitled to,” he wrote on his blog.

Meanwhile, the portable-benefits plan laid out in writer Steven Hill’s 2015 New America article “New Economy, New Social Contract,” envisions something called an “Individual Security Account” for each gig worker, but one into which employers are required to contribute a sum commensurate with the number of hours worked. (It appears 2015 was a banner year for portable benefits manifestos.)

Again, making these types of schema mandatory would require considerably more contentious and wide-ranging legislation than pushing a pilot program through Congress. Legislation altering employment law in favor of workers, anything shifting responsibility back onto employers, would likely be fiercely contested. And in the current political climate, it is difficult to see how it would succeed, although Hill stressed to me that positive changes can be made without waiting for comprehensive federal legislation. “The thing is, we don’t have to do this at the federal level. A city government could do this. In San Francisco, they’re already talking about doing this,” Hill said. “It doesn’t have to wait for Senator Warner’s bill to pass. It could be done at a state level, and it could be done at a local level.”

“The Affordable Care Act helped to make your health care a portable benefit, to some degree,” Stanford University economics professor Paul Oyer pointed out to me, as the law has allowed people to individually purchase health insurance. But while the ACA is proof that large-scale benefit portability can occur, it was an administration’s cornerstone project; unless the Trump administration suddenly develops an interest in the social safety net, it seems unlikely the current White House or its Republican Congress will prioritize benefits.

If Warner’s portable-benefits bill passes (though it likely faces an uphill battle against the Republican-led Congress), it would signal that the government is at least aware of the growing segment of the population who lack the protections and benefits that traditionally came with employment. Even though it doesn’t touch the question of classification, it would at least help develop research about ways to ameliorate the struggles of people who work full-time schedules with zero-time benefits. It’s a sorry indicator of how low our expectations are for policymakers, given the scope of this pressing economic problem. At the same time, though, it’s a minor cause for celebration.