The rise of the so-called “gig economy” — loosely defined as a market of freelance, self-employed and contract workers, often with low-to-median skill levels, who make a living performing a succession of short-term assignments — has been changing what it means to have a job in America. As those effects continue to be seen across the country, we should welcome a growing number of experiments with alternative ways to provide what long have been considered essential workplace benefits and protections.
For more than 80 years, federal and state labor laws have taken for granted the existence of clear lines between employees and contractors. Employers set employees’ schedules and exercise significant control over how they do their jobs; in exchange, they are held responsible to provide certain guaranteed benefits.
Independent contractors have flexibility to arrange their own time, but they also are responsible for obtaining their own benefits. These fixed concepts of employment status are incorporated into rules governing everything from overtime pay to pensions to workers’ compensation to health care.
But those boundary lines have become fuzzy in recent years. Research by Freelancers Union and the online marketplace Elance-oDesk finds there are now 53 million American freelancers making a combined $715 billion in freelance earnings. A growing number of these freelancers offer their services through platforms — from transportation network companies like Uber and Lyft to more broad-ranging apps like TaskRabbit and Thumbtack — that make use of labor arrangements that straddle the line between independent contractors and traditional employees. These workers want the flexibility to set their own schedules and not to submit to the control of a full-time employer. But they’d also like access to benefits that, under current law, firms could not offer without classifying the workers as employees.
Many have noted that what’s needed is a “third status” that combines features and responsibilities from both contract work and employer-employee relationships. Toward that end, the Portable Benefits for Independent Workers Pilot Program Ac t — introduced last month by Sen. Mark Warner, D-Virginia, and Rep. Suzan DelBene, D-Washington — would provide $20 million in seed funding to state and local governments and nongovernmental nonprofits to find ways to extend benefits and other workplace protections — including paid leave, workers’ compensation, skills training, unemployment insurance, tax withholding and tax-advantaged retirement savings — to freelance workers. Such experiments could help discover the best ways to resolve a host of thorny issues surrounding portable benefits.
But government-sponsored programs aren’t the only way to tackle these issues. There are encouraging signs the private sector also is stepping up to the challenge. In Pennsylvania and several other states, Uber has launched a test program to allow drivers to opt into a kind of injury-protection insurance. The company gives drivers the option to dedicate revenues from a 5 cent per-mile price increase to purchase insurance for medical costs, income replacement and survivor benefits that stem from a work-related accident.
According to Uber, the coverage would apply the entire time the driver is on the Uber app but the premiums would be based on passenger mileages. If a driver chooses not to participate, they can pocket the entire 5 cents per mile increase.
Programs like Uber’s extend protections similar to workers’ compensation to workers who aren’t technically classified as employees. Similar to traditional workplace benefit packages, it also gives the company a competitive edge by offering incentives to drive for them, rather than a competitor. Best of all, it keeps the government from monkeying around with an economic ecosystem that thus far has proven successful and capable of coming up with solutions to handle issues as they continue to grow.
The gig economy will face many challenges as it vies to become a more permanent part of the U.S. economy. Regulators and lawmakers should be cautious not to curtail these kinds of experiments as the industry goes through these expected growing pains. The same system that figured out how to deliver on-demand car rides also can figure out how best to come up with fair and competitive arrangements for the new working world.