Why you should care
Because America needs to decide if we want dignity, benefits and protections for all workers, or just for employees.
OZY’s educational wing, OZY EDU, is touring the nation’s colleges to bring important conversations into the classroom. First up: The Future of Work. We’re exploring how everything from automation to the gig economy is reshaping work, and how the education system can keep up. Read more.
A funny thing happened when I started working on a story about the gig economy, also called the freelance economy, which is enabled by digital platforms like Uber, TaskRabbit and Airbnb. At times, it felt like the tale of two economies — one where flexibility, autonomy and diverse sources of income set workers free; and another where income instability, uncertainty and a lack of benefits generate a lot of stress. So which is it?
Well, when it comes to work, it seems like freedom cuts both ways in America. Gigging lets you set your own hours and choose your own projects, but it also forces you to pay for your own health insurance, hustle for jobs and contribute to your own retirement account. Oh, and none of the protections offered under the Fair Labor Standards Act (FLSA) apply to you. Essentially, the U.S. labor market structure penalizes anyone who’s not an employee in a full-time job, says Diane Mulcahy, author of The Gig Economy. “For a country that is so enamored with the entrepreneur, we have a perverse way of supporting that.”
So what could change look like?
What rights should all workers have?
To back up a bit, the practice of attaching benefits like health care to full-time jobs only started in World War II, when price controls forced companies to come up with different ways to attract talent. It’s a historical quirk, but a significant one, since full-time W-2 employees continue to benefit from U.S. labor policies more than any other class of worker. They get unemployment insurance, workers’ compensation and legal protections under the FLSA, as well as benefits like health care. In general, part-time employees get minimum wage and some legal protections, but no benefits or unemployment insurance. The self-employed — independent contractors who file a 1099 — get nothing.
After the 2008 recession, this became even more of a problem, because jobs came back in the 1099 column, not the W-2 column. To put it another way: Demand for work came back, but full-time jobs didn’t. So why are we still tying benefits and protections to employee status when the whole notion of job security is changing?
It’s important to remember that the digital gig economy still represents only a tiny portion of contractor work, and the challenges for workers without benefits — many of whom work in retail, food services and construction — were here long before the first TaskRabbit delivered a bacon, egg and cheese at 3 a.m. What the gig economy’s done is shine a spotlight on the issue.
Some changes are already being suggested, like creating a new class of worker. A few digital platform companies, like Shyp and Hello Alfred, voluntarily classify employees as W-2s. Countries like the United Kingdom are exploring policies that would give contractors some, but not all, of the benefits of employees. This incremental approach is laudable, but it ignores the greater question, which is: What rights should all workers have?
Well, to start, let’s expand the FLSA to cover all classes of workers. Allow everyone who works the dignity of workers’ comp and unemployment insurance, and protections against sexual harassment and discrimination. The idea that you need to work a certain amount of hours for one company to earn those rights is ludicrous. Also, get rid of the self-employment tax. Currently, employers pay half of an employee’s share of Social Security and Medicare, but, when you’re self-employed, as Ben Zipperer, an economist at the Economic Policy Institute, points out, you have to pay it all. “That raises expenses in a way we often overlook.”
And then there’s health care. It’s not a coincidence that the rise of 1099 workers tracked the passage of the Affordable Care Act. Roy Bahat, head of Bloomberg Beta, a venture capital firm that invests in the future of work, says that every worker focus group they met with had the same top answer when asked what the government could do for them: “Pay for my health care.” “Truck drivers in Ohio were actually saying things like, ‘If Canada does it, why can’t we?’” says Bahat.
Obviously, these policy proposals, including expanding health care coverage, would be a heavy lift in Washington, to put it mildly. But they could actually increase innovation, not stifle it. “Workers crave stability,” says Bahat. “It’s the platform that risk-taking comes from. We tout the gig economy as freedom, and yet, paradoxically, people tend to take risks when they feel safe enough to take them.”
Think about it this way: Maybe, through the dignity of reliable worker benefits for all, we can give people the stability to really shake things up.