New labor market dynamics and technological innovations are transforming the way Americans work. By some estimates, over one-third of U.S. workers now participate in the gig economy, a term that resists easy definition but tends toward task-oriented work, which may or may not be electronically mediated. On-demand drivers, dog walkers, event and entertainment workers, freelance writers, and web developers are only a few examples.
Some observers see alternative work arrangements, including online platform work, creating opportunities for worker flexibility, autonomy, resilience and empowerment. But some labor activists see these changes overwhelming the legal and policy frameworks that have governed the relationship between workers and businesses for decades.
Many observers fear the benefits and protections historically associated with work are increasingly out of reach for a growing segment of the labor force. Others note the limits of those historical protections, especially for marginalized communities. They point, for example, to a widening racial benefits gap within the employer-provided benefits regime that characterized much of the last century.
Non-traditional workers, including independent contractors, on-call and temporary workers may have a great need for a benefit safety net, depending, in part, on whether these work arrangements serve as a primary source of income or a supplement. Yet they tend to enjoy considerably lower rates of workplace benefit coverage.
Gig companies, which hire gig workers and may or may not use online platforms, maintain they cannot offer many types of benefits without risking significant legal liability or adopting business models that threaten the very flexibility prized by gig workers.
These companies have resisted classifying workers as employees. Classifying them as contractors instead avoids certain taxes and obligations, including workers’ compensation and unemployment insurance coverage, as well as compliance with many federal and state labor laws. The law around worker classification is notoriously complex, dynamic and sometimes blurry, with various multipart tests used to determine whether an individual is an independent contractor or an employee (depending on the type of inquiry and jurisdiction).
Policymakers, industry innovators, labor organizers and other experts are exploring the potential of portable benefits, or benefits that are linked to individuals rather than particular employers, as a way to expand worker financial security and drive broader economic prosperity. Portable benefits that follow workers are not a new idea (think COBRA health insurance coverage and even Social Security).
But with today’s tectonic shifts in the workforce, state policymakers are weighing which benefits should follow workers from job to job, along with eligibility, funding and administration considerations. Meanwhile, industry leaders are stepping into the breach with new products that leverage fintech and behavioral economics, and institutional innovators are thinking through new models for worker organization and benefit structures.
What combination of workers’ compensation, unemployment insurance, retirement benefits, paid leave, health insurance, and workforce development opportunities, such as skills training or education, should be deployed to support gig workers? Should benefits be individualized, e.g., stipends to offset health insurance costs; privatized, e.g., occupational hazard insurance; and elective; e.g., requiring workers to opt-in and/or direct funds toward the benefits they value most? Or should they more closely resemble the suite of benefits that has historically characterized employer-employee relationships?
Who exactly should be eligible to receive these benefits? How should worker organizing rights, classification issues, and other legal protections be addressed in this context? And what are the appropriate roles of government actors, businesses, customers and workers in paying for and administering these programs?
Did You Know?
- A study commissioned by Mastercard expects the flexible economy to grow 17.4% annually, representing $455 billion in global activity through the end of 2023.
- Non-traditional workers tend to receive considerably lower rates of workplace benefit coverage.
- Since 2018, state lawmakers in at least nine states have introduced legislation that would establish portable benefits programs for gig workers, create funds to foster innovative experimentation in this area, or study related issues.