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On Creating New Government Policies to Deal with the Sharing Economy
Nick Hanauer and David Rolf outline a solution to what they (and Hillary Clinton, it seems) argue is a big, big problem right now: economic insecurity created by the growing sharing/on-demand/gig economy. Americans need a new social contract, one that brings more certainty and tangible benefits to all these part-timers and independent contractors. As they explain in Democracy Journal:
This is the new “you’re on your own,” benefit-free, race-to-the-bottom reality for millions of American workers. And as more new innovative businesses and business models are invented, this process will only accelerate. As the sharing economy kicks into high gear, more and more Americans will become independent contractors activated at the touch of a button on an app, working for a fleet of employers. … A robust set of mandatory universal benefits would put all employees and employers alike on an equal footing, while providing the economic security and certainty necessary for the middle class to thrive.
So what does this new social contract look like? It consists of two parts, what Hanauer and Rolf have termed a “Shared Security Account” and “Shared Security Standards.” here is how this system works:
Mandatory accrued benefits should include a minimum of five days a year of paid sick leave, 15 days a year of paid vacation leave, a matching 401(k) contribution, and the same health insurance premium contribution as currently required under the Affordable Care Act (ideally, health care would fall into the insurance benefit category, but that is a larger battle).
Employers—that is to say [the] entity [that] is paying the worker—would be required to contribute to the worker’s Shared Security Account with each paycheck, with the contributions prorated based on a standard eight-hour day, 40-hour week, and 2,080-hour year. For example, 20 days a year of combined vacation and sick leave is equivalent to a contribution of $0.0769 for every dollar of wages paid, and that is the rate at which companies like TaskRabbit and Uber would contribute for non-hourly piecework. … Mandatory insurance benefits should include unemployment, workers’ compensation, and paid maternity, paternity, family, and medical leave. These would not be cash benefits that the employee could accrue and cash out, but rather pooled insurance to which both the employer and employee would contribute small premiums as a percentage of pay, based on actuarial tables.
These SSAs would be prorated, portable, and universal:
But all mandatory benefits that normally accrue to full-time employees on a daily basis—sick days, vacation days, health insurance, unemployment insurance, workers’ compensation insurance, retirement matching, Social Security, and Medicare—should also accrue to part-time employees (hourly, salaried, or contract) and sharing-economy providers on a prorated hourly or equivalent basis. … Job-based benefits no longer make sense in an economy where fewer and fewer workers hold traditional jobs. This is why these accrued benefits must be fully portable, following the worker from job to job, or contract to contract. … Because benefits from multiple employers are pooled into the same account, portability and proration work together to provide workers with the full panoply of benefits, even within the flexible micro-employment environment of the sharing economy. …
In the new economy, a basic set of benefits and labor standards must be universal across all employers and all forms of employment, with few exceptions or exemptions. While there is much to recommend the innovations introduced by companies like Uber and TaskRabbit, they are currently exploiting gigantic loopholes in our social contract by transforming jobholders into independent contractors, thus stripping them of essential benefits. A robust set of mandatory universal benefits would put all employees and employers alike on an equal footing, while providing the economic security and certainty necessary for the middle class to thrive.
Let’s assume for a moment that concern about the uncertainty of the “gig economy” is widespread — far more than just among journalists in the Acela corridor who take Uber and worry they will soon be paid per story. Let’s assume this is a serious problem needing a solution, and ASAP.
So maybe this alternative approach: Rather than running all those mandated benefits through employers as H&R propose, allow wages to rise in offset and make it easier for workers to save their own dough to meet the vicissitudes of life. Even nudging workers to do so. And also maybe even different tax-preferred savings accounts for different purposes. (Obviously this is a simplified version.) I mean, isn’t it generally accepted, for instance, that workers pay for the majority of health insurance costs, through lower wages as well as through explicit premiums? Why would we want to double-down and considerably expand that approach?
Published in Economics
The main benefit of the so called shared economy is to be free of burdensome costly regulations, mandated benefits, forced savings that aren’t really savings and union dues and work place rules. If people own their own savings , health care savings accounts, and ones own insurance on anything one wants to insure, it is portable, under ones control and out of reach of politicians who might change the rules. We used to call the shared economy a market economy, now we have this technology that lets us match supply and demand on just about anything one can think of. It’s wonderful and may save us yet, but not if we decide it needs some centralized rules to protect us from ourselves. The trick will be to design better ways ( please not centralized) to adjust to the blistering changes this thing imposes on most of us.
a) Uber workers already have an alternative. They can pursue the traditional route of seeking employment with a taxi company. They choose this so-called “benefit free, race-to-the-bottom reality”. It is not thrust upon them. Heck, thanks to Uber it’s even easier to break in to the taxi business, since Uber has caused the purchase price of taxi medallions to drop precipitously in many markets.
(Also, do taxi drivers even get benefits?)
b) How come writers who assume that benefits are superior to cash are never required to actually back up that belief, and instead are allowed to treat it as an a priori truth?
Jim,
This is the kind of radical thinking that gets us out of the frozen New Deal job with benefits and government bureaucracy to enforce them mentality. Aside from the public employee unions destroying everything they touch, this is largely gone already. Let us take a simple example.
Let’s assume we do away with the ACA entirely. We replace it with a government Health insurance real time rating system that rates policies before they can be signed. Like the gas mileage ratings posted in the car window. Also, we open up the Health Insurance competition to keep a continuous down force on price. Next, we create more powerful HSAs that allow for large contributions. We now create a tax credit for Health Care that the IRS must separately direct deposit into the consumers HSA. Finally, we give companies a corporate tax credit to direct deposit Health benefits for employees into their HSAs.
The Health Care consumer winds up with a hugely more efficient system that delivers more care at lower price. The consumer can have a chance to seriously evaluate their premiums/policies against a scale as objective as the nudgers can make it and still make their own decisions. Their Health Insurance is as portable as possible. Meanwhile the net effect should be a stimulus to hiring rather than the deterrent to hiring that it has become.
Regards,
Jim
By all means, lets take these fledgling industries and strangle them in the cradle with regulations, requirements and mandates. Then the entrenched monopolies propped up by government cronyism, graft and kickbacks can continue apace.
Much to my chagrin in the past year I’ve had to join, not one, but two unions. NABET, the National Association of Broadcast Engineers and Technicians and the IBEW. Competing national networks have contracts with each and they don’t recognize membership in the other as being valid.
Each mandates though a health benefit, a contribution to the Entertainment Industry Flex Plan. However, the way ObamaCare was written I must have a fully paid for insurance policy to gain access to the thousands that have been deposited in my name. Furthermore I am legally prohibited in using these funds to buy health insurance.
But the networks can claim they’ve given me health care!
The reason why “on-demand” jobs are growing is in large part due to the fact that excessive regulations have increased the cost of hiring actual workers.
The right solution is to lower the regulatory and financial burden of hiring actual employees, not increase the cost of independent contractors.
We can start with Obama-care, which effectively added up to $18,000 annually (the annual cost of health insurance for a family of four) to the cost of a minimum wage worker, more than doubling the cost of hiring a minimum wage worker.
The Gig-Economy is bigger than it appears. Uber, AirBnB etc. get all the media coverage; but there’s more to it than that. I belong to a networked community that advocates business over salary; and the people I deal with include everything from landscape workers, home cleaners, graphic designers, financial advisers, message therapists, app developers, website developers, photographers, acupuncturists, yoga instructors, concierge fitness trainers, meditation instructors, personal chefs, business consultants, marketing consultants and a lot more….
Let’s hope we create something that will work.
Stupid question: if I set up my own app ride-share service and employ exactly one person (myself), how do I pay my one employee for sick time, vacation time, and retirement?
Answering in good faith:
An IRA can be setup by any person for themselves. Unemployment taxes are available if you pay salary (I had to pay unemployment taxes for a Nanny I hired). As for vacation and sick time: it’s called saving. The alternates are supplemental insurances such as AFLAC – which can be bought by individuals.
well the self-employed fall into a different category, but if you were to hire exactly one non-owner in this business, you would have to make their salary low enough that you could pay for all this other stuff with the revenue from the ride-share service.
Are these like grammar-nazis who talk messages into being more correct and understandable? As a grammar-nazi myself, I heartily approve, and have started looking for message-therapist jobs near home.
Yes. Though, I have a personal grammar-nazi at home – who unfortunately does not monitor my internet massage (Oh!) posts.
:-D I can’t type. Therefore I code (for a living).
Anecdote time!
Up here in the Great White North, the conservative government set up a trial program for self-employed people to voluntarily participate in the Employment Insurance system.
Very few chose to participate, so the program was cancelled.
Another alternative used to be the Mutual Aid Society. Not for vacation days, but for sick benefits, etc. Mutual aid societies used to be a pretty big deal in the US – and they worked surprisingly well, particularly for poorer, marginalized workers. But then they got crowded out by the Welfare State.
Probably because the government ran it. Companies, industries, regions, associative organizations; all have provided benefits to members. Now they are eclipsed, displaced by government’s irresistible yet incompetent tractor beam, smashing everything it scoops up.
Yeah, what she said.
By the way, I’ve had a few drinks now, and my Spidey sense is tingling something fierce at the term, “sharing”. The sharing economy is probably another in an endless parade of insidious Leftist plots to subvert our very thinking about the primacy of the individual and his property. How long before the sharing becomes mandatory, hmmm?
The wiki page on the sharing economy says it’s supposed to promote, among other things, “participatory democracy”. THAT one’s wiki page says, “…participatory democracy tends to advocate more involved forms of citizen participation and greater political representation than traditional representative democracy.” That doesn’t sound good.
Also, the “sharing economy” page says, “The collaborative consumption model is used in online marketplaces such as eBay as well as emerging sectors such as social lending.” What could social lending be? Lefties love everything social. When I hear the word, “social”, I release the safety catch of my Browning.