US legislators just proposed a $20-million experiment that could bring benefits to freelance and gig-economy workers

The US social safety net doesn’t cover those with non-traditional work arrangements.
The US social safety net doesn’t cover those with non-traditional work arrangements.
Image: Reuters/Edgar Su
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In the US, social safety-net programs are tied not to citizenship, but to jobs. Employers contribute to social security, unemployment insurance, and disability insurance programs along with their employees and, in many cases, also provide access to retirement benefits and health insurance.

The problem with this system is that, increasingly, workers in the US are not employees.

Almost all US job growth since 2005 has been so-called “contingent work,” which includes freelancers, temporary workers, contractors, and the on-demand drivers who work for companies like Uber.

While employees may worry about losing their benefits if they lose their jobs, many of these contingent workers don’t have access to these benefits in the first place. “I don’t think that’s manageable long-term,” says US senator Mark Warner, a Democrat from Virginia. “People sometimes like the flexibility of moving from job to job. They might even be doing ok. But if bad stuff happens, that breeds huge economic insecurity.”

On Wednesday (May 24), Warner introduced legislation in the Senate that would create a $20-million fund to experiment with ”portable benefits,” one answer to this challenge. Suzan DelBene, a Democratic representative from Washington State, introduced a similar bill in the House of Representatives.

Making benefits portable means allowing workers to keep them as they move from job to job, or gig to gig. In the US, there’s one portable benefit that everyone gets: social security. Workers keep the same account—administered by the federal government—when they switch jobs, and multiple employers can contribute to that same account on behalf of the same worker simultaneously.

There are also a handful of portable-benefit programs for independent workers exist in the US. The Black Car Fund in New York, for instance, is a workers-compensation fund for drivers, paid for by a 2.5% surcharge on their customers’ fares. The Freelancers Union, a federation of independent workers, offered access to a group insurance plan for people without traditional employers, until the Affordable Care Act made the model illegal (now the organization offers individual plans). Unions for building trades and actors administer benefit funds that multiple employers can pay into on behalf of workers.

Warner and DelBene’s proposed plan, which would be funded by the Department of Labor, would issue grants for pilot programs that create new types of portable benefits. Local and state governments, as well as non-profit organizations such as unions, would be eligible to apply for the grants.

Union leaders, on-demand companies, and other stakeholders have supported portable benefits as a broad concept, but often disagree on the specifics of what the programs should look like. Some on-demand companies have argued that contributing to a portable benefits program would open them up to claims that they’ve been treating their workers like employees rather than independent contractors. They have proposed creating a portable-benefits program that employers would contribute to in exchange for the promise that their workers will be considered independent contractors rather than employees. Another way around this problem could be mandatory contributions, says Wilma Liebman, a former chairman of the National Labor Relations Board who has studied gig-economy worker-classification issues. “The states or local governments could include mandates,” she says. ”Then employers would argue that they paid the benefits under mandate, and that shouldn’t be evidence of employer status.”

Union leaders have called for models where employers would be required to make mandatory, prorated contributions to portable-benefit plans for anyone they hire, regardless of whether those hires are employees, contractors, or freelancers. Others have argued for a system in which companies have the option, but not the legal requirement, to contribute. Opinions also vary over whether private companies, unions, local governments, or another type of organization is best fit to administer portable benefits.

Representatives from gig economy companies Postmates, DoorDash and Lyft said in statements they supported Warner’s proposed legislation, as did Sara Horowitz, founder and executive director of the Freelancers Union.

Warner says he hopes the bill, if passed, will create more models of portable-benefit programs to examine before setting federal standards. “I think if we try to legislate top-down now, we’d probably get it wrong,” he says. The proposed legislation includes a requirement that the Government Accountability Office evaluate the outcome of experiments funded by the grants and provide a report to Congress. From there, Warner says, federal standards could be developed for portable benefits across the country.

“The social contract was set up on the idea of you’re going to go work for one firm for 30 years, and you’ve got all these benefits for doing that,” he says. “That’s not the case anymore. We can bemoan the fact that’s not the case forever, or we can say, let’s create a system that will work for the world today.”