In recent years, conservatives have championed the gig economy to make it cheaper and easier to hire people to do work without paying benefits. Liberals, who have fought for rights that go with employee status, such as the right not to be subject to discrimination, priority for paying unpaid wages in bankruptcy, criminalization of small business owners who fail to pay wages, and most notably, benefits — such as health insurance, have opposed the switch to the gig economy.
I believe that many protections that employees have should also apply to gig workers and that benefits should come through the marketplace, subsidized by the government or by other organizations rather than by small employers.
Employers pay an enormous amount in benefits. This makes the cost of hiring a full-time worker much greater than the salary. The norm in America for big business since the end of World War II and for most other businesses came when Congress enacted a law known as ERISA in 1974.
Health care and retirement benefits were originally bargained for by labor unions — just like the practice of not working Saturdays —and the practice then spread throughout the economy. So historically Democrats support “employees” — people who get benefits with jobs and Republicans support freedom for employers.
But there is nothing inherently liberal or conservative or rational about saddling employers with health care and retirement. We should promote a free market for labor— where workers choose to work wherever they want. Fear of losing benefits keeps people stuck in a job: it interferes with the labor market.
As we switch to more people working in the GIG economy we need a new model.
There is one possible approach often used by unionized plumbers, electricians, musicians, carpenters, and Teamsters. The funds for healthcare and retirement in these fields get contributions from participating employers but are not managed by them. If an employer goes bankrupt, the funds for benefits for the employees remain safe. As long as the worker works for a participating employer, he earns credit for benefits. But the benefits remain safe when a company fails or a job ends. The downside is that the contributions by employers in these systems are large and prevent new small companies from competing.
Perhaps we could try a model of a mix of medium and large employers and the government each contributing. We could, in effect, subsidize the benefits of the employees and contractors of the smallest businesses. This would allow small businesses to attract workers and grow at a lower cost. It would help entrepreneurs become employers. Such a plan would also benefit workers who would now have the freedom to pick jobs based upon their interest in the work and how much the job pays— and to remove benefits as a factor.
We must take the subject of workplace benefits out of political ideology and push it into the realm of solving problems. The vast bulk of Americans want capitalism with ease for small businesses to start and pay for workers, a free market for labor, and secure health and retirement benefits. Let’s change the rules to make that happen.
For more information on the gig economy, read the Bloomberg Businessweek article, “The Gig Economy is Coming for Millions of Americans“. February 17, 2021.