What Happens To Job Benefits In A Gig Economy?

This story is being co-published with Capital & Main as part of a series on California Game Changers : Nine Big Ideas That Could Transform the State and Nation.

Sami Abdou should be feeling pretty content. After more than a decade of struggling to patch together a living, he directs TV segments for an Emmy-nominated documentary series now in its “umpteenth season” on a major network.

But, he says, “I think I have economic PTSD.”

This year he expects to gross $90,000, but he still can’t stop checking his bank account or worrying about a precipitous dip in his income next year.

“I’m definitely fortunate,” he says, “but that could go away in a second.”

Abdou sits in a mom-and-pop coffee joint in Los Angeles’ Echo Park neighborhood, gazing at his MacBook through thick square glasses and waiting for his next assignment. He knows it’s coming but his network isn’t paying him to wait, and he’s anxious.

With almost no savings or retirement account, he’s not even close to being able to buy a house. “I pay for all my own benefits — medical and dental,” he says. “I’m 32 and this is the first year I’ve been able to have those things for the whole year.”

Abdou isn’t alone. Some economists argue the traditional employee-employer relationship, which has undergone tectonic shifts since the 1980s — is going the way of the Leave It to Beaver family of the 1950s. In 2015 the federal General Accounting Office found that as many as 40 percent of Americans are considered independent contractors, day laborers, W-2 subcontractors, or work part-time or in temp jobs. All of the net job growth in the economy between 2005 and 2015 was in this sort of contingent work, according to a 2016 study by economists Alan Krueger of Princeton University and Lawrence Katz of Harvard. Some of these non-traditional workers lack basic protections like workers’ compensation or unemployment insurance, and most lack health insurance, sick pay or retirement.

Many workers are on the outside looking in at the nation’s prosperity, argued Service Employees International Union Vice President David Rolf in an American Prospect article co-written earlier this year with venture capitalist Nick Hanauer. One way to change that: Offer so-called portable benefits – basic protections such as health care, retirement and sick pay -- that would follow all workers from job to job.

“Imagine an entirely new system,” Rolf and Hanauer wrote, “that substantially closes the gap left by the ongoing decline of secure full-time employment.”

Indeed, advocacy for a new safety net for American workers gained traction two years ago, when the unlikely alliance between business and labor that the Prospect article described, called for more flexible benefits for workers who piece together an income from multiple sources or hop from gig to gig.

In a single day a driver, for example, could earn contributions from both Uber and Lyft. If he logged on to TaskRabbit to do a home-repair job, he’d get a prorated benefit payment from that platform, too. Workers would choose their benefits from a menu and the whole system would be administered by nonprofits, professional associations, credit unions or labor unions.

The founders of Lyft and the CEO of Care.com, along with other tech entrepreneurs who fuel multimillion and -billion dollar ventures with armies of gig workers lacking benefits, began to argue that all Americans deserved them.

“A lot of them genuinely see the risk this poses ethically, economically, societally and politically,” says Ben Mangan, a lecturer at the University of California, Berkeley’s Haas School of Business. “They like to fix a big problem.”

The good news, says Nell Abernathy, a vice president at the Roosevelt Institute, a progressive think tank, is this country is rich enough to pull people from the brink of economic collapse -- where nearly half of Americans currently find themselves. In 2016, the Federal Reserve found that 46 percent of Americans don’t have $400 in case of an emergency. A new 21st-century social contract, in which basic benefits aren’t tied to employment, could change that and bring a raft of societal benefits along with it, Abernathy said. Clearly consumer spending would rise. But she noted there is evidence that financial security also boosts health outcomes, child development and entrepreneurship.

In California, agricultural workers, writers and other creative types would be among the millions who would get some breathing space from the financial squeeze that has become their daily reality, Abernathy said.

“There is a real moral case, but there’s simply an economic case that we will be better served as a nation if people can achieve their real potential.”

Not so fast, says Ken Jacobs, who chairs UC Berkeley’s Center for Labor Research and Education. While he sees nothing wrong with portable benefits and the security they’d bring, he thinks the scope of the problem is more limited than many portable benefits advocates argue it is. Economic inequality is real, and many people – even those with traditional jobs -- lack basic benefits, he says. But he believes the speed at which the gig economy is growing is vastly overstated. And many gig workers lack benefits simply because their employers wrongly call them “independent contractors,” as opposed to company employees, and get away with it.

A legal battle over who can properly be called a contractor is still raging. Two years ago, a National Labor Relations Board decision appeared to put responsibility for contractors squarely on the shoulders of the bosses for whom they worked, but higher courts have disputed the labor board’s conclusion in some subsequent cases, and agreed in others.

In fact, thousands of workers at tech companies like Uber, GrubHub and Amazon are suing those companies in class actions to demand the employee status that they say they’re legally due and the benefits that come with it. Earlier this year, Lyft paid out $27 million to settle a similar lawsuit, although under the settlement its drivers remain independent contractors.

The economic upheaval that has left these gig workers and many others working without a safety net is due in part to an intense corporate focus on short-term profits, says Ben Mangan. A weakened labor movement is another factor (only six percent of private sector workers are unionized); so is the rise of technologies that allow companies to outsource work anywhere around the world. Today’s tech revolution is just as disruptive as the manufacturing boom of a hundred years ago that shifted work from farms to factories, says Nell Abernathy. And, just as they did a century ago, worker advocates are debating exactly how to offer basic worker protections in a changing economy.

Ken Jacobs says that while he’s for state-administered health care and retirement, he’d also support worker-run funds for things like sick pay or vacation. Rolf backs a Washington state bill that would require companies to contribute 25 percent of a contract workers’ pay – up to $6 per hour -- to a nonprofit portable benefit fund for workers’ compensation and other benefit options like retirement, health care or paid time off.

A similar bill in the New York state legislature is backed by gig-employer Handy.com and would create portable benefits in exchange for recognition that the company’s fix-it workers and others are independent contractors.

But, warns Jacobs, the bill is a dangerous one: “Details matter here. In exchange for portable benefits, are you granting these companies the ability to get out of [granting] benefits they would otherwise provide?”

A major federal portable benefits program is what’s needed, Abernathy says, but such a plan is unattainable from the current administration and Congress. Rolf and Hanauer contend that portable benefits stand a better chance of gaining traction at the local and state levels. They argue the idea will eventually percolate upward to influence the national debate. Smaller-scale pilot programs are underway as well, with Department of Labor funding and grants from Google.org, the search giant’s philanthropic arm. In the U.S. Congress, Sen. Mark Warner (D-VA) has introduced a bill that would make $20 million in grants available to groups that would create a portable benefits pilot program.

Among the first to benefit from such programs are nannies and house cleaners, who know something about precarious work, says Palak Shah, director of the National Domestic Workers Association’s Fair Care Lab. With a $1.5 million assist from Google.org and a smaller Department of Labor grant, UX designers and other tech types have built MyAlia.org, an online platform that allows multiple employers to contribute $5 per weekly house cleaning job to a single worker. Cleaners begin earning sick time immediately, and they can add other benefits like life, accident and disability insurance. (MyAlia is still being tested, so Shah hasn’t yet released data on the platform or its users.)

“You could say domestic workers are the original gig workers,” Shah says. “We can be seen as the advance team for [a new] labor movement.”

Fifty-eight-year-old Norma – she doesn’t want to use her last name -- is one of them. Originally from Peru, she’s been a nanny for 17 years. She started her current job in a beach community south of Los Angeles nine years ago, before one of the two kids she cares for was born. She says she loves the children and takes pride in her work. She also knows her rights and isn’t afraid to speak up. Still, she doesn’t think she can convince the couple who employs her to pay for benefits. She earns just $12 an hour and hasn’t even been able to persuade her bosses to comply with California law, which requires overtime for domestic workers. “They’re good people,” she says. “But they’re tight with a buck.”

For now, Norma doesn’t see her employers agreeing to spend more money on her. “There’s a lot of competition. Someone is always willing to work for $10 an hour.” And, at the more prosperous end of the economy, TV director Sami Abdou expresses the same sentiment. He says his bosses have even stopped handing out swag and throwing wrap parties.

The Roosevelt Institute’s Nell Abernathy is optimistic, however.

“All those experiments need to happen and all will get us to a place of innovation that points the way forward,” she says. “The endgame needs to be widespread safety.”