Restructuring the Social Safety Net for a Changing Workforce

by September 18, 2018

Independent contractors are often compensated without getting benefits from employers. Thanks to the gig economy, lawmakers are rethinking the social safety net. (Image “Uber” by Núcleo Editorial via Flickr, CC license by 2.0.)

Worker benefits for those in the gig-economy has lawmakers from both sides of the aisle rethinking how to structure the social safety net to freelance and contract workers.

The rise of a digitized economy left an impression in the U.S. economy with a surge in tech-driven companies hiring independent workers rather than traditional payroll employees. Companies such as Uber don’t hire drivers as traditional workers, leaving many of these workers to fend for themselves to acquire their own benefits that a traditional employer would typically offer.

While the threats of an expanding gig-economy fall flat according to an in-depth analysis from the Bureau of Labor Statistics, freelance and contract workers make up roughly 10 percent of all American workers. American workers who are labeled as freelance or contract have to look for alternatives to get 401k plans, health saving plans and certain retirement plans.

Even as the recent tax overhaul passed by Republicans late last year repealed the individual mandate of the Affordable Care Act, many contract workers will still not receive benefits. Covering the gig-economy will mean covering an economy in flux.

State legislative efforts moving up portable benefits

The need to develop a social safety net for these workers has lawmakers thinking about implementing a system of “portable benefits.”According to the Aspen Institute, portable benefits offer workers ownership of benefits, companies would make a fix rate contribution in accordance to how much a worker works for them, and benefits would extend to independent workers. So far four states, Washington, California, New York and New Jersey, are proposing their versions of a portable benefits system.

Washington state is leading the charge proposing its own bill that would require companies to contribute into a nonprofit fund that will provide health insurance, retirement and other benefits.

American workers are able to retain certain benefits when moving jobs or when they go into retirement, also called portability. Such benefits are already guaranteed by single-employers with 401k plans, health savings plans and certain retirement plans. The Health Insurance Portability and Accountability Act, otherwise known as HIPPA, ensures workers with pre-existing conditions are not discriminated against from moving into one group health plan to another.

Efforts for a federal portable benefits system has failed in the past year to attract congressional lawmakers into pushing this bill into law.

However, nine states and certain cities are providing their own solutions to paid sick and family leave to workers. Contract and freelance workers in these states receive the same benefits by paying premiums at the same rate as payroll employees.

Are tech-companies on board?

Uber CEO Dara Khosrowshahi signed a letter earlier this year calling for Washington state to pass a portable benefits system in the state. This is a sign of growing support from tech-companies to urge policymakers to give portable benefits for on-demand workers.

Lyft and Etsy were among some of the tech companies that signed a letter urging lawmakers the same demand back in 2015.

Google provided $50 million to the Future of Work initiative which will look at solutions companies can provide to workers that will include benefits, skill building and job matching for a changing workforce in the U.S.