The Next Big Thing: Job Benefits That Go Where You Go

We need to overhaul America’s social safety net, which was designed for a different labor market and economy.

YES! Illustration by Jennifer Luxton. 

Thomas Fisher, professor at the College of Design at the University of Minnesota, is a gig economy enthusiast. At a conference talk last spring, he touted it as a building block in the creation of a high-tech version of the traditional village economy. In this new community-based economy, he said, collaboration will trump competition, the pursuit of experience will replace the desire to own, workers will enjoy flexible jobs and multiple careers, and consumers will be producers.

A skeptical audience member questioned his enthusiasm: Isn’t the gig economy a worker dystopia with low wages, no benefits, and job insecurity?

“We are in the early Industrial Revolution phase once again, and like then there is a lot of inequality,” Fisher replied. “We’ll need to develop laws and public policy to handle it.”

There’s the rub.

For workers, the gig economy offers the tantalizing prospect of greater opportunities for entrepreneurship, flexible jobs, and a variety of careers. But turning that promise into reality will take a major overhaul of America’s social safety net, which was designed for a different labor market and economy. (Think 1950s and a gold watch at retirement.) The fundamental priority of the gig economy era should be to attach safety net benefits—especially retirement savings and health insurance—to the individual or household rather than to the employer.

“You’re giving people access to the benefits they care about, and, if they aren’t attached to the employer, workers could be choosier about the jobs they take,” says Lane Kenworthy, sociologist at the University of California, San Diego, and author of The Good Society.

Is this a pie-in-the-sky concept? Hardly. We’ve made a comparable social transformation before.

In the late 19th century, a majority of workers labored long hours at hazardous, arduous jobs. Most workers didn’t have vacations, let alone pensions. A patchwork quilt of state and local programs and charitable organizations offered some relief to the jobless. But those efforts were limited, and job insecurity was part of working life.

The foundation for the modern social safety net was laid during traumatic years.

The 1935 Social Security Act provided support to the elderly and disabled in the midst of the Great Depression. Laid-off workers got financial relief with unemployment insurance. The Fair Labor Standards Act of 1938 included a national minimum wage and overtime rules. During World War II, large employers offered employees health insurance and pension benefits (though largely as a means of getting around a national wage freeze). The Employee Retirement Income Security Act of 1974 (ERISA) strengthened pension and health insurance protections. Labor laws like these were designed to provide workers with greater economic security. The baseline assumption was that the typical employee worked full time for a single employer. These laws still hold sway.

Imagine a worker named Jill. She worked out of a cubicle in the corporate headquarters for a major national retailer for nearly two decades. She participated in her employer-sponsored retirement savings plan and health insurance benefits. She earned the federal minimum wage when she started in 1990, and, early in her career, got extra money from overtime.

"We are in the early Industrial Revolution phase once again, and like then there is a lot of inequality."

Jill lost her job in 2008 during the recession. She filed for unemployment benefits to tide her over. She used COBRA to keep her employer’s health insurance plan in place. (The 1986 Consolidated Omnibus Budget Reconciliation Act let workers keep their group health plan for up to 18 months after leaving.) She could no longer contribute to her 401(k) since she wasn’t on payroll, so she rolled it over into an IRA. Jill found another full-time job three months later. Her safety net is intact.

America’s modern social safety net for the typical worker was a genuine break with the past and a vast improvement over what came before. The problem is Jill’s segment of the workforce—the single employer, full-time worker—has been shrinking while the ranks of America’s contingent workers, such as independent contractors and freelancers, are swelling. The Government Accountability Office estimates some 40 percent of the workforce is contingent, up from 31 percent in 2005.

That’s because contingent gig workers are exempt from most labor laws and, therefore, much cheaper for employers. Management has restructured, downsized, rightsized—pick your favorite euphemism. Jobs are less secure, wages are stagnant, and income inequality is high and rising.

Contrast Jill’s situation to that of Robert. He graduated from college in 2004. He never managed to land a full-time job, so he has always been an independent contractor. His clients paid him decently for completing projects, although they usually stretched out payments from 30 to 90 days when business slowed. As an independent contractor, he wasn’t eligible for minimum wage, over-time, workers’ compensation, or Family Medical Leave Act benefits. He couldn’t participate in his clients’ employer-sponsored retirement and health insurance plans. He pays the full 15.3 percent payroll tax. But when Robert lost his clients in 2008 during the recession, he wasn’t entitled to file for unemployment benefits. His safety net is full of holes, which makes it financially hard for him and his wife to plan and raise their two young daughters. His wife works part-time and temporary jobs, so she doesn’t qualify for benefits either.

So how do we ensure that the jobs that do exist provide quality support? The answer lies in broadening the social safety net from its single-employer, full-time worker model to a universal framework that accommodates self-employment, gig work, contingent work, and multiple part-time jobs.

Take retirement savings. There have been a number of savvy proposals for establishing a universal retirement savings plan during the past few presidential administrations, Republican and Democratic alike. The basic idea usually involves providing everyone with an IRA or 401(k)-type account with government matching benefits. For example, Gene Sperling, the former director of the White House National Economic Council under Presidents Bill Clinton and Barack Obama, suggests a version of a universal 401(k). Lower- and middle-income Americans would receive a dollar-for-dollar matching credit of up to $4,000 annually per household. Higher income households would get at least a 60 percent match. This would also be available through IRA contributions for the self-employed and those temporarily not working.

Health insurance plans should reflect the needs of a mobile workforce. The Obama administration’s Affordable Care Act took a huge step toward improved portability with the insurance exchanges. For the first time, individuals and families, regardless of their employment status, have access to comprehensive and affordable health coverage. Longer term, America’s employer-centered health insurance system should be eliminated in favor of a Medicare-for-all plan.

A shift toward universal benefits rather than employer-based benefits would encourage workers to embrace the variety that the gig economy offers.

Still, the most intriguing universal benefit gaining traction is a guaranteed minimum income or universal basic income. The idea is that everyone would get periodic income payments with no conditions attached beyond citizenship. The amount proposed is usually in the $10,000-a-year range.

This concept garners support from both conservatives and liberals, although for very different reasons. Conservative theorist Charles Murray of the American Enterprise Institute promotes a $13,000 universal basic income (with $3,000 of that amount dedicated to buying health insurance). In exchange, he wants to scrap all antipoverty and social welfare programs. More liberal proponents of the idea don’t buy that aspect of his proposal, especially if payments are limited to $10,000. Instead, they see a universal basic income as a way to dramatically reduce poverty—in essence, by establishing an income floor for the poorest Americans that would supplement, rather than replace, a range of existing antipoverty programs like Medicare.

The income is “equivalent to recognizing shared ownership of a significant fraction of the resources, physical and intellectual, that enable the society to produce what it produces,” explained the late economist and Nobel laureate Herbert Simon.

What might universal benefits mean to the typical worker?

Let’s say Maria works full time at an advertising agency. She is unhappy with her new manager and quits her job. She picks up some gig economy work to supplement her universal basic income while she decides what to do next. She’s making enough to keep contributing to her retirement savings. She keeps her health coverage too.

Eventually, she decides to start her own social media consulting business. She does well for a year, but business dries up in a recession. She files for unemployment insurance, which supplements her universal basic income. She realizes that she enjoyed entrepreneurship, but she wasn’t good at finding clients. She joins several gig economy platforms that find her business while allowing her to exercise control over her schedule. At no point in this journey does she lose her retirement savings or health insurance. The combination of unemployment insurance and the universal basic income give her time to think through her options.

A shift toward universal benefits rather than employer-based benefits would encourage workers to embrace the variety that the gig economy (broadly defined) offers. That sense of freedom would also force management to pay more attention to their workers and pay them higher wages. Yes, genuine design differences exist among various universal benefit proposals, but embracing the principle should shape a new social compact, one better suited to a high-tech, internationally integrated economy.