Policy Challenges and Economic Opportunities in the Sharing Economy
I’ve watched with some interest the dust-up over Hillary Clinton’s comments about the gig economy.
As perhaps the first federal policymaker to do a deep-dive on many of these issues, I find the faux outrage over her comments to be amusing.
Any attention that’s paid to this exciting and fast-growing segment of the U.S. economy is long overdue. It is remarkable to me that, until now, Washington has remained on the sidelines as the workforce — and the very concept of the workplace — have undergone their most dramatic transformations in decades.
I recently invited Virginians working in the sharing economy to tell me how it’s working for them: what works, what doesn’t, and what federal policymakers could do to make the on-demand economy work better for more people.
More than 1,200 Virginians responded. Some offered compelling stories about how freelance work is providing a lifeline in a tough economy. They valued the freedom and flexibility of this on-demand work. Others complained (and I fully agree with them) that our traditional 20th Century presumptions, regulations, and definitions no longer work in a 21st Century digital workplace.
A few suggested the government should get out of the way altogether. My favorite, by far: “The sharing economy is like the secret beach that hasn’t been discovered by the rule makers yet. There’s no lifeguard on duty. It’s swim at your own risk… and that’s what makes it great.”
It is important to recognize that this sharing economy is not just made-up of millions of millennials. It also includes middle-aged professionals surprised to be downsized at mid-career, and also Baby Boomers hit with a premature end to what they thought was a solid career. It also includes a lot of people for whom working several jobs at the same time is nothing new: it’s how they’ve always survived.
But many of these on-demand business models are based upon the premise that workers are independent contractors, not employees. That means employers do not help pay the costs of health insurance or retirement. They also typically don’t pay a share of unemployment or workers’ compensation coverage.
So today’s on-demand workers, even if they are doing relatively well, exist day-to-day on a high wire, with no safety net underneath them. That may work for a lot of them — until the day that it doesn’t. And that’s when the taxpayers likely will be asked to pay the bill.
So at the very least, Washington needs to catch-up and start asking some tough policy questions.
First, are there other options for providing safety net benefits for workers who are not connected to a traditional, full-time employer? Which specific benefits are we talking about? Who should administer them?
We could look to the ACA healthcare exchanges as one public-private model, or perhaps borrow the idea of the “hour bank,” used by labor unions for 60 years, to administer benefits for members who work for a series of contractors.
It could be consumer-driven in part, too, providing customers with an option to designate a portion of their payments into an independently administered fund that helps support contract workers.
Second, while we all know litigation is underway across the country about whether on-demand workers are independent contractors or employees, this issue is too important to leave to the courts alone. As policymakers, we should begin discussing whether government and industry’s 20th Century definitions still work. Perhaps there’s a need for a classification midway between the two definitions, providing a clearer roadmap of the responsibilities of the employer and the employee.
Third, the federal government needs to start working at internet speed. It’s been ten years since we collected reliable data about how many people are part of the contingent, or part-time, workforce. Estimates range from three million to more than 50 million, but we don’t know for sure.
And it should not have taken three years for federal regulators to issue rules allowing more startups to use Internet-based crowdfunding to raise equity capital from smaller investors.
Just a few years ago, no one had even heard of Uber or Airbnb. And while we don’t know what the disruptive technologies of tomorrow will look like, we know developments like driverless cars, same-day drone deliveries, and 3D printing appear to be right around the next corner.
Policymakers should be encouraging these innovations, while also looking for ways to make the on-demand economy work better for more people. I’m glad Hillary Clinton is part of this conversation, and I urge other thoughtful policymakers to join us.
