The Democratic Party hasn’t quite figured out how to take on the rapid rise of the “gig economy.” Hillary Clinton said last summer that companies like Uber and AirBnB created “exciting opportunities,” but also “rais[ed] hard questions about workplace protections and what a good job will look like in the future.” She was immediately attacked by Republicans, but also by David Plouffe, once a top Obama aide and now employed by Uber, who said it was an “overblown reaction.”
The gig economy has not otherwise been an enormous issue on the campaign trail, and legislators in Congress haven’t attempted to address it in any comprehensive way. But Thursday in Washington, Senator Elizabeth Warren waded into the debate with a lengthy policy speech at the annual New America conference in which she said it’s time to “rethink the basic bargain for workers who produce much of the value in this economy.”
Warren’s essential point is that for all the talk about Uber, ride-sharing apps and their brethren are only part of a larger, destructive trend toward classifying workers as part-time. “Long before anyone ever wrote an article about the ‘gig economy,’ corporations had discovered the higher profits they could wring out of an on-demand workforce made up of independent contractors,” Warren said. Indeed, 53 million Americans—one in three workers—is a freelancer.
Moreover, the recession has forced millions of Americans into lower-paying jobs. According to the National Employment Law Project, there are 1.2 million fewer jobs in mid- and higher-wage industries than there were prior to the Great Recession and 2.3 million more jobs in lower-wage sectors.
Warren sees the gig economy as more of a symptom than a cause. “The gig economy has become a stopgap for some workers who can’t make ends meet in a weak labor market,” she said. “For many, the gig economy is simply the next step in a losing effort to build some economic security in a world where all the benefits are floating to the top 10 percent.”
So what’s her solution? Warren outline three lines of attack for policymakers.
Improve the safety net. Warren has long supported expanding Social Security, which she didn’t mention explicitly in the speech. But she did call for electronic and automatic deduction of payroll taxes for Social Security for all workers, even temporary ones. If people don’t pay payroll taxes—and many contract workers don’t—it might disqualify them for disability insurance and lower their benefits once they hit retirement. She also called for a new system of catastrophic insurance for all workers. “Everyone means everyone—even workers who haven’t built up enough credits for disability insurance, even workers who don’t have traditional worker’s compensation,” she said. “This type of insurance could be relatively cheap if it’s pooled across the entire workforce through regular, small, automatically-deducted contributions.” And Warren reiterated calls for mandatory paid leave for all workers.
Make employee benefits portable. Part-time workers often struggle to maintain healthcare and retirement benefits enjoyed by full-time employees. The Affordable Care Act made headway in addressing health insurance coverage through expanded Medicaid and health care exchanges, and Warren said it should be improved by “enhancing its portability and reducing the managerial involvement of employers.”
But then there’s Warren’s big proposal: portable retirement plans for all workers. “Instead of an employer-sponsored 401(k), this plan could be run by a union or other organization that could contract investment management to the private sector,” she said. “Because of the amazing advances in online investment platforms and electronic payroll systems, individuals could set up automatic contributions. It’s time for all workers to have access to the same low-cost, well-protected retirement products that some employers and unions provide today.”
Interestingly, Warren did not suggest that states run these plans—even though many states, like California and her home state of Massachusetts, are already moving to create state-run portable insurance plans. Warren’s office clarified that she does support those efforts as well.
Increase regulation and clarify laws around part-time work. There are certainly appropriate cases where workers should be classified as part-time workers without benefits. But overclassification is a huge problem, where functionally full-time workers are qualified as contract workers and denied better pay and benefits. There are already laws on the books that would theoretically prevent this, but they are often not enforced. Warren called for a crackdown. “The many employers who treat their employees well shouldn’t have to compete against the ones who don’t. That’s not a level playing field; that’s a broken system,” she said.
She also issued a vague call to streamline labor laws that define who is part-time and who is not. Warren didn’t lay down any markers for the new laws, but just said, “The boundaries between employees, contract workers and gig workers are complex,” and that “harmonizing these definitions will mean less regulatory burden for businesses and fewer opportunities for misclassification of workers.”
Finally, she called for a universal right for workers to organize. “Those who provide the labor should have the right to bargain as a group with whoever controls the terms of their work and they should be protected from retaliation or discrimination for doing so,” she said. She didn’t outline how this might be done, however.
Some progressive economists did want more detail from Warren, in this area and others. The Center for Economic and Policy Research’s Dean Baker, who has written extensively about the gig economy, said, “She ended up skirting a lot of the big issues. Okay, workers should be willing to organize, but how do you do it?”
Baker said he also wanted more detail on how to classify part-time workers. “We have to figure out how we get from here to there. The contention is that many people aren’t full-time workers. In some cases I think it’s a very poor case, as with Uber,” he said. “But there will be some areas where there will be ambiguity.”
But Warren’s speech was one of the first serious attempts by a prominent Democrat to deal with the gig economy, and so perhaps a through policy checklist shouldn’t be expected. “It’s laying down a principle,” Baker said. “Her voice carries a lot of weight, so when she gets out here and takes these positions, it’s welcome to see her entering the debate on this.”