As ‘gig economy’ grows, policy solutions prove elusive

This is part of a project about the gig economy published by Missouri Business Alert

The so-called gig economy, in which workers take on temporary or contract-based jobs instead of or in addition to full-time employment, is gaining prevalence. But the legal and regulatory framework governing the companies and workers that make up this economy hasn’t kept pace, labor and policy experts say.

“Current labor law is outdated, doesn’t fit the nature of employment today,” Judy Ancel, the director of worker education and labor studies program at the University of Missouri-Kansas City, said in an email. “As more and more people don’t have regular, stable jobs, they are in arrangements outside of the scope of either the Fair Labor Standards Act or the National Labor Relations Act, and have no protection.”

Upwork, the online freelance marketplace, and the Freelancers Union, a national advocacy group, released their third annual Freelancing in America survey in October. It estimated that freelancers represent 35 percent of the total U.S. workforce and contribute about $1 trillion in earnings to the economy.

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Diane Mulcahy | Courtesy of dianemulcahy.com

“Our labor market is structured in a way that is clearly obsolete and outdated,” said Diane Mulcahy, author of the book “The Gig Economy,” and a senior fellow at the Ewing Marion Kauffman Foundation. “This artificial demarcation between employees and contractors doesn’t fit the workforce today. It doesn’t accommodate well all the people that are involved in the independent work … The government needs to think about how do we update our labor market to create a system in which we give rights, benefits and protections to all workers, no matter how they choose to work.”

During election season, Missouri Business Alert contacted economists, employers, union leaders, lobbyists and political candidates, seeking their thoughts on key policy issues related to the gig economy. Many shared thoughts on key challenges raised by its emergence, but concrete policy solutions remain elusive.

Classification conundrum

One impediment to developing policies that would more effectively govern the gig economy is the lack of a precise understanding of that economy. To date, the government has not established a clear-cut classification for gig workers or an effective system to measure the gig labor force.

Growth of the gig labor force, from Uber drivers to on-demand consultants, has led to a classification dilemma, causing uncertainty about these workers’ rights and legal standing.

Take, for instance, Uber drivers: In the U.K., a tribunal ruled in October that the drivers are entitled to workers’ rights, including paid holidays and the minimum wage, The Wall Street Journal reported. In the U.S., however, Uber drivers are still fighting for their employee identity. They filed a class-action lawsuit in California claiming they have been misclassified as independent contractors and are entitled to employees’ benefits. On Nov. 21, a federal judge paused the suits until at least February due to legal quandaries raised at a recent hearing, according to Law 360.

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Different jurisdictions have grappled with the issue of how to classify Uber drivers, among other on-demand workers. | Courtesy of Latrell G./YouTube

These classification questions also make collecting data about the gig economy difficult, meaning policymakers and government agencies may lack information that could help guide their decisions on the matter.

“I think one of the difficulties is that the people who are in the gig economy are counted in different places in federal data,” Alan Spell, research manager at the Missouri Department of Economic Development, said. “Sometimes, they overlap. So it’s hard to break out the exact number.”

The Bureau of Labor statistics announced earlier this year that it will conduct a survey on contingent and alternative employment as part of its May 2017 Current Population Survey, a monthly survey that measures the unemployment rate and other labor market indicators. The survey will identify workers with contingent or alternative work arrangements; measure workers’ satisfaction with their current arrangement; and measure earnings, health insurance coverage and eligibility for employer-provided retirement plans, according to the statement.

“Over the last five years, (the gig economy) has expanded to areas where people have not traditionally thought of it as contingent workers,” Spell said. “The recognition that the digital world is now connecting people and making this gig economy easier to facilitate … it’s time to gather the information and take it into the digital reality.”

Health insurance

Since independent workers lack the benefits that many companies offer to full-time employees, health insurance policy is a prominent concern for many workers in the gig economy.

Since the presidential election, President-elect Donald Trump has continued to call for sweeping health care reform, proposing “a full repeal” of the Affordable Care Act, or Obamacare.

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President-elect Donald Trump has vowed to repeal the Affordable Care Act, which could be felt acutely by part-time and contract workers. | Courtesy of Gage Skidmore/Wikimedia Commons

Paul Ginsburg, president of the Center for Studying Health System Change, said after the election that a complete repeal was unlikely, but that a partial repeal could be done through the budget reconciliation process.

“Such a step would not only kill the coverage expansion, but probably in the process also severely damage the individual insurance market,” Ginsburg said.

Even before Trump’s election, the condition of the federal insurance marketplace was a source of concern for freelancers who purchase health plans there. In late October, the Department of Health and Human Services announced that premiums for plans purchased through HealthCare.gov would increase 25 percent next year.

With major insurance companies leaving or signaling a potential exit from the marketplace, the average number of insurers in states that use HealthCare.gov will be 3.9 per state in 2017, down from an average of 5.4 per state in 2016, according to the Kaiser Family Foundation.

Unionization

An individual gig worker has little or no leverage to negotiate wages, overtime pay or other protections. Aware of this, more gig workers have started forming unions to bargain collectively and win protections enjoyed by more traditional labor unions.

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Kelly Ross | Courtesy of Ross/Twitter

Drivers who work for Uber, Lyft, and Sidecar have started App-Based Drivers Associations in at least two states. A group of Los Angeles-based Uber drivers partnered with local Teamsters in August for “organizational and lobbying assistance.” In September, after Uber drivers in New York created a Facebook page called Uber Drivers Network NYC, some of them went on strike over Uber fare cuts.

Kelly Ross, deputy policy director of the AFL-CIO, said despite the alternative ways to organize labor, the fundamental value of unionism remains. He also stressed that the change in unionization is a natural result of a changing job market.

“Every kind of work arrangement has a different kind of union, because workers in that work arrangement have different needs,” he said. “The fundamental thing is that workers need a voice and representation.

“In the future, we can expect that the kind of jobs that are out there is going to be different. … The way (workers) find representation is going to be changing.”

The future

For employers, part-time and contract arrangements will remain a popular way to hire talent at a lower cost, said Ray McCarty, president of Associated Industries of Missouri.

“(Hiring independent contractors) may be a way for employers to find expertise outside their borders, outside the places they would normally find employees,” McCarty said. “In that way, they also expand the labor pool available to them.”

Mulcahy believes wholesale change in the way we treat employer-employee relationships is the best way forward.

“Instead of having this artificial divide between employees and contractors, what we should do is get rid of the classification, and everybody should just be a worker,” she said. “You have access to rights, protections and benefits on a pro-rated basis. We should have a labor system that supports all workers no matter how, how much, when and where they work.”

Most efforts to organize gig workers are being made in big cities like New York and San Francisco, where there are high concentrations of the workers. But Caitlin Pearce, director of member engagement at the Freelancers Union, sees these efforts as a step toward more comprehensive reforms across the country.

“They are making these large economic contributions, and they are driving a lot of innovation and creativity happening in the cities,” she said. “Smart city officials are realizing that they have to start protecting and supporting those workers. We see it as a sign of more future progress to come.”

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