Albany Times-Union: Little Financial Security in ‘Gig Economy’ Benefits Plan

Here’s a riddle: When is 2.5 greater than 17?

The answer is never, of course. But that’s not stopping the online-based cleaning company Handy from circulating a proposed bill in Albany that asks “gig economy” workers to buy into its bad math.

The idea is that “on-demand” companies like Handy, Uber and TaskRabbit could set up so-called “portable benefits funds” for their workers, contributing 2.5 percent of the proceeds from each transaction to help pay for benefits such as health care. But here’s the catch: The workers would have to forfeit any claim to being employees and agree to be classified as independent contractors.

That means they’d give up rights to workers’ compensation, unemployment insurance, employer contributions to Social Security and coverage under New York’s paid family leave law. Total value of rights forfeited: around 17 percent of income.

Enrollees in this scheme would also waive other core labor rights, such as health and safety protections and the right to be paid at least minimum wage.

The proposal’s supporters are framing this as a big win for portable benefits — a system that provides key benefits and insurance to workers as they move from job to job. The concept is an important one — indeed, we call for such programs in a new report. But a meager 2.5 percent contribution to a benefits fund hardly begins to make up for what’s lost when workers give up employee status.

It’s no wonder Handy wants the deal: It would free the company from lawsuits exposing its illegal failure to pay payroll taxes. At least five states — Oregon, Alaska, California, New York, and Washington — have found that gig-economy companies violated state labor and employment laws or underpaid payroll taxes. That’s likely why some on-demand companies want to rig new rules that wholly exempt their sector from payroll taxes that other businesses must pay.

Handy’s proposal would establish the nation’s first sectorwide portable benefits fund — and set a bad precedent — so it’s crucial we get it right the first time, using three key principles identified in our report.

First, we should build on our country’s existing systems of portable benefits — workers’ compensation, unemployment insurance, and Social Security — making them more inclusive and expansive, instead of creating more exemptions.

Second, we should build a sector-based portable benefits system that supplements social insurance protections and places worker organizations at its center. Unions representing “gig” workers such as musicians, writers, actors and construction workers, for example, have negotiated and administered supplemental pensions and other benefits for decades. Another good model is the proposed New York City Taxi Workers Health and Welfare Fund, which would deliver benefits to independent taxi drivers.

Finally, a sustainable portable benefits model must include business contributions and public funds. Benefits programs based solely on individual savings or funded through small fees will not provide economic security to low-wage workers, for whom the primary obstacle to saving is insufficient income.

Like more and more workers today, gig economy workers are struggling at a time when work delivers less and less of what we need to get by. Handy’s bill raises big questions about how we will deliver economic security in a changing economy, in which too many corporations continually try to shed responsibility for their workers. We can do better than Handy’s one-sided proposal.

Nell Abernathy is vice president of research and policy with the Roosevelt Institute. Rebecca Smith is the deputy director of the National Employment Law Project.

Read the original op-ed at the Albany Times-Union.

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About the Authors

Rebecca Smith

Director of Work Structures, National Employment Law Project

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