Jobless Benefits for Gig Workers a Tricky Proposition

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By Chris Opfer

Oct. 14 — There’s growing interest in creating an unemployment benefits program for gig workers, but so far lawmakers, advocates and other stakeholders are coming up with more questions than answers.

“The downside to gig employment is that it’s often episodic work and all of the risk and cost is being borne by the workers,” Sara Horowitz, Freelancers Union executive director, told Bloomberg BNA. “The unemployment isn’t as long term, but it is more frequent.”

The biggest issue is how to pay for a system that could provide jobless benefits to millions of workers in gig, on-demand and other contract-based positions. Then there are questions about how to cover sporadic bouts of unemployment and how to determine whether someone is really looking for work.

The rise of on-demand, sharing economy businesses has drawn increased attention to contingent workers. They’re typically considered independent contractors, which means they don’t get minimum wage and overtime protections, workers’ compensation benefits, unemployment insurance or tax withholding.

Warren Touts ‘Basic Protections.'

A wide spectrum of stakeholders is talking about ways to better protect gig and other contract workers. One idea involves creating a new classification that would allow businesses to offer them some benefits and training without taking on the liability that comes with being a traditional employer. Some are also pushing for a portable benefits system that would allow multiple employers to kick into the same plan for workers with more than one job.

“All workers—no matter when they work, where they work, who they work for—should have some basic protections and be able to build some economic security for themselves and their families,” Sen. Elizabeth Warren (D-Mass.) told Bloomberg BNA via e-mail. “No worker should fall through the cracks and that includes making sure all workers have access to unemployment insurance while they are out of work and looking for their next job.”

The discussions are complicated by the fact that some lawmakers want to see gig and other contract workers reclassified as traditional employees, complete with all of the protections and benefits. The New York Labor Department recently found that two former Uber drivers are entitled to unemployment benefits as employees of the ride share operator, and lawsuits are challenging the company’s decision to treat workers as independent contractors.

Actively Looking for Work?

Federal law sets the guidelines for state unemployment insurance programs, which are largely funded by a tax on employers. The benefits programs are designed to assist workers who lose their jobs through no fault of their own.

The system would likely need to be tweaked to fit contingent workers, many of whom jump from project to project or otherwise see frequent swings in their hours and income. That might be accomplished by making benefits available on a more short-term basis or providing other income-smoothing programs, like self-insured accounts to cover sporadic declines in pay.

“The lack of financial security from week to week and month to month is a gigantic issue for employees in the gig economy and other independent contractor jobs,” Seth Harris, a former deputy labor secretary in the Obama administration, told Bloomberg BNA. “But there are open questions about whether you can handle unemployment insurance through a benefits policy structure.”

One of the problems with trying to fit the on-demand employment model into an unemployment insurance system that’s nearly a century old is that the current system requires a person to be actively looking for work.

An Uber driver who chooses to spend less time behind the wheel in a given week, for instance, probably wouldn’t be eligible for benefits. A driver whose car is in the shop might have a better case, as might someone who cleans homes through an online service like Handy or TaskRabbit and sees a dip in demand.

Demand for Data

Better data about the contingent workforce would probably make it easier to resolve some of the questions about how to expand the social safety net. The Freelancers Union recently estimated that as many as 53 million workers draw at least some of their income from gigs, while the McKinsey Global Institute says on-demand jobs make up only a small portion of independent work.

“I think we need to be careful not to have a one-size-fits-all solution,” Gene Zaino, the president of self-employed business service provider MBO Partners, told Bloomberg BNA. “There are gig workers who may need a safety net more than independent workers who want to build a one-person business for themselves.”

Some policy makers are also concerned about rushing to regulate a still burgeoning way of doing business. That means any legislation to assist gig workers is likely still a long way off.

“There’s a huge amount of discussion, but there’s a lot to figure out before they get to a consensus,” Harris told Bloomberg BNA. “These kinds of things don’t normally happen on the first go around.”

To contact the reporter on this story: Chris Opfer in Washington at copfer@bna.com

To contact the editor responsible for this story: Peggy Aulino at maulino@bna.com

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