The days of Americans working 9 to 5, Monday through Friday, in a cradle-to-grave job are all but over. That’s not hype; it’s just the direction the economy is going.
The Gig Economy Is Huge—and Growing
Consider, for example, that today, already more than one-third of American workers don’t work for companies on a W-2 employee basis. Rather, they work on a project or contract basis. If this trend continues as expected, by 2027, more than half of American workers will be working in America’s gig economy.For the sake of clarity, the gig economy is the quintessence of the free market system at work, and is a direct result of the digital revolution. Much like the railroad in the 19th century and the national highway system of the 20th, universal digital connectivity has expanded and facilitated commercial and labor transactions, as well as the sharing of all kinds and classifications of information.
A Revolution for Working Americans
The digital transformation of the employer–worker relationship can hardly be overstated. Individuals can now freely market their labor and services as independent contractors to companies around the world. This allows firms to hire independent contractors alongside—and often instead of—full-time workers. They’re typically paid by the job or project.As you might imagine—or perhaps even know firsthand—gig workers may have more than one job and employer at a time. They often work remotely from their home or, in the case of the massive ride-sharing industry, from their cars. This is an enormous shift in how the economy works. It gives both employers and contractors more control and flexibility over their relationships, schedules, types of work, and locations where they perform their work.
Health Care Behind the Times
One of the biggest challenges for gig workers is replacing the affordable health care coverage.Many former W-2 employees had health care coverage through their old employers. But as contract workers, many are now under-covered or have no health care insurance at all. Excessively high and rising health care costs pose a great risk to the well-being of workers, putting a higher burden on social services as well as being a threat to the tax base.
Broken Health Care System a Risk to Millennials, Too
Adjusting our health care coverage choices for the gig economy is not only a political problem, but an economic one as well. It’s not just older, former W-2 workers at risk of financial ruin due to high health care costs. Almost half of millennial workers participate in the gig economy as well.The more the younger generation becomes engaged and invested in the gig economy, the more acute the problem will become. In a few short years, low-cost, employee-sponsored health care coverage will become less the norm in the American workforce.
California Trying to Kill Gig Economy
It remains to be seen, however, if some of the major gig economy employers, such as Uber and Lyft, GrubHub, UpWork, and others, offer health care insurance to their contract workers, or even if they’re legally or financially able to.Intended to protect gig workers, the new California law only endangers their livelihoods by forcing firms that use contract workers to pay for their health care and other benefits. Gig workers are against it, as are employers.
Outdated Tax Code Punishes Gig Workers
The tax code needs to reflect the new realities of the 21st-century American workforce as well. Allowing gig workers to fully deduct expenses such as gas, insurance, office equipment, internet connection fees, and other business-related costs is crucial. But under the new tax laws, deductions are capped, making it too costly and even unprofitable to be a gig worker.A New Approach Is Needed
But that’s not the only problem facing gig workers in the new economy. Other negatives include missing out on sick pay, Social Security contributions, life insurance, and retirement fund matching. All of these benefits typically come in most employers’ benefit packages. These aren’t only safety nets for workers, but for society as well.How all of these benefit needs are resolved going forward remains an open question. But what is clear is that things can’t continue as they are now.
The divide between our outdated systems based on old assumptions and the new economic realities must be bridged, and fast. The legislative arena is where the right protections for gig workers and the gig economy itself must be established. It begins with having access to low group rates for health care coverage and being able to write off all business-related expenses.
Now is the time to rethink how we can structure these very critical aspects of our society and government in accordance with our rapidly evolving structural economic changes. If we don’t, the negative implications for American workers’ health and economic well-being are staggering.
