Gig Economy's Growth Calls for Modern Labor Laws, Economist Alan Krueger Warns
Current labor laws and safety nets for workers were developed in a different era and more protections are needed for the growing number of independent workers in the gig economy, a prominent economist said Thursday on Capitol Hill.
Alan Krueger, Princeton University economics professor who served as chairman of President Obama’s Council of Economic Advisers, pointed to proposed federal policy solutions and state initiatives that could address inequities and inefficiencies associated with the independent worker sector of the economy. He suggested there are policy solutions, including changes to tax, benefits and labor laws to extend protections to the growing sector.
“How do we extend a safety net to a large and growing group of workers?” Krueger said during a lecture hosted by The American Academy of Political and Social Science. “The challenge will be in how do we create this in our existing system and extend those protections to the rest of the workforce.”
Krueger’s warnings and policy proposals come at a time when lawsuits and state and local laws have exploded around the country arguing over how to address workers who do not fall into traditional categories, including a debate over classification of these workers in the online economy as independent contractors or employees and whether they have a right to unionize.
He called for more evidence and data and presented a survey he conducted at Princeton assessing more than 10,000 workers who considered themselves self-employed. Krueger’s research suggests that a third of job growth in the U.S. is a result of self employment and adding contract work, it represents two-thirds over the last decade. Where to put the growing gig economy is more elusive, he said. He said that group is doubling every year. Uber specifically doubles its workforce every six months.
“It’s going to fuel a lot of growth moving forward,” he said.
Krueger pointed to measures in Washington state and New Jersey that provide shared security accounts that put workers in a universal system with health insurance and retirement benefits. These ideas were promoted by Nick Hanauer, Seattle-based entrepreneur and venture capitalist, and union leader David Rolf in 2015.
Krueger also said some companies fear providing benefits to these workers because they then may be forced to classify them as employees. He said “safe harbor” laws could be useful. He also suggested that the gig economy and independent contract workers should receive extended coverage under Civil Rights Act.
“Self-employment continues to grow and the online economy will fuel that in the future,” Krueger said. “There is a significant, substantial group of people left to their own devices in obtaining their own safety net.”
Krueger’s lecture draws on work he and Seth Harris, former Deputy Secretary of Labor and Cornell University professor, produced in 2015 that suggests a new category of “independent workers.” Establishing that new category, they suggest, could settle the number of growing legal disputes and gray area associated with the gig economy.
Under their proposed definition, a new legal category of independent worker would be distinguished from the traditional employee because they control whether, when and where and how long they work. Yet, they would still receive legal benefits and protections, including the freedom to organize and bargain collectively, civil rights protections, mandatory tax withholding and worker-company share contributions for payroll taxes that fund Social Security and Medicare. Hundreds of thousands of workers would be affected by this proposal.
Legislation has either passed or is brewing in states including Washington, California, New York and New Jersey, over some of the issues Krueger addressed. Federal proposals are also in the works to provide “portable benefits” for workers in the gig economy and updating the Fair Labor Standards Act, which addresses minimum wage and overtime pay protections.
U.S. Sen. Mark Warner, D-Virginia, who has championed such efforts, said Thursday there is a need to re-examine the whole workforce and said that 21st century laws are not sufficient.
“We need good data, portable benefits and new models of social insurance,” Warner said. “The discontent that drives the political chaos will only get worse.” He added: “This goes to the heart of how can we make 21st century capitalism work for more people.”
Source: Law Journal