Jun 30 2015
By: Mark Warner
My father returned from military service in World War II and worked for 40 years for the same company. He earned steady advancement and a secure retirement through the combination of a company pension, Social Security, and his savings.
When my generation, the Baby Boomers, came along, the defined-benefit of a company pension morphed into the defined-contribution of the 401k, and both employers and employees contributed.
Today, nearly 80 million American millennials are flooding into the workforce. And whether by choice or economic necessity, many in this generation are piecing together two, three or more on-demand job opportunities, often with no benefits at all, in what has come to be known as the Sharing, or the On-Demand, Economy.
You could say my father’s generation viewed employer-sponsored health, disability, workers’ compensation and retirement benefits as a “belt AND suspenders” proposition, and Baby Boomers viewed it more like “belt OR suspenders.” But members of the millennial generation could be expected to hold-up their pants all by themselves.
Remarkably, Washington mostly has remained on the sidelines as the U.S. workforce and the very concept of the workplace have undergone the most dramatic transformations in decades. By my count, almost 25 people are running for President in 2016, and almost none of them are talking about these issues.
To be sure, the sharing economy is not just comprised of millions of millennials who began entering the workforce in 2000. As many as one-third of American workers now moonlight or have a second job. The sharing economy also includes middle-aged professionals downsized at mid-career, and Baby Boomers hit with a premature end to what they thought was a solid career.
It also includes a lot of people for whom working several jobs at the same time is nothing new: it’s how they’ve always survived.
Today, technology-driven platforms like Airbnb, Etsy, TaskRabbit, and Uber provide on-demand connections to match supply and demand for things people never had an opportunity to monetize previously: A spare room. A ride. A chunk of free time, and a specialized skill.
But many of these new business models are based upon the premise that workers are independent contractors, not employees. That means employers do not help pay the costs of health insurance, retirement, unemployment or workers’ compensation insurance.
That means many workers, even if they are doing relatively well, exist day-to-day on a high wire with no safety net underneath them. That may work for many of them — until it doesn’t. And that’s when the taxpayers likely will be asked to pay the bill.
Washington needs to catch-up, and start asking some tough policy questions about the ramifications of these new concepts about work.
First, the biggest challenge may be the change in the employer-employee relationship. Are there other options for providing safety net benefits for workers who are not connected to a traditional, full-time employer? Who should administer it? Should it be opt-in or opt-out?
We could look to the ACA healthcare exchanges as one public-private model, or perhaps borrow the idea of the Hour Bank, used by the building trades for 60 years, which administers benefits for members who work for a series of contractors.
It could be consumer driven, by providing consumers with an option to designate a portion of their payments into an independent fund that helps support contract workers. There are other public-private models, too, and they also deserve a look.
Second, while litigation is underway about whether on-demand workers are independent contractors or employees, this is too important to leave to the courts on a case-by-case, state-by-state basis. As policymakers, we should begin discussing whether government and industry’s 20th Century definitions still work for a 21st Century economy.
Third, the federal government needs to become much more nimble. It’s been ten years since we collected reliable data about how many people are part of the contingent workforce. Estimates range from three million to more than 50 million, but we don’t know for sure. Additionally, we also need to recommit to extending broadband to under-served and unserved rural regions. And we also should not overlook the impact of the millennial generation’s combined $1.2 trillion in student loan debt: It is limiting options, opportunities and economic mobility for too many young people.
Finally, millennials are demonstrating a preference for renting and sharing instead of owning things such as vehicles and houses. That could have huge ramifications for local, state and federal tax structures designed to incentivize ownership.
Five years ago, no one had even heard of Uber or Airbnb. And while we don’t know what tomorrow’s disruptive technologies will look like, developments such as driverless cars, drone deliveries, and 3D printing are right around the next corner.
Policymakers in Washington and Richmond should be encouraging these innovations, and recognize when it’s best to get out of the way. And we should be working together to make sure this new economy works better, and creates additional economic mobility, for more Virginians.
Warner, a Democrat, co-founded Nextel and served as governor before being elected to the U.S. Senate in 2008 and 2014.