Latest News

By: Matt Rosoff

Capitalism has been very good to U.S. Senator Mark Warner.

As a VC and early investor in wireless technology, he helped start the company that became Nextel, invested in hundreds of other startups, and has an estimated net worth over $200 million.

But the Democrat from Virginia is worried about the state of capitalism today.

"I worry that capitalism is not working for broader and broader swaths of Americans, particularly low and moderate [income] and non-knowledge-based workers," he told Business Insider in an interview this week at the Consumer Electronics Show.

Warner was at CES to speak on a panel about global innovation and the tech economy, and to talk at a reception about one of his big areas of interest of the last year: Bringing more stability to the growing number of workers in the "on-demand" economy, like Uber and Lyft drivers or Handy home cleaners.

Where do these workers get health insurance? What do they do if they get hurt and can't work?

Warner said that the 20th century social contract, where employers offered benefits like health insurance in exchange for a promise of full-time job commitment from the employee, is breaking apart as the economy changes. And some of the old classes of benefits no longer make sense for a workforce that values flexibility.

"For example, one of the big concerns in the debate has been unemployment insurance. Unemployment insurance if you're an on-demand worker isn't really relevant. On the other hand, income insurance might be relevant. If you're an Uber driver or Lyft driver in Boston and a hurricane comes and you can't work for two weeks, that's not your fault."

This isn't just a thin slice of Americans he's worrying about. According to a recent survey of 3,000 people, an estimated 45 million Americans have earned money in the "on demand" economy, whether as a worker or through renting their home out through a service like AirBnb.

That's 22% of the adult population, a number that surprised Warner when he read it. (The survey was designed in part by the Aspen Institute's Future of Work Initiative, which Warner co-chairs with former Indiana governor Mitch Daniels, a Republican.)

"I was wondering at first if that included selling something on eBay," Warner said, "but it didn't. If you take it up to that classification it was up to 70%." 

He's not necessarily calling for new government programs or regulations as the solution, but rather envisions a mixture of public and private programs.

"I do think there needs to be some joint contributions of platforms, companies, and employees," he told us. "If you were an actor or you were a carpenter — the on-demand economy's been around a long time — you had an hour bank that you paid into that was not managed by the government, it was managed by a third party. In that case it was a union. So could that be re-envisioned for the 21st century."

He also says that the big on-demand companies have started to come around to the idea that some minimum standards for employee security will probably have to be set, and they'd rather participate than have rules forced on them.

"When I first started meeting the CEOs, a lot of them were like, 'Why are you guys even looking at us? You should just let us be, we're just independent contractors, we're just connecting people, we're not doing anything.' They realize that gig is up."

Warner isn't so concerned about whether on-demand workers should be classified as regular employees or contractors — known as "W2" versus "1099" employees for the income tax form they fill out. 

For instance, some fast-food workers are classified as W2 employees, but are only allowed to work 29 hours a week so their employers don't have to offer them health benefits under the rules of Obamacare. So they get stuck in a situation where they always have to be on call and can't take a second job, but then get sent home early if the company's scheduling software estimates lower than normal demand because of something like incoming bad weather. "That's the worst end of the stick."

More broadly, he thinks the balance of power between labor and capital has changed, but that government policy hasn't reflected that change. In the 20th century, labor was abundant and capital was scarce. Now that's been flipped on its head, especially when it comes to skilled labor. Policymakers need to take that into account in terms of the tax code, immigration reform, and a lot of other areas.

He also said that if Silicon Valley wants Washington D.C. to understand technology better, they need to engage with government rather than trying to ignore it. "I challenge my friends in the Valley all the time — you can curse the darkness, or you can light a candle. So come on, help us out."