Above, watch the full conversation “The 1099 Economy: Exploring a New Social Contract for Employers, Employees, and Society,” hosted by the Aspen Institute Economic Opportunities Program.
The Rise of the 1099 Economy
We are starting to see a shift in the nature of employment as a new economy driven by an independent workforce grows each year. These contingent workers benefit from flexible schedules, location-independence, and often, income similar to that of traditional employees. However, that freedom currently comes at the cost of forfeiting certain benefits. As Sen. Mark Warner (D-VA) said during a recent discussion on the contingent workforce, “even if you’re doing really well, you’re operating without a safety net below you.”
With this risk in mind, Warner joined Center on Budget and Policy Priorities Senior Fellow and former White House Chief Economist Jared Bernstein, Peers Co-Founder Natalie Foster, National Guestworker Alliance and New Orleans Workers’ Center for Racial Justice Director Saket Soni, and Intuit Inc. Chief Tax Officer David Williams to discuss the unique opportunities and regulatory challenges presented by this new economy.
To understand how this contingent workforce has grown, Foster explained the four types of individuals most likely to pursue this kind of “on-demand” work:
- A person who is looking for more schedule flexibility
- A person who wants an additional source of income
- A person who is in transition, or between multiple jobs
- Entrepreneurs who see this as an opportunity to start their own businesses
With new technology and online platforms making it easier for individuals to participate in this type of work, some of the people outlined above have started to make the switch from having one full-time career to many “on-demand” jobs. And although the data varies widely from anywhere between 4 percent and 40 percent of the American workforce participating in this economy, it is clear that a large and growing number of individuals are opting into this style of work — whether by choice or by necessity.
Reclassifying the Contingent Worker
“Someone who may drive four times a month on Uber, rents out their apartment two weekends on Airbnb, and makes some stuff for Etsy, while she is also trying to start an IT business… classifying that person as a full time employee just doesn’t [make sense],” said Senator Warner when discussing the inherent challenge in attempting to classify these workers under the current system.
While policymakers and courts grapple with whether these workers should be considered as employees or independent contractors, the problem with classifying them as independent contractors is that they are not protected by labor standards like minimum wage, overtime pay, etc., nor do they have employers paying into their health care or other social benefits. With this in mind, Foster claimed that the most important question surrounding this issue is: “How do we create the level of stability that we’ve created over the last century for workers while maintaining the flexibility that we know people want?”
Determining a way to apply current labor standards to a changing workforce became a focus of the discussion. While some felt that our government would have to start from scratch, Bernstein explained that “regulation and innovation can coexist,” and using the existing structures “doesn’t bring us back to the Stone Age… but rather is a way to map the old onto the new.” In his view, the answer to the problem lies in marrying our current labor standards with the independent worker.
Other speakers proposed their own solutions. Williams spoke of a need to start at the tax level and reform the current tax code, whereas Soni explored the possibility of portable benefits that a worker can utilize independent of an employer. Soni also proposed a guaranteed minimum income as a possible policy idea. Foster talked about the idea of prorated benefits, where each company that hires these independent workers pays into a percentage of their benefits. While there was no consensus on the answer, there was an agreement that the issue must be addressed.
There is a certain urgency with this issue, as Warner explained: “Nobody in Washington is really talking about this yet… and we have to make sure this issue doesn’t get caught in the partisan divide,” his point being that there is an opportunity for policy around this issue to stay ahead of any conflict driven by political polarization if policymakers act now.
While there are no definitive answers for what needs to be done to protect this new group of American workers as more individuals opt out of traditional full-time employment, it is clear that this issue demands attention, and it is, as Soni said, “a question that requires a policy imagination that is leaning into the future.”