The following post was co-authored by Senior Fellow Lori Sanders.
This coming Tuesday, Hillary Clinton is expected to claim a resounding victory at the climax of a long, hard-fought election. But even if the country moves decidedly to the left, congressional Republicans will soon have to pivot to prepare for new policy battles that will take center stage in 2017. Regardless who is elected, one of these fights is likely to be over the status of millions of contract workers in the so-called “gig” or “sharing” economy, and beyond.
While Donald Trump has made some favorable comments about the sharing economy, prominent conservatives like Grover Norquist have expressed fears that, if Clinton is elected, she will wage a crusade against the employment practices of companies like Uber, Postmates or TaskRabbit, who many on the progressive left see as “exploiting” their workers by classifying them as independent contractors. As they see it, this “share-the-scraps economy” is transforming us into a nation of part-timers with low pay and no job security.
The answer, they say, is to reclassify all of these workers. As former Labor Secretary Robert Reich notes: “Congress doesn’t have to pass a new law” to change the test for employment classification. It can simply issue a new rule. President-elect Clinton could make this happen quite easily if she wanted to. But does she?
Clinton has already circulated an extensive policy agenda. But nowhere in her extensive, more than 7,000-word tech policy plan—which deals with everything from cybersecurity to intellectual property—is there a mention of the “sharing economy.” This is no small omission.
In a July 2015 speech at the New School—the first major economic address of her campaign—Clinton alluded to many of the strong criticisms of the gig economy that have taken root on the left, remarking that the rise of the sharing economy “[raises] hard questions about workplace protections and what a good job will look like in the future.” Clinton also notes that many young people—particularly in minority communities—“cannot find a job.” While talent is “everywhere,” she notes, “opportunity is not.” She subsequently added that, as president, she would work to make this trend “strengthen, not hollow out” the American middle class.
For sure, the gig economy is a big deal. Research conducted in 2014 by PriceWaterhouseCoopers predicts global sharing-economy revenues could reach $335 billion by 2025. Uber, the largest sharing-economy company, is valued at more than $60 billion. That’s more than most Fortune 500 companies. The sector is only going to get bigger. Already, there are two dozen “unicorns”—privately or closely held companies valued more than $1 billion—in the sharing-economy space.
With that said, Clinton appears to misdiagnose the problem. There’s next-to-no evidence that the gig economy is taking over the world. Over the past two decades, the number of people working part-time has declined as a percentage of the labor force. Bigger companies have come to employ more workers and startup activity has declined precipitously. Tenure at the same job has risen. The data simply doesn’t support the idea that we’re becoming a nation of part-timers thanks to the rise of Uber and its ilk.
Some real changes have happened. Job schedules have become less regular for many unskilled workers, for example, and the percentage of people employed full-time by one company but working at another have also risen. Still, most people in the sharing economy are using it to supplement their income, rather than to replace an existing job. For example, 69 percent of Uber drivers have other full-time or part-time work.
Perhaps it’s no surprise that—following a resounding backlash to her speech—the Clinton campaign walked back her remarks, stopped talking about the issue and left it out of her innovation policy plan. When the campaign is over, rather than pursuing a strategy of forcing innovative companies into the outdated dichotomy of employee versus contractor or giving into everything that old-line unions and their advocates want, the next president should view it as an opportunity to start a conversation about modernizing American labor policy for the 21st century.
The difficult truth is that our labor regulations are out of date. Americans need fresher and better skills, newer models for delivering benefits and, in many cases, flexible opportunities to supplement their income. Any change that forces companies and individuals to comply with a more stringent interpretation of employment-classification rules will not only do harm in the short term, it will stymie our ability to create something better suited to our current and future needs.
The quickest and easiest change the next president could make would be to encourage the creation regulatory of safe harbors for these companies to experiment with new ways to offer benefits and structure work. This would build on efforts the Obama administration began in June when it awarded competitive grants to organizations seeking to develop new portable retirement-benefit systems.
In some cases, these experiments are possible under current labor law. In others, they may require special legislation or a process to allow for labor-law waivers.
In the process, we will not only see improvements in the lives of those drawing parts of their income from the sharing economy, but will also learn a great deal about modern benefits preferences that can inform a larger discussion about how contractors and full-time employees should be treated. New structures created under the safe harbors could allow firms to offer health coverage or workers’ compensation without being declared “employers”; offer “wage insurance” in place of unemployment compensation; or do something entirely new. These could come through partnerships with local unions, as is the case in New York City, or they could come through partnerships with existing financial firms, like insurance brokers.
The critical point is if likely President-elect Clinton truly wants to stop the “hollowing out” of the middle class while improving benefits for all, allowing the sharing economy to continue to function in a disruptive and experimental way is imperative. The sharing economy has already disrupted the way we view transportation, household tasks and travel accommodations. We shouldn’t fear letting it disrupt the ways in which we offer benefits.
While there’s no panacea to address all of the challenges in our labor market, the sharing economy is a short and long-term winner, helping provide flexible new opportunities for work and the perfect vehicle to experiment with new benefit structures. When the election is over, whoever is elected president should take this opportunity to restart the conversation outside of the rhetoric of the campaign trail.