My passion lies in helping individuals and communities to thrive. The growth of individuals in contingent and/or gigging work offers both possibilities and challenges towards this goal. Contingent work can provide flexibility to individuals to pursue their goals and passions in ways that our grandparent’s generation likely would never had imagined. But we must strive together to ensure that workers in these arrangements do not lose the hard fought protections that we have won for more traditional workers.
Preserving Employee Rights to Achieve Economic Security
While the ideal answer to the angst of the American worker is to heal the social bonds in our society; undoing years of accumulated cultural change cannot happen overnight and in practicality cannot be fully done. For the past 20 years we have witnessed an increase in contingent workers – workers who work part-time of full time on a temporary or contract basis. Today this mindset is amplified by the prioritization of the rights of ‘owner/shareholder’ interests over other stakeholders in the business and the depersonalization of employees to a monetary commodity. It is also equally a reaction to the drive for individuality and self-determination in American society today. “The industry that drove America’s rise in the nineteenth century was often inhumane. The twentieth-century corrective—a corporate workplace of rules, hierarchies, collective bargaining, triplicate forms—brought its own unfairnesses. Gigging (contingent work) reflects the endlessly personalizable values of our own era… The power to control one’s working life would return, grassroots style, to the people” (Heller 2). While some individuals voluntarily choose a contingent work style for flexibility a large percentage of contingent workers are in this role involuntarily. The next logical response in this progression is to preserve for the individual the benefits that became associated with the employer relationship during the middle of the 20th century. In particular, the benefits of predictable income, health insurance coverage, and retirement savings are critical to reducing life stressors for the American worker.
President Roosevelt in his bill of rights said that workers needed adequate protection from the economic fears of old age, sickness, accident, and unemployment (Roosevelt 1944). In the twentieth century unions provided security for members by advocating for living wages, scheduling protections, health benefits, safety precautions, and retirement benefits among others. “In 1960 33% of workers were represented by unions and today that figure is 11%. And as union membership declined government stepped into the role of protector of employee rights through increased regulation” (Hartman and DesJardins 190). Today the government protects ‘traditional’ employees regarding overtime, minimum wages, discrimination, unemployment, and retirement savings among other items. These benefits are critical to the economic security of workers and currently are limited for or not available to contingent workers.
The first challenge is dealing with volatility in income which is a hallmark of the contingent job market. Rachel Schnieder and Jonathon Murdoch helmed a study called US Financial Diaries on American households’ financial position over time and the influence on decision making within those households. What they found was that traditional measures of financial wellbeing which measured data for a specific moment in time or in average over large periods of time missed an important factor, variability in income. In fact, for the 235 households in the study the average household five months of the twelve months studied the participants income was 25% above or below their averaged monthly income. Or in other words a family making $60,000 per year might make $5,000 a month for seven months but those months would be interspersed by a month of $9,000, a month of $7,000 and three tough months of only $3,000 income. (Schneider & Murdoch 2017) These households must choose which bills to pay and which to delay during the tough months and the good months are spent catching up on old bills and late fees or delayed but necessary expenditures like car or house repairs. In fact, one study household chose stability over traditional financial measures by the wage earner in the household switching from his commission based tractor-trailer repair job to a similar position that is further away but guarantees a minimum number of hours worked and doesn’t pay on commission. This switch cost the family a longer commute and lower annual income but he and his wife no longer have to worry about whether paying the mortgage this week would mean not having enough money for food the next week if his paycheck came in low. (Schneider & Murdoch 2017) Their powerful response to the uncertainty of their income is a clear demonstration of the effects that contingent work has on American households.
A primary source of volatility in a worker’s earnings is cutbacks by employers in response to economic stimuli. A good example of this scenario is a local specialty bakery who successfully sought out and won a contract for their goods with a chain of grocery stores. The business owner hired four additional staff to meet the increased production needs for the contract. At the end of a year the grocery store chain evaluated the placement of the product and decided to drastically reduce the number of stores that carried the product. Given the at will status of employment in the United States the usual response to these setbacks by businesses is to lay off workers. While workers can file claims for unemployment benefits this takes time and these benefits are lower than the worker’s wages. A model program to address this challenge is the Work Share program operated through the Oregon Employment Department. The employer arranges with the Employment Department to continue employment of the workers at reduced hours (for example a reduction of 40% to 24 hours per week) and the worker receives partial unemployment benefits (40% of their normal benefit amount). Finally, the program stipulates that the employee retains eligibility for any health and retirement benefits they had before the reduction in hours. (OR Employ Dept. 2017) This not only is a benefit in reducing lost wages but increases the security of the worker since they retain their current position and are able to return to full time work as business recovers.
Employer based health insurance and retirement benefits are usually structured towards full time traditional employees leaving contingent workers vulnerable to easily avoidable economic risks. One way to preserve these benefits for contingent workers is to decouple these benefits from the employer/employee relationship. Current research indicates that participation rates for employer based retirement plans are much higher than for IRAs. The Investment Company Institute’s 2015 survey on U.S. Households’ Saving for Retirement found that 55% of workers have access to employer sponsored retirement plans, of the other 45% only 5% had an IRA. The other 40% of U.S. households had no formal retirement savings accounts. (Holden & Schrass p3) Some states have begun to consider and design programs that seek to address the retirement savings challenge. A good example is the OregonSaves program which will begin a test phase in July 2017. Eventually all employers that do not have their own retirement plan will be required to register with the program and enroll their employees. Employees will be automatically enrolled to contribute 5% of wages unless they opt out of for a different level. These after-tax contributions go into a RothIRA owned by the individual. If the individual switches employment when the new employer reports the hire the State of Oregon locates their existing account and direct contributions to it. (OR Retirement Board 2017) This plan is a good first step forward to expanding access to retirement savings to more workers. I would recommend further steps in this area to include enabling the plans to allow pretax contributions or employer contributions and increasing contribution limits to further increase comparability to employer based savings plans.
Finally, we must address the challenge of health benefits for employees. One of the challenges faced by the Affordable Care Act was ensuring that insurance providers continued to offer plans on the insurance marketplaces implemented as part of the ACA. Insurers evaluated profitability and feasibility for their offerings based on separate market segments. These segments currently include Medicaid, employer group, individual market, ACA marketplace, and Medicare supplements. My recommendation is to essentially remove the segmentation by removing the current patchwork approach to health insurance in America. This approach would include all plans being sold directly to individuals by the insurance companies. The government would include a basic set of benefits that must be covered similar to the benefits required under the ACA. A flat value would be set per participant to cover that basket of benefits. Employers would pay this flat amount for every employee including contingent workers. In the case of people who currently qualify for Medicaid and Medicare the government would pay this flat amount instead. Individuals would remain free to choose plans that suited their individual needs beyond this minimum coverage and would be responsible for paying the difference. Because the policies would be individually owned it would address current concerns about continuity in coverage and the effects of employment changes.
Often the cause behind the utilization of contingent workers is the perceived penalty to employers to maintain a staff of full time employees. The employer is concerned about limiting overhead costs and maintaining their competitive edge. “Employers that do not offer retirement savings plans to their employees often cite concerns about costs, legal and regulatory requirements, and liability issues. In a 2013 survey of small businesses with and without retirement plans conducted by the Main Street Alliance/American Sustainable Business Council, 64 percent cited cost as the largest barrier to offering a retirement savings plan. Another survey, conducted in 2014 by the Small Business Majority in Illinois, found that of the 70 percent of small businesses that do not offer plans, 27 percent cited a lack of administrative capacity and 14 percent cited cost as reasons for doing so.” (PEW 8) These same concerns about monetary and administrative challenges are used for most of the benefits traditionally reserved for full time traditional employees. What this simple focus on monetary factors overlooks is the competitive edge lost due to prime candidates selecting other employment that offers the benefits they need.
While responding to the changing nature of employment in the US seems like a daunting task we can work together to help preserve the rights of all workers without harming the businesses that help our communities thrive. Increasing participation in programs like WorkShare preserves talent for employers and reduces recruitment and training costs while providing stability for workers as well. State administered retirement plans have the potential to offer employers an alternative to the administrative challenges in maintaining their own retirements plan combined with a prime tool for employee recruitment. Building a framework for individual ownership of health plans has the potential to increase employee choice while simplifying the insurance landscape. Business choices need not be a choice between money and people.
Hartman, Laura Pincus., and Joseph R. DesJardins. Business Ethics: Decision Making for Personal Integrity and Social Responsibility. New York: McGraw-Hill/Irwin, 2008. Print.
Heller, Nathan. “Is the Gig Economy Working?” The New Yorker. The New Yorker, 10 May 2017. Web. 27 May 2017. http://www.newyorker.com/magazine/2017/05/15/is-the-gig-economy-workingThis article takes a more narrative approach to investigating the gig economy. The author has interviewed several participants in the ‘gig’ market and presents a complex picture of both the positive and negative sides of the issue. The author’s authority rests on his direct interviews with the subjects of his article. The author offers a personal side to the subject that really brings the debate alive to readers.
Holden, Sarah, and Daniel Schrass. 2016. “The Role of IRAs in U.S. Households’ Saving for Retirement, 2015.” ICI Research Perspective 22, no. 1 (February). Available at http://www.ici.org/pdf/ per22-01.pdf.
Oregon Retirement Savings Board OregonSaves Program Details. Oregon Retirement Savings Board Web 2 Jun 2017.
Roosevelt, Franklin D. The Public Papers & Addresses of Franklin D. Roosevelt (Samuel Rosenman, ed.), Vol XIII (NY: Harper, 1950), 40–42
Schneider, Rachel and Jonathon Murdoch. “The Power of Predictable Paychecks.” The Atlantic. Atlantic Media Company, 24 May 2017. Web. 27 May 2017. https://www.theatlantic.com/business/archive/2017/05/financial-diaries-predictable-paychecks/527100/. This article shares some of the conclusions from a study on households’ financial positions over time and shares the story of the one of the study participants to highlight these conclusions. The study focused on variability in income and the impact on financials choices made by study participants. The authors of the article were the leaders of the research project so it is likely that the data presented from the study is accurate. Schneider is a senior VP at the Center for Financial Services Innovation and Morduch is a professor at the NYU Wagner Graduate School of Public Service. This source provides not only statistics on the commonality of income instability but powerful stories of how this instability affected study participants.
The Pew Charitable Trusts “How States are Working to Address the Retirement Savings Challenge” The Pew Charitable Trusts. June 2016. Web 06 Jun 2017. http://www.pewtrusts.org/~/media/assets/2016/06/howstatesareworkingtoaddresstheretirementsavingschallenge.pdf. This publication by The PEW Charitable Trusts explores the primary approaches being considered so far by state governments to increase their residents’ retirement savings. It also explores the regulatory challenges to these approaches. The PEW Charitable Trusts have been working to shape public policy since 1948. This publication was invaluable for my discussion about the future of policy on retirement savings because it brought together in one place many of the factors that are in play in the field.
Oregon Employment Department Work Share Oregon. Oregon Employment Department. Web 2 Jun 2017. http://www.oregon.gov/EMPLOY/Businesses/WorkShare/Pages/Work%20Share%20Home%20Page.aspx