The recent ruling by the California Labor Commission that San Francisco Uber driver Barbara Ann Berwick is not a contractor but an employee is seismic. For years now, Uber has successfully fended off such efforts, arguing, “Hey, we’re just an app.” We admire the innovative spirit that Uber represents and use the service ourselves often. But who are they trying to kid? Berwick wouldn’t be out there driving on her own. She’s an Uber employee.
America is filled with millions of Berwicks. Middle-class workers face many threats, including declining wages and the rising costs of education. But by far the biggest threat to middle-class workers—and to our economy as a whole—is the changing nature of employment itself.
Gone is the era of the lifetime career, having been replaced by a new economy intent on recasting full-time employees into contractors, vendors, and temporary workers. It is an economic transformation that promises new efficiencies and greater flexibility for “employers” and “employees” alike, but which threatens to undermine the very foundation upon which middle-class America was built and to strip away benefits.
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That is why it is essential that we imagine and adopt new policies that guarantee all workers the basic level of economic security necessary to sustain and grow the American middle class, and with it, the economy as a whole. We must acknowledge the radically different needs of a new generation of Americans—many of whom already have more employers in a week than their parents had in a lifetime—by adopting a new “Shared Security System” designed to fit the flexible employment relationships of the “sharing economy.”
Take, for example, an American worker whose story is increasingly typical of this new age. We’ll call her “Zoe.” Zoe is a woman in her late 20s who works part time at a hotel outside Denver. She’s worked at the front desk for five years, and her supervisor says he’s happy with her performance—but he never schedules her for more than 29 hours in a single week, so she does not qualify for health insurance or other benefits that full-time workers enjoy. Always in need of extra income, she started auctioning her services as a landscaper on the popular work-outsourcing site TaskRabbit. She earns an additional $100 or so a week at it.
On Friday and Saturday nights, she’ll usually pick up a “shift” working as a driver for UberX. Occasionally, on the rare weekday off, she’ll go live on UberX to drive people to and from the airport. During tourist season, Zoe will pick up a little spending money by renting out her apartment on Airbnb, living in her parents’ house for days or weeks at a time.
If you think all her hard work amounts to a stable lifestyle, you’re wrong. Zoe doesn’t have enough money in the bank to sustain a savings account, let alone to contribute to retirement. She’s never late with her rent, but the idea of owning a house is far out of reach.
The contrast between the experience of Zoe’s generation and that of her parents is stark. Zoe’s parents entered the workforce with the expectation that hard work would be rewarded with decent pay, improving prospects, and a comfortable retirement; it was an era in which most Americans could reasonably expect to work for only a handful of companies over the course of their career, and certainly no more than one employer at a time. This was the social contract of the 1950s, ’60s, and ’70s. But for Zoe’s generation, this contract no longer exists.
The lesson we can take from Zoe’s experience is that our traditional job-based benefit system no longer makes sense in an economy in which fewer and fewer workers will hold traditional jobs. For while the sharing economy promises many exciting new opportunities, without a new labor-owner framework, it simply cannot provide the economic benefits, stability, and security necessary for a robust and thriving middle class.
An economy based on micro-employment requires the accrual of micro-benefits, and a twenty-first-century sharing economy requires a twenty-first-century social contract that assures shared economic security and broad prosperity.
We propose a new Shared Security System that endows every American worker with, first, a “Shared Security Account” in which to accrue the basic employment benefits necessary for a thriving middle class, and second, a new set of “Shared Security Standards” that complement and reinforce that account.
One can think of the Shared Security Account as analogous to Social Security, but encompassing all of the employment benefits traditionally provided by a full-time salaried job. Shared Security benefits would be earned and accrued via automatic payroll deductions, regardless of the employment relationship, and, like Social Security, these benefits would be fully prorated, portable, and universal.
Proration. The obvious solution to the explosion of part-time work—voluntary or otherwise—is to prorate the accrual of benefits on an hourly or equivalent basis. For example, if Zoe works 30 hours a week at the hotel, she should earn three-quarters of the benefits offered by a full-time 40-hour-a-week job; if she works 20 hours a week, she should earn half the benefits.
To be clear, proration is not a radical idea. Social Security and Medicare have always been prorated: Zoe’s employer pays half of her 15.3 percent combined Social Security and Medicare tax, regardless of how many hours she works. But all mandatory benefits that normally accrue to full-time employees on a daily basis—sick days, vacation days, health insurance, unemployment insurance, workers’ compensation insurance, retirement matching, Social Security, and Medicare—should also accrue to part-time employees (hourly, salaried, or contract) and sharing-economy providers on a prorated hourly or equivalent basis.
Portability. Job-based benefits no longer make sense in an economy where fewer and fewer workers hold traditional jobs. This is why these accrued benefits must be fully portable, following the worker from job to job, or contract to contract. For example, paid vacation days that Zoe accrues at one employer could be carried over to her next, although the cost of paying for these days would come from funds banked in her Shared Security Account. Because benefits from multiple employers are pooled into the same account, portability and proration work together to provide workers with the full panoply of benefits, even within the flexible micro-employment environment of the sharing economy.
Universality. In the new economy, a basic set of benefits and labor standards must be universal across all employers and all forms of employment, with few exceptions or exemptions. A robust set of mandatory universal benefits would put all employees and employers alike on an equal footing, while providing the economic security and certainty necessary for the middle class to thrive.
We need many additional worker-friendly changes, things we collectively call Shared Security Standards: paid leave, an overtime threshold covering the bottom 65 percent of workers, a $15 minimum wage indexed to living standards, pay equity, and fair scheduling, to name a few. Together, the Shared Security Account and the Shared Security Standards—along with family support programs like affordable child care and high-quality universal preschool—would comprise a new social contract designed to fit the flexible employment relationships of the new economy. This is how we will usher in a new era of middle-class economic security, and by so doing also provide American businesses with the economic stability and certainty that they demand.
This column is adapted from a longer essay in the Summer 2015 issue of Democracy: A Journal of Ideas. You can read it here.
Nick Hanauer is an entrepreneur and venture capitalist in Seattle. He is the co-author of two books, The True Patriot and The Gardens of Democracy. David Rolf is the president of SEIU 775NW, international vice president of SEIU, and the author of the forthcoming The Fight for Fifteen: The Right Wage for a Working America. @NickHanauer, @DavidRolf_SEIU.
