全球智库信息集成服务系统

The gig economy refers to application-based technology platforms, or apps, that deploy armies of workers to perform services ranging from on-demand taxis and home cleaning and maintenance to meal delivery and child care. Some experts predict that this sector will transform the way Americans work and could offer workers unprecedented levels of freedom. Yet policies designed to keep workers safe and ensure that they receive decent wages may not apply to many workers in the gig economy. As a result, too many gig economy workers are stuck in unstable, low-wage jobs.

Gig economy workers are frequently classified as independent contractors—a status that by law means a worker is self-employed.¹ Independent contractors may contract with multiple companies; are responsible for paying employer-side state and federal payroll taxes; and should receive significant freedom on how they provide services. Some argue that this freedom and flexibility is an incredibly important benefit for workers balancing multiple jobs and family commitments.

Yet, nothing in federal employment laws prevents companies from giving virtually the same measure of flexibility to their employees.² Moreover, the independent contractor status leaves workers exposed to economic fluctuations as well as to abuse from contracting companies, because they are not covered under most workplace protection laws and do not receive workplace benefits.³

To shoulder these risks, independent contractors must have sufficient power to negotiate with their clients a pay rate higher than what would be paid to an employee to do similar work. However, many existing surveys suggest that independent contractors may be earning very low wages.⁴ Increasingly, large companies are driving down costs by shedding their role as an employer through a variety of means, including by relying on staffing agencies, franchises, and independent contractors to supply their workforce, according to Brandeis University’s David Weil.⁵

Nowhere is this happening more clearly than in the gig economy. By classifying workers as independent contractors, companies can save up to 30 percent on labor costs.⁶ This savings too often leads low-road companies to illegally misclassify their employees as independent contractors. Workers at several gig economy companies have filed lawsuits alleging that they are contractors in name only, arguing that their contracting companies do not provide sufficient independence to justify their classification as independent contractors and that they should be re-classified as employees.⁷

Yet even traditional employees are shouldering more risk. Retail and restaurant employees, for example, are increasingly subject to unpredictable, just-in-time scheduling that makes obtaining full-time work and planning for transportation and child care very difficult.⁸ Today, an estimated 40 percent of the American workforce is working for temporary staffing agencies, as independent contractors, or as part-time workers.⁹

Partly as a result of this fractured labor force, most working Americans no longer capture the full benefits of economic growth. Between the beginning of the economic recovery in 2009 and 2015, the top 1 percent of Americans received the majority of the gains in economic growth.¹⁰ The income of the top 1 percent grew by 37.4 percent during that time period, while the average income of the bottom 90 percent has grown just 4.6 percent.¹¹ And while productivity has increased by about 72 percent since 1973, wages of the typical workers have remained essentially flat.¹²

Policymakers, gig economy companies, and worker advocates increasingly debate how to shape policy that will raise standards for independent contractors in the industry while maintaining the technological innovations that consumers enjoy. While the federal government is unlikely to act to improve conditions for gig economy workers in the near term, progressive state and local governments are beginning to adopt policies to provide benefits and a voice on the job for these workers.

Yet, in many communities, workers classified as independent contractors have few legal protections, and more can be done in even the most innovative cities and states. For example, while a number of communities are debating how to provide benefits to gig economy workers, without policies that ensure a baseline wage threshold or that grant workers a voice in determining their wages and benefits, low-road companies could respond to requirements to contribute to benefits with commensurate decreases in pay.

Specifically, cities and states can raise standards for independent contractors by:

• Creating a wage threshold for all independent contractors
• Creating platforms and protections to deliver needed benefits to workers
• Providing a pathway for workers, companies, and government to negotiate for industry-specific wages and benefits

These policies would ensure that high-road companies that provide decent jobs can thrive without being undercut by those who fail to meet minimum standards for their workers.

While this report does not specially address policies to combat employee misclassification, our recommendations will reduce the incentives for companies to illegally misclassify their employees by reducing the cost difference between independent contractor and employee status.

Moreover, we reject policies that either require workers to forfeit their employment rights under the laws in exchange for the provision of a limited set of benefits or that carve workers out from coverage entirely. Decisions on whether workers are misclassified should be determined by the courts, based on the specific facts of the case.

We hope this report will add to the ongoing conversation about how to address the needs of workers in the gig economy and serve as a compliment to existing proposals to ensure that workers are properly classified.¹³

Independent contractors inside and outside of the gig economy do not receive a host of benefits and protections afforded to traditional employees. Many argue that workers are willing to forgo employment benefits, in part because they have greater opportunity for independence and flexibility. However, surveys of contractors show that they increasingly desire both flexible work arrangements and needed benefits.¹⁴ Moreover, research demonstrates that access to a strong social safety net is needed to allow these workers to start and maintain their own businesses.

Existing protections and benefits

Under U.S. employment law, independent contractors enjoy far fewer legal protections and are far less likely to receive company-provided benefits than workers classified as employees. Workers classified as employees receive minimum wage and overtime protections under the Fair Labor Standards Act; are allowed to form unions and collectively bargain under the National Labor Relations Act; are able to collect unemployment insurance and workers’ compensation in the event of a job loss or workplace injury; and in a number of states and cities, are entitled to paid sick leave and hourly wages higher than the mandatory federal minimum. Employees also split payroll tax contributions for Social Security and Medicare with their employers and are eligible to receive company-provided benefits such as contributions to retirement savings plans and paid family leave.

Independent contractors, on the other hand, receive few protections under U.S. employment laws. (see Table 1) Under federal law, contractors have no guaranteed minimum wage or overtime protections; have no protected rights to form unions or collectively negotiate for better wages and benefits; and do not receive unemployment insurance or workers’ compensation in the event of a job loss or workplace injury. And if contract workers lose a contract or are otherwise discriminated against on the basis of age, religion, sex, disability status, or national origin, they have little recourse.¹⁵ Moreover, discretionary company-provided benefits—such as paid leave and retirement contributions—are not typically available to independent contractors.

State and local workplace laws typically follow this pattern of providing protections for workers based on their employment status. Many cities and states have enacted laws requiring companies to pay wages higher than the federally mandated $7.25 per hour and to provide paid sick and family leave, but these laws apply only to employees.

A handful of innovative governments are starting to enact laws to ensure that independent contractors and other types of unprotected workers receive the pay and benefits that they deserve. Most recently, New York City enacted the Freelance Isn’t Free Act in order to impose penalties on companies that fail to pay their contractors and grants the city enforcement authority.¹⁶ And in order to protect contractors who are injured on the job, New York state established the Black Car Fund, which provides workers’ compensation for drivers who are independent contractors.¹⁷ A number of states have adopted statutory employee laws that require companies to pay into the workers’ compensation system to cover independent contractors in a certain limited number of job categories.¹⁸ Likewise, at least seven state legislatures have enacted a Domestic Workers’ Bill of Rights to provide basic labor protections to caregiving workers who were carved out from receiving protection under federal workplace laws, despite being classified as employees.¹⁹ Finally, the Seattle City Council voted in 2015 to give taxi drivers, for-hire drivers, and transportation network company drivers the ability to unionize.²⁰ Yet in even in the most innovative jurisdictions, contractors receive significantly fewer protections and benefits than employees.

In order to shoulder the additional risks and costs associated with their work status, contractors must be able to negotiate with companies for a pay sufficient to purchase health and disability insurance; save for retirement, periods of unemployment and underemployment, and illness; and cover any business costs and the full cost of Social Security and Medicare taxes.

When independent workers are not able to negotiate for this sort of a pay premium, companies relying on contracted labor rather than employees can enjoy significant cost savings. The average cost of legally required benefits for employees—including unemployment insurance, workers’ compensation, Social Security taxes, and Medicare—is about 11 percent of a worker’s pay.²¹ All totaled, when the cost of discretionary benefits such as health insurance, retirement contributions, and paid leave is added to legally required benefits, it accounts for about 30 percent of employees’ total compensation packages, on average.²²

Companies hiring contractors can also enjoy significant cost savings in the event that a worker causes harm or injury to another person. While employers are liable for employees’ negligent acts or omissions in the course of employment, businesses that hire independent contractors are generally absolved from this liability.²³

Flexibility and independence

Despite the lack of access to traditional benefits, many argue that the independent contractor classification can provide significant advantages to workers. With this status, they contend, comes the unique ability for companies to provide independence and flexibility—particularly flexible scheduling.²⁴

Surveys show that all workers—and particularly Millennials and working parents—are increasingly looking for jobs with flexible scheduling.²⁵ Indeed, available data indicate that workers participating in the gig economy do so, in part, because of its flexible work schedule. In a 2014 survey commissioned by the Freelancers Union and Elance-oDesk, 42 percent of freelancers reported that they chose contract work in order to “have flexibility in my schedule.”²⁶ And an analysis of Uber’s driver data by economists Jonathan Hall and Alan Krueger found that there is significant variability in the number of hours that drivers work from week to week.²⁷

Yet worker advocates point out that this flexibility is limited by industry rules and practices—for example, guidelines from transportation network companies indicate that workers must accept nearly all rides offered.²⁸ And a 2017 article in The New York Times explored how gig economy companies influence when, where, and how many hours workers put in through the use of “psychological inducements and other techniques unearthed by social science.”²⁹

Moreover, federal and state workplace laws do not prevent companies from allowing flexible scheduling for their W-2 employees. Indeed, legal scholars have made this point in order to argue that nothing prevents gig economy companies from reclassifying their workforce as employees and maintaining flexibility.³⁰

And while some have claimed that gig economy companies must classify workers as independent contractors in order to offer a flexible schedule, the fact that a company does so is not generally sufficient evidence under the law to demonstrate that such workers are running their own businesses and should therefore remain classified as independent contractors.³¹ Under the Obama administration, the U.S. Department of Labor (DOL) issued an interpretation of the Fair Labor Standards Act that said that flexibility alone is not a significant factor in determining employee status.³²

In practice, when gig economy companies have converted their independent contractor workforce to employees, they have also begun to exert more control over their workforce. Several gig economy service providers—such as Instacart, Shyp, and Hello Alfred—now use employees instead of independent contractors or, in some instances, use a mix of employees and independent contractors.³³ While the law allows these companies to maintain the same level of flexibility and independence of their workforce, many have indicated that they will rein in some flexibility for employees.³⁴

For example, Instacart—an app-based grocery delivery service—announced in June 2015 that it would start allowing its shoppers in some locations to choose to become part-time employees instead of independent contractors and later began hiring new shoppers as employees. As employees, workers are covered under workers’ compensation insurance and the company will pay for other employment-related taxes. While employees still could pick their own shifts, they now set their schedules in advance and are subject to maximum hours limits.³⁵

Similarly, if cities and states require companies using independent contractors to abide by higher standards—and thereby increase the cost of contracting out labor—companies employing contractors may re-evaluate whether the labor savings associated with this status is worth allowing these workers flexibility and independence.

Independent contractors want flexibility and economic stability

While the conversion to employee status may be the preferred and statutorily required outcome for some workers, many properly classified independent contractors would like to receive benefits from their contracting company while maintaining this status.

More than half of freelancers say they began their current work arrangement out of choice, according to the 2014 Freelancers Union and Elance-oDesk survey, yet 21 percent of workers freelancing part time reported that availability of affordable benefits was a top barrier to freelancing more.³⁶ A 2015 survey of gig economy workers commissioned by the Aspen Institute and TIME magazine found that although gig economy workers were about evenly split on whether they prefer the security and benefits of working for a traditional company—41 percent—or the independence/flexibility of the on-demand economy—43 percent—nearly three-quarters said they should be given more benefits as part of their job.³⁷

Gig economy companies increasingly report an interest in providing access to these sorts of benefits—but say that they are hesitant to do so out of fear that such actions be considered in misclassification lawsuits. In 2015, several gig economy companies joined worker advocates and think tanks on a letter calling for safety net reforms to ensure that all workers, no matter how they are classified, have access to the benefits they need.³⁸ And the Freelancers Union, a nonprofit organization that promotes the interests of independent contractors through advocacy and services, offers its members access to both health insurance and retirement plans.³⁹

While it is possible for independent contractors to access benefits such as health care and retirement through a spouse, a third-party actor, or an individual plan, they are significantly less likely to have this sort of coverage as compared with workers in traditional employment programs. Only 13 percent of self-employed workers had access to a workplace retirement plan in 2011, a decrease from 18 percent in 1999.⁴⁰ And despite the fact that the Affordable Care Act allows independent contractors to purchase insurance outside of an employment arrangement, 20 percent of unincorporated, self-employed workers reported that they did not have health insurance in 2016, as compared with only 10 percent of wage and salary workers.⁴¹

Yet, as collected in a 2015 article by Walter Frick for The Atlantic, numerous studies have demonstrated that access to a strong social safety net enables workers to start and maintain their own businesses.⁴² For example, a 2010 RAND Corporation study found that American men were more likely to start their own business after qualifying for Medicare at the age of 65 as compared with just before.⁴³ And after France reformed its unemployment system to make it more generous, there was a significant increase in the entrepreneurship rate.⁴⁴ Value added per worker two years into business was 7,000 euros higher after the unemployment insurance expansion.⁴⁵

Likewise, Harvard Business School’s Gareth Olds compared entrepreneurship rates for households that just barely qualified for the government-funded State Children’s Health Insurance Program to households whose incomes were slightly more than the cutoff, finding that eligibility in the insurance program increased the self-employment rate by 23 percent and that the survival rate of new business increased by 8 percent.⁴⁶ Similarly, McMaster University economist Philip DeCicca found that New Jersey’s adoption of a state health insurance plan for uninsured adults increased self-employment among New Jersey residents as compared with other states.⁴⁷

Finally, government reviews have shown that programs to reduce the cost of health insurance for self-employed workers have led in increases in business survival rates. For example, economists at the U.S. Department of the Treasury found evidence suggesting that increasing the deductibility of health insurance premiums for self-employed individuals from 60 percent to 100 percent between 1999 and 2003 decreased the probability of exiting self-employment by nearly 3 percentage points.⁴⁸

Despite the increasing demand and demonstrated benefits of a strong safety net for all workers, too many independent contractors lack access to benefits. Moreover, the next section demonstrates that many low-wage contractors may not be compensated for the lack of benefits through increased pay.

Independent contractors are part of a much larger subset of the workforce that includes workers who lack the security and stability of a regular, full-time job and are often paid lower wages. While academics debate the size of this workforce—referred to as the precarious workforce—many argue that the portion of workers employed in these types of positions is growing as companies seek to minimize the costs associated with pay, benefits, and regulatory compliance. Moreover, a number of surveys indicate that too many independent contractors are earning low wages.

Size and growth of the precarious workforce

The precarious workforce includes workers with insecure employment arrangements with few job protections, including temporary workers, freelance workers and independent contractors, part-time workers, and day laborers. The exact size and growth of this workforce is debated, but workers employed under precarious work conditions make up a significant portion of the larger workforce, with estimates that 4 out of every 10 workers are now employed in precarious situations.⁴⁹ These workers typically face higher income volatility than workers in traditional employment relationships because they spend more time unemployed or underemployed and some have low earnings.⁵⁰

The data on precarious workers are unclear, partly owing to difficulty in defining these workers and partly owing to the simple lack of data directed at understanding this workforce.⁵¹ While the DOL has historically collected the most detailed and direct source of government data on contingent workers and independent contractors, a subset of the broader precarious workforce, such a survey was last conducted in 2005.⁵²

In the meantime, the U.S. Government Accountability Office (GAO) released a report in 2015 finding that the proportion of the total U.S. workforce participating in alternative work arrangements increased from about 35 percent to 40 percent between 2006 and 2010, while the subcategory of independent contractors remained virtually unchanged.⁵³

Researchers debate what has been happening in the intervening years, particularly with the rise of the gig economy. University of California, Berkeley, sociologist Annette Bernhardt conducted a review of the current data in 2014, finding that while there is an intuition about the rise of precarious employment resulting from the reorganization of work and production, it is not immediately evident in statistics about the labor force. Using data from the Current Population Survey (CPS), she found that the percentage of the workforce defined as self-employed has remained relatively stable over time.⁵⁴

However, based on even these conservative estimates from the CPS Annual Social and Economic Supplement, the portion of the U.S. workforce classified as independent contractors is significant—an estimated 6.2 percent of the American workforce, or nearly 10 million workers.⁵⁵

Moreover, a number of academics and research organizations using other government data sources have found that there has been significant growth in the portion of U.S. workers classified as independent contractors. Economists Larry Katz and Alan Krueger found that the number of workers filing a 1099 form increased in the 2000s—from 2000 to 2012—even while the CPS statistics on self-employment have declined.⁵⁶ Initial research from labor economists Katharine Abraham, John Haltiwanger, Kristin Sandusky, and James Spletzer similarly has found that more than 80 percent of workers represented as self-employed in Detailed Earnings Records data from the Internal Revenue Service (IRS) are not classified as self-employed in census data.⁵⁷

Furthermore, looking prospectively, I