In the era of Uber and DoorDash, state governments are grappling with how to address the problems stemming from a growing independent or “gig” workforce.
In Utah, there are more than 80,000 self-employed and independent workers who may not have access to traditional work benefits. This arrangement reflects a relic of the past. Many decades ago, tax incentives were created to encourage our benefits to be tied to our jobs, and labor laws were created to restrict companies from providing benefits to nontraditional employees.
But today, one out of every three Americans is making income outside of the traditional employment arrangement and choosing flexible, independent and entrepreneurial forms of work. Utah has now become the first state in the country to welcome these workers into the future economy.
Last month, Gov. Spencer Cox signed into law the nation’s first voluntary portable benefits plan (SB233). The bill removes the age-old legal barriers that prevent companies from freely providing benefits to independent workers.
Several companies are ready to give benefits to independent workers, conditional on laws permitting them to do so. For example, the CEO of Uber publicly wrote: “Our current system is binary, meaning that each time a company provides additional benefits to independent workers, the less independent they become. That creates more uncertainty and risk for the company, which is a main reason why we need new laws and can’t act entirely on our own.”
The portable benefits bill opens access for voluntary participation that could enable companies to provide a menu of benefits. Some businesses may provide one or two individual benefits, whereas others — especially larger companies — may provide a more complete set of offerings for independent workers.
Utah’s welcoming approach stands in contrast to California’s Assembly Bill 5 (AB5), which attempted to prohibit many of these new forms of work by forcing organizations to hire workers as traditional employees instead. The experiment backfired and resulted in job losses across the state — especially within small businesses and community groups like theaters, music venues and independent media organizations. Many workers neither became employees or nor were able to maintain their current jobs as independent workers. Thanks partly to a bipartisan backlash, there are now 110 professions in California exempt from AB5.
At the same time, the U.S. Department of Labor is finalizing a complex rule that would significantly restrict flexible and independent forms of work across the country. This is bad news for small businesses which need contractors but cannot afford extensive legal counsel to ensure compliance, and for independent workers who want to maintain their work arrangements.
Indeed, according to the Bureau of Labor Statistics, 79% of independent workers prefer their arrangement over traditional employment. Nearly half say this type of work gives them the flexibility they need because they cannot take on 9-to-5 employment owing to personal circumstances, such as health issues or family obligations.
These flexible job arrangements can be particularly transformative for women who are the primary caregivers in their households. One study finds that self-employment rates are higher for women who have young children and that self-employed female workers have more flexibility in their work location, hours and schedule than women in traditional employment.
A survey of 2,000 women in independent work found that a quarter recently left full-time jobs, and 60% of this group did so because they wanted flexibility, needed more time to care for a child or other relative, or both. Policies that restrict independent work could disproportionately hinder women’s participation in the labor force.
But unlike California and the Department of Labor’s restrictions, Utah’s approach is in line with the desires of this new workforce. About 80% of self-employed workers prefer access to flexible or portable benefits — benefits that are not tied to a particular job or employer.
Instead of closing the doors to an important source of income for many millions of Americans, Utah is creating innovative reforms that open the doors for tomorrow’s workforce, today. It’s now time for the rest of the country to follow.
Liya Palagashvili is a senior research fellow with the Mercatus Center at George Mason University and author of “Flexible Benefits for a Flexible Workforce.” She recently testified on this issue before the Utah Legislature.