Economic Security for the Gig Economy
* Report: Economic Security for the Gig Economy. A Social Safety Net that Works for Everyone Who Works. Etsy, Fall 2016
"The US economy is undergoing a fundamental shift.
Fifty years ago, the average worker expected to stay with one employer for the duration of their career, and that employer provided a full suite of benefits that guaranteed economic security to the worker and their family. Today traditional full-time employment is no longer the norm. More people—including the majority of Etsy sellers—work independently and combine income from multiple sources. As a result, a growing number of people lack access to the benefits that ensure basic economic security.
To date, proposals to address these challenges have focused on incremental reforms that attempt to retrofit 20th-century systems into a 21st-century economy. Though well intentioned, this approach fails to cover all of the people who are impacted by the changing economy. It’s time to start thinking bigger and reimagine a world that guarantees a social safety net to everyone who works, regardless of how they work.
We start from the basic premise that everyone needs:
* A single place to manage benefits, regardless of income source
Tying benefits to employment excludes too many workers and results in economic inefficiencies. We propose creating a Federal Benefits Portal, which would tie all benefits (retirement, health insurance, paid leave, tax-advantaged savings accounts, disability, etc.) to the individual, providing a single marketplace to view, choose and pay for their benefits, regardless of where or how they earn income.
* A simple, common way to fund those benefits
Although payroll has been a useful way to administer benefits, it excludes everyone working outside traditional employment. We propose using tax withholding as the universal means to administer benefits contributions, enabling both employees and 1099s to withhold their Social Security and Medicare taxes from their pay, as well as an additional percentage of pre-tax income to fund benefits. All withheld pay and matching contributions would be routed to an individual’s account on the Federal Benefits Portal, where they could allocate consolidated contributions across plans.
* A way to manage income fluctuations
Those outside traditional employment often experience considerable income volatility, and lack income protections like minimum wage or unemployment insurance. We propose combining all existing tax-advantaged savings accounts (health, dependent care, parking and transportation) into a single MyFlex Account, which anyone could use to manage short-term income fluctuations throughout the year. To manage more catastrophic income loss, we propose expanding the Earned Income Tax Credit and allowing it to be administered quarterly.
These proposals are not meant to be prescriptive, but rather the beginning of a conversation. In publishing this paper, we hope to broaden the scope of the current debate about the future of work in the US, and put forward ideas upon which others might build. We are deeply appreciative of our advisors who have lent their ears, brains and imaginations throughout the process, and look forward to continued discussion with collaborators both old and new."