Labor Department Plans to Help Gig Workers

Written by SK Ashby

An increasingly large share of the American workforce are so-called "gig workers" who are indirectly employed as independent contractors. Hiring workers in this manner allows companies to offload a significant amount if not most of their labor costs because contractors are not owed the same benefits as full-time employees are.

But that could change soon. Labor Secretary Marty Walsh says he believes many contract workers should be legally classified as employees since they basically are in any practical sense of the word. The Labor department is expected to draft new policies to address this in the near future.

From Reuters:

“We are looking at it but in a lot of cases gig workers should be classified as employees... in some cases they are treated respectfully and in some cases they are not and I think it has to be consistent across the board,” Walsh told Reuters in an interview on Thursday, expressing his view on the topic for the first time.

“These companies are making profits and revenue and I’m not (going to) begrudge anyone for that because that’s what we are about in America... but we also want to make sure that success trickles down to the worker,” he said. [...]

The U.S. Bureau of Labor Statistics reported in 2017 that 55 million people in the United States were gig workers - or 34% of the workforce - and was projected to rise to 43% in 2020.

The gig economy immediately calls to mind companies like Uber, but the practice of hiring workers as contractors with fewer if any benefits is becoming more widespread as reflected by the numbers above. Some of the biggest corporations in the world such as Microsoft have internal walls within the company separating full-time employees from contractors. These hiring practices are less visible to the public because most people will never meet the person who coded their software, but many more people have probably used a ride-hailing service at least once.

The gig-economy is an enormous money-making machine for a tiny number of people in corporate offices. Executives and shareholders see enormous valuations for company stock based on a business model with very little labor costs compared to other companies with fewer contractors. This is contributing to inequality even within the corporate world as tech startups rake in billions overnight playing by a different set of rules than legacy employers do. A company like Uber -- to use as a frequent example -- can be valued in the tens of billions even if they haven't turned a profit yet because the valuation is based on exploitation of a workforce that subsidizes their own employment by accepting a job with no benefits.

That is not to say that every gig or every company with gig workers is bad, but it's a structural hole in labor law that is exacerbating other issues like unemployment and access to health care. The coronavirus pandemic necessitated the creation of an entirely new federal unemployment program to cover gig workers who were never covered by state-based programs.

I doubt the Biden administration can close the entire hole, but they could make a dent.