California fired a warning shot across the bow of the gig economy a couple of years ago when it enacted legislation that made it more difficult for companies to classify employees as independent contractors. Their rationale was simple: contractors and gig workers do not enjoy the same legal protections as standard employers. The biggest concern is that they didn’t have access to traditional employee benefits.
Admittedly, there isn’t a clear path to make benefits like health insurance and retirement plans available to gig workers. But it can be done. Moreover, it should be done. But if the private sector doesn’t figure out how to develop benefits for gig workers, we can expect other states to follow California’s lead. The problem is that California’s approach is not the right way to go.
Not on the Books
From an administrative standpoint, one of the biggest difficulties of offering benefits to gig workers is the fact that they are not on the books as salaried employees. Gig workers are not hired in the traditional sense. They are contracted to provide certain services on an at-will basis.
Traditional benefits are not available to them because they aren’t part of an employment group. Meanwhile, employers cannot afford to purchase benefits on the individual market to cover their gig workers. Doing so would be far too costly.
The result is that the vast majority of freelancers and gig workers go without traditional benefits. But why? Why continue working in the gig economy rather than returning to the traditional workforce where legal protections and employ benefits abound?
Gig Work Equals Freedom
California legislators thought they were doing a good thing when they changed the rules. Most of them still see things that way. Gig workers do not agree. As a recent post published on the National Conference of State Legislatures website pointed out, gig workers value their freedom. They work in the gig economy because they want to, not because they have to.
Gig work and freelancing equal freedom. Workers who choose this path can set their own schedules. They can accept contracts based on the type of work they want to do. They can come and go as they please, within reason. Best of all, they are not tied to an employer they don’t want to work for.
Dallas-based BenefitMall recently cited a study in one of their blog posts on workplace heterogeneity, a study suggesting that just over one-quarter of all American workers are gig workers. That number is expected to grow in the coming years. Lawmakers must know that following California’s example, forcing gig workers and freelancers back into traditional employment isn’t going to sit well.
Affordable Individual Benefits
The solution to the lack of benefits among gig workers is pretty simple: come up with affordable individual benefits. In the grand scheme of things, there is no legitimate reason individual health insurance plans should cost so much more than group plans. Insurance company claims that the disparity has to do with employer groups sharing the financial burden – as opposed to individuals bearing the entire burden themselves – don’t hold water.
An insurance company with one million subscribers covers them all regardless of work status. They all collectively share the financial burden because they all pay monthly premiums. The only reason carriers charge more on the individual market is the fact that they can.
Developing benefits for the gig workforce is possible. It just requires a different mindset. That mindset should not include legislation designed to cancel the gig economy. Times are changing. The gig economy should be allowed to thrive without state or federal interference, employee benefits notwithstanding.