The gig economy is beginning to make headlines more and more, drawing the ire and attention of policy makers and other stakeholders, while also seeing consistent popularity among consumers. UMass Dartmouth Professor and Public Policy Center (PPC) Executive Director Michael Goodman offers his thoughts on some new economic realities and how the gig economy is changing the dynamics of the American workforce.
What is the gig economy?
MG: The so called “gig economy,” is exemplified by the emergence of companies like Uber and TaskRabbit. These firms rely on a pool of contingent labor that is paid on a fee for service or commission basis. Technology allows service providers and customers to directly connect, providing considerable flexibility into the labor market. The phenomenal success of many of these firms reflects the considerable value they bring to the marketplace. And they are already fundamentally changing major industries, especially transportation.
How is it changing the dynamics of the American workforce?
MG: These developments have shifted the risks associated with employment from the employer to the employee. Many would argue that this is contributing to a growing disconnect between our long standing economic security policies and the realities of today’s labor market. These policies rely on increasingly dated mechanisms for raising funds to support fringe benefits such as health care, vacation and sick time, and other benefits. Presently, we rely largely on legal mandates, payroll taxes and cost sharing on the part of employers and employees to ensure that most workers can receive these benefits. Since workers in the Gig economy are considered “independent contractors”, firms like Uber are not required (or expected) to do the things that we typically expect employers to do, including paying unemployment insurance and providing fringe benefits. This raises some serious questions about the fundamental assumptions underlying our state and national employment security policies.
Is the gig economy here to stay?
MG: I think so. This isn’t the first time that the dynamics on the ground changed the structure of the economy. Both Social Security and unemployment insurance emerged in response to a series of economic and demographic changes that increased the financial insecurity of Americans. More often than not, it takes a national crisis (i.e. the Great Depression) to generate the will required to make significant changes to fundamental social and economic relationships. The gig economy raises fundamental questions about the employer-employee relationship and the ways in which we fund benefits, which for most of us is with (and through) our employer.
We are now about seven years post Great Recession, the greatest national economic crisis since the Great Depression. As difficult as it was, that crisis offered us a major opportunity to have a serious national conversation about how to modernize our economic security policies to adapt to contemporary economic reality. We appear to have missed that opportunity. I hope it won’t take another national crisis to deal directly with these issues. However, In light of the current state of our national political institutions, I suspect it will.
About Michael Goodman
Michael Goodman is Executive Director of the Public Policy Center (PPC) and Associate Professor of Public Policy. The PPC is the University’s applied social science research, technical assistance, and public service unit based in the College of Arts and Sciences and affiliated with its Department of Public Policy. Professor Goodman is also Co-Editor of MassBenchmarks, the journal of the Massachusetts economy published by the University of Massachusetts Donahue Institute in collaboration with the Federal Reserve Bank of Boston. For more information, please visit the PPC website.