We’re in a time warp on employment law. The economy has shifted toward a gig economy model, but the Biden administration seems to be stuck in the 1930’s factory model.
Start with the gig economy. The shift began in the 1980’s when business schools preached the benefits of “shareholder” value to the exclusion of all other considerations. The bean counters scrutinized each company’s expenses in slash and burn operations. First to go was in-house training of workers.
Second to go was entire swathes of workers. The downsized workers were often hired back as independent contractors to do their old jobs. The “savings” on not paying employee benefits to them created “shareholder” value. Senior management promptly rewarded themselves with bigger pay packets and stock options while shoveling a few dollars more to their shareholders as dividends.
(Business leaders now moan about their inability to find workers with the appropriate skills but are still unwilling to invest in their workers. In an article a few years ago in The Wall Street Journal business leaders admitted they would not invest in training their workers because they didn’t want to lose their investment when the employees left. The irony of demanding loyalty from workers while offering nothing in return is apparently lost of these overpaid masters of the universe.)
By the 2000’s, the internet had lowered the cost of starting a business. The switch to a gig economy accelerated during last year’s covid. Many workers pushed into unemployment during the past year have decided to bet on themselves by starting their own businesses.
Unfortunately, the Biden administration seems to be stuck in the past. Don’t get me wrong. Biden’s boffos are a distinct relief after Trump’s minions tried to resurrect the 1980’s by dismembering every law that might protect workers.
But the Biden administration’s approach will undermine the gig economy, the most dynamic part of our economy now that most big businesses are monopolies dominating their industries. Recent Department of Labor guidance makes it more difficult to classify workers as independent contractors. The rationale is that too many companies deliberately misclassify workers as independent contractors in order to save on payroll taxes and employee benefits. That is true.
However, that’s no reason to rip the heart out of the gig economy. Instead of rolling back the economic clock, it’s time to change how employee benefits are offered. Employee benefits like health care, fair wages and overtime pay were forced on employers in the 1930’s in a clever maneuver to bust the unions; and indirectly to fight communism since most Americans believed that all union organizers were commies.
That was then. Now we need to free up workers to use their skills and interests to the best of their abilities. Instead of looking backward, the Biden administration should imagine how the future of work could look.
It’s time to create individual health accounts, just as there are individual retirement accounts. Allow gig workers to top up their IRA’s with amounts equivalent to an employer’s 401(k) match. Give gig workers a tax credit to cover a set number of vacation and sick days each year.
Some people prefer traditional employment. Some people are suited to be gig workers. The benefit of encouraging a hybrid economic model, part traditional and part gig, will unleash the creative abilities of our country.
About Norma Shirk
My company, Corporate Compliance Risk Advisor, helps small businesses create human resources policies that are appropriate to the employer’s size and budget. We also integrate HR compliance into the company-wide compliance program through internal controls and advising on how to mitigate risks with insurance. The goal is to help small companies grow by creating the necessary back office administrative structure while avoiding the dead weight of a bureaucracy. To read my musings on the wacky world of human resources, see the HR Compliance Jungle (www.hrcompliancejungle.com). For my musings on history, visit History By Norma, (available at http://www.normashirk.com). To read my musings on a variety of topics, see my posts here on Her Savvy (www.hersavvy.com).
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