Our Current Economy, Decades in the Making

Noam Scheiber has a very good piece in the Times looking at how the current “gig economy” — which hasn’t offered much job protection and security for contract workers — has been in the making for decades thanks to the outsourcing of labor:

The decades-long shift to these more flexible workplace arrangements, the venture capitalist Nick Hanauer and the labor leader David Rolf argue in the latest issue of Democracy Journal, is a “transformation that promises new efficiencies and greater flexibility for ‘employers’ and ‘employees’ alike, but which threatens to undermine the very foundation upon which middle-class America was built.”

Along with other changes, like declining unionization and advancing globalization, the increasingly arm’s-length nature of employment helps explain why incomes have stagnated and why most Americans remain deeply anxious about their economic prospects six years after the Great Recession ended.

Last year, 23 percent of Americans told Gallup they worried that their working hours would be cut back, up from percentages in the low to midteens in the years leading up to the recession. Twenty-four percent said they worried that their wages would be reduced, up from the mid- to high teens before the recession.

Even if the economy continues to improve, the lingering malaise will almost certainly be the central issue in next year’s presidential election.

Presidential contenders Hillary Clinton, Marco Rubio, and Jeb Bush have each framed their economic policies to address wage insecurity and the erosion of middle class incomes (Clinton specifically addressed her concerns over the “gig economy” and its lack of workplace protections this week). Other lawmakers, like Virginia Senator Mark Warner, have pointed out that the U.S. tax code needs to be revamped to provide some kind of social safety net for contract workers (in the way that unemployment and disability benefits are available for employees who have employers that pay payroll taxes).

What happens, Warner asks, if a contract employee gets injured and is unable to generate income? He argues that the burden would be on taxpayers and the government to provide assistance, while “logistics” companies like Uber and Handy shrug and say, “not my problem.” Here is a problem a well-funded tech company could try solving.

Update: Fred Wilson, co-founder of Union Square Ventures which has invested in companies like Twitter, Tumblr, and Kickstarter, writes:

My view on these comments is that Hillary is right. These companies are creating exciting new economies and unleashing innovation. And she is also right that these companies raise questions about work place protections and what a good job will look like in the future.

We should not be afraid of this discussion. We should embrace it and have it.

I find it heartening.

Photo: Mark Warner

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