Laura D. Tyson: Preserving the Social Contract in a Gig Economy

Laura D. Tyson

In a new column published by Project Syndicate, Laura D. Tyson and Lenny Mendonca argue that the rise of digital, on-demand work platforms – from Uber and TaskRabbit to – requires new policies to protect the social contract for “contingent” workers.

Although the new platforms provide opportunities for both workers and companies, they write, they also bypass the traditional channels through which the U.S. and many countries deliver benefits and protections to workers. These protections include unemployment insurance, health insurance, and retirement plans. They also include protections under the Fair Labor Standards Act on child labor, overtime and the minimum wage.

“Unless policymakers act, the US will continue to drift toward a two-tier labor market,” they warn. “One tier will be populated by fully employed high-skill workers with generous employer-provided (and tax-advantaged) benefits, as well as high-skill individuals who finance their own benefits… The other tier will include a large pool of contingent middle- and low-skill workers without the benefits, income, or security on which a robust and resilient middle class depends.”

lenny mendonca

The solution, Tyson and Mendonca argue, is a new approach to benefits that incorporates three principles.

First, they should be portable, meaning they are attached to individual workers rather than to companies. Second, they should be universal, applying to all forms of employment. Third, they should be pro-rated, linking employer contributions to the time worked, jobs completed or income earned.

Political support is growing for such proposals.

A group of strange bedfellows – “gig” employers, labor organizations, venture capitalists, and bipartisan think tanks – recently issued a letter calling for a stable and flexible safety net based on these conditions. In Congress, forward-looking policymakers like Senator Mark Warner of Virginia are seeking ways to get ahead of the issues and create momentum for bipartisan solutions.







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