The "gig economy" is said to be "coming." A great many recognize that it is instead perhaps already here, but that it is growing. This has implications for workers, employers, and society. But first, a little background.
Workers' compensation was envisioned in the age of an agrarian economy evolving through the industrial revolution. Manufacturing was becoming the main economic "driver." By the 1850s there was recognition of the effects of this transition, and by the 1870s there was a drive for some alternative to torts, first in Germany, then England. The United States would see attempts at socialism at the turn of the century, but the first successful workers' compensation laws would come in 1911. An excellent overall history was published by the Iowa Orthopedic Journal.
Workers' compensation is not today what it was in 1911. There has been an evolution that has legislatively expanded the scope and breadth. The concepts of "repetitive trauma" and "occupational disease" are among those expansions, as are benefits for psychiatric injury. Initially, most state programs were not mandatory, but have since evolved to some level of forced participation. Texas remains an exception with its voluntary "opt in" law, and recently the market has watched as Oklahoma attempted an "opt out" alternative. Say what you will about workers' compensation, there is seemingly never a dull moment.
Since workers' compensation became a part of our national fabric, the nation itself has changed as well. In the 1970s automation and robotics began to change manufacturing. There was also a transition beginning that would see the American service sector expand and manufacturing decline. There are a multitude of factors that contributed to that shift, but it is important to note that the results of change were traumatic to a great many workers.
Change and transition are challenging at best and sometimes downright scary. By 1990 we had witnessed significant economic changes to manufacturing. Automation was part of that, as was a trend toward shifting manufacturing jobs to foreign shores where labor was cheaper. Despite those effects, manufacturing still employed more Americans in 1990 "than any other sector in 36 states," according to The Washington Post. But, by 2014 that employment had "plummeted" and manufacturing remained the "dominant industry in only seven states."
Change and transition are challenging at best and sometimes downright scary. By 1990 we had witnessed significant economic changes to manufacturing. Automation was part of that, as was a trend toward shifting manufacturing jobs to foreign shores where labor was cheaper. Despite those effects, manufacturing still employed more Americans in 1990 "than any other sector in 36 states," according to The Washington Post. But, by 2014 that employment had "plummeted" and manufacturing remained the "dominant industry in only seven states."
Evolution continued. The "dot.com" revolution of the 1990s promised to change our world. Technology was deployed in new ways, and communication became instantaneous. Initially, some saw it primarily as a tool for rapid sharing of bad jokes, but we evolved to depend upon the Internet.
The initial promise of that technology expansion was still fresh on our minds when the "bubble burst" in the 1990s. There has been much written as to the "how" and the "why" of both the bubble itself and the burst. But, it changed our world. Many web companies started, expanded, and then went bust. The advent of information technology has begun to change our world. Technology disrupted our communication and interactions. Social media, like the juggernaut MySpace, began to influence our habits and interactions.
The initial promise of that technology expansion was still fresh on our minds when the "bubble burst" in the 1990s. There has been much written as to the "how" and the "why" of both the bubble itself and the burst. But, it changed our world. Many web companies started, expanded, and then went bust. The advent of information technology has begun to change our world. Technology disrupted our communication and interactions. Social media, like the juggernaut MySpace, began to influence our habits and interactions.
The first decade of the Twenty-First Century brought more change. This began the "gig employment" disruption. It brought us companies like Uber, Airbnb, and Grubhub. That era also brought us innovations and expansion to social media with the likes of Facebook, Twitter, and more. Our integration into the technological age changed the way we both communicate and consume.
And yet, through these innovations, evolutions, and changes, workers' compensation has remained persistent. In some states, its structure has been more stable than in others. There have been various statutory changes in definition, burdens of proof, and benefits. But, workers' compensation, as a socialistic change to the common law, has endured.
And yet, through these innovations, evolutions, and changes, workers' compensation has remained persistent. In some states, its structure has been more stable than in others. There have been various statutory changes in definition, burdens of proof, and benefits. But, workers' compensation, as a socialistic change to the common law, has endured.
Today, we find ourselves amid yet another "technology" revolution. That is a bit ironic because it was in fact technology that drove all of our other economic "revolutions." We now face the change that will be driven by the disruption of robotics and artificial intelligence. Their influence will be layered on the results of the Internet revolution and the "gig economy." More than a few doubt that workers' compensation, as it currently exists, is prepared for those challenges.
Robotics and artificial intelligence will affect the demand for workers. Some see employees shifting to different employment as a result, and others predict large populations of unemployed. Some prognosticates predict an increasing shift from traditional employment to more independent contractors in a "gig economy," fed by the influence of these technology changes.
There may therefore be more workers whose injuries or illnesses are not born by employer organizations. Under the laws of most states, "gig workers" and "sole proprietors" are often not required to procure workers' compensation coverage. If independent contracting, or "gig" work expands, society will struggle with who will be responsible for those injury-related costs because, after all, Someone has to Pay (May 2016). And, some contend that those responsibility issues are already at a critical point, even if the "gig" economy expands no further.
There may therefore be more workers whose injuries or illnesses are not born by employer organizations. Under the laws of most states, "gig workers" and "sole proprietors" are often not required to procure workers' compensation coverage. If independent contracting, or "gig" work expands, society will struggle with who will be responsible for those injury-related costs because, after all, Someone has to Pay (May 2016). And, some contend that those responsibility issues are already at a critical point, even if the "gig" economy expands no further.
Whether the gig economy is "coming" or "here" may be debated. But regardless, some question whether and how the costs associated with this disruption can be socialized. Injuries do not stop because one is a sole proprietor instead of an "employee." The occurrence and cost of injury and illness exist, regardless of labels. Ultimately, the payers of these costs are likely to be taxpayers and consumers. Whether through tax dollars or otherwise included in the cost of the products and services they consume, they will likely be the Ultimate Payer (May 2016).
Some suggest that the solution to this socialization issue is rather simple. A great many states allow very small employers to avoid participation in workers' compensation. In Florida, participation is only required if there are "four or more employees are employed by the same employer." Section 440.02(17)(a), Fla. Stat. That section was perceived as affording too much leeway in some industries and was amended in 1990 and again in 1991 (an example of the expansion of workers' compensation), and now requires coverage for all workers in the construction industry.
National Public Radio (NPR) recently published a thoughtful article: The Future Of Benefits: A New York Program Might Provide A Model. This analysis notes that "government policies are slow to adapt" to change, but argues that New York launched a program in 2000 that could provide a road map for socializing the cost of workplace injuries that fall without the current parameters of traditional workers' compensation, through independent contractor relationships and entrepreneurial work.
The New York Black Car Fund has a nearly 20-year history of providing some medical, disability, and death benefits to drivers who are injured while working. NPR contends that it may well be "a model for how benefits might function in the future." It currently "covers about 125,000 drivers," including "contractors for Uber, Lyft or more traditional taxi or limousine services." It provides a measure of benefits, but not the benefits of workers' compensation. The Black Car is "funded by a 2.5 percent consumer surcharge on each ride." Thus, a "tax" is being imposed on the consumer of services.
NPR reports that Congress is working to encourage states to implement "new ways of delivering benefits for freelance workers." Their proposal is to provide "seed money" for cities, states, and nonprofits to devise a methodology for a socialized safety net for this "gig economy." The motivation is clear. For each injury that is not covered by some form of insurance, there are likely to be costs that require payment. Some will be paid by workers, but others by taxpayers. Thus, there is a perceived need for some new socialistic process for workers in this new "gig economy" paradigm.
NPR reports that Congress is working to encourage states to implement "new ways of delivering benefits for freelance workers." Their proposal is to provide "seed money" for cities, states, and nonprofits to devise a methodology for a socialized safety net for this "gig economy." The motivation is clear. For each injury that is not covered by some form of insurance, there are likely to be costs that require payment. Some will be paid by workers, but others by taxpayers. Thus, there is a perceived need for some new socialistic process for workers in this new "gig economy" paradigm.
But, is the solution proposed by NPR, a benefit program that provides less for those in the "gig economy," a real solution? In America, should equal protection under the law really provide disparate solutions for different groups of people? As workers' compensation has evolved, that has occurred. Some occupations enjoy far greater workers' compensation protection than others, under the color of law. Yes, state workers' compensation laws discriminate in favor of some at the expense of others.
Is America a place where laws should create disparate classifications of workers, with some receiving more access to benefits than others? If costs are to be socialized, does it make sense to have the Black Car plan, or would it make as much sense to simply require that all those drivers and "gig" workers must be included in workers' compensation? Why does NPR advocate relegating these "gig" workers to second-class status, providing them "some" relief but not the protections of our century-old workers' compensation?
If these "gig" workers or independent contractors have no coverage, then their treatment and disability costs will fall upon them or upon the taxpayer. But, if they were all required to procure and pay for workers' compensation, then the costs associated with their individual work risks would become part of the cost of the services that they deliver. Either socialize cost. But, workers' compensation already exists in 50 states. Perhaps a better solution than the NPR two-class system would be state laws that simply require all workers to be insured for work injuries?
Of course, like the failed Obamacare mandate experiment, this would require states to enforce that "mandatory" coverage. Despite Obamacare mandating health coverage for all Americans, many remained uninsured despite it. Kaiser estimates that four years into implementation, 28 million Americans remained without health insurance despite that mandate.
As the economy continues to evolve, the cost of injury and illness will remain. America adopted socialism and workers' compensation a century ago to pay these costs. America must now come to grips with how to socialize the costs of those who are not "employees," because the indicators are the "gig" is here to stay. Should they pay for their own injuries, be forced to participate in workers' comp, have their own second-class Comp substitute, or be the responsibility of the taxpayer?
Is America a place where laws should create disparate classifications of workers, with some receiving more access to benefits than others? If costs are to be socialized, does it make sense to have the Black Car plan, or would it make as much sense to simply require that all those drivers and "gig" workers must be included in workers' compensation? Why does NPR advocate relegating these "gig" workers to second-class status, providing them "some" relief but not the protections of our century-old workers' compensation?
If these "gig" workers or independent contractors have no coverage, then their treatment and disability costs will fall upon them or upon the taxpayer. But, if they were all required to procure and pay for workers' compensation, then the costs associated with their individual work risks would become part of the cost of the services that they deliver. Either socialize cost. But, workers' compensation already exists in 50 states. Perhaps a better solution than the NPR two-class system would be state laws that simply require all workers to be insured for work injuries?
Of course, like the failed Obamacare mandate experiment, this would require states to enforce that "mandatory" coverage. Despite Obamacare mandating health coverage for all Americans, many remained uninsured despite it. Kaiser estimates that four years into implementation, 28 million Americans remained without health insurance despite that mandate.
As the economy continues to evolve, the cost of injury and illness will remain. America adopted socialism and workers' compensation a century ago to pay these costs. America must now come to grips with how to socialize the costs of those who are not "employees," because the indicators are the "gig" is here to stay. Should they pay for their own injuries, be forced to participate in workers' comp, have their own second-class Comp substitute, or be the responsibility of the taxpayer?
Update 03.21.18 - This post drew some response from the Fund. A follow-up post was written to address the further information and corrections it provided. That is The Gig Economy Post - Redux (March 2018).