Wednesday, March 21, 2018

The Gig Economy Post - Redux

This blog recently focused on the "gig economy" in The Gig Economy - Can it Be Socialized. That post focuses in part on a New York innovation, a Fund for drivers engaged in self-employment, independent contracting, and even the "gig economy." After publishing, I received an extensive note from the Fund, explaining misperceptions gleaned from the NPR coverage of the Fund cited in the original post. That interaction led to the following. 

Whether the gig economy is "coming" or "here" may be debated. But regardless, there are those who questions 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

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 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 medical, disability, and death benefits to drivers who are injured while working. The 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." 

The NPR article suggests that the fund provides a measure of benefits, but not the benefits of workers' compensation, which was discussed in this post originally. I was contacted after publishing this post by Jason A. Fromberg, who is affiliated with the Fund. He corrects the NPR misperception, assuring me that the Fund provides full statutory New York Workers' Compensation coverage to those independent contractor drivers that it serves. 

There are some distinctions, but they are additional benefits, not inadequacies. In addition to workers' compensation, the Fund provides benefits that are not required by workers' compensation, including a lump-sum death benefit (life insurance) and various educational opportunities. Thus, the Fund does not provide "workers' compensation lite" as the original post noted based upon the NPR coverage. 

The Black Car is "funded by a 2.5 percent consumer surcharge on each ride." Thus, a "tax" is imposed on the consumer of services. That is the purported innovation of the Fund, that there is a legislatively mandated tax on services that finances coverage. Certainly, any worker in the gig economy could choose to allocate some portion of earnings to purchasing workers' compensation, health insurance, or life insurance (or a different vehicle, or any other accoutrement). The point appears to be that there is at least a perception that some or many drivers otherwise do not purchase voluntarily and so this mandate effects coverage through taxation. 

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 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. 

I initially questioned the NPR advocacy of what they intimated was an alternative benefit structure. Having learned that the Fund merely provides the same workers' compensation benefits any employer or self-employed may purchase (and more), it seems a more logical alternative solution. However, that legislative mandate of contractor coverage now seems even less distinguishable from a simple statutory amendment requiring coverage for all workers, as suggested in the original post. 

The New York Fund exists to provide coverage to a population of workers. The cost of that workers' compensation is passed to the consumer in the form of a tax. Other businesses similarly, though not as patently perhaps, pass the cost of workers' compensation to the consumer aggregated into the cost of goods or services (as is the cost of labor, supplies, raw materials, etc.). The effect may be the same, but in one instance the consumer sees the cost of workers' compensation (the fee or tax), but in the other the consumer likely sees only the aggregate price of goods or services. 

Some will argue, perhaps, that the same inclusion of "gig workers" or independent contractors could be accomplished without such a surcharge or tax. As suggested in the original post, perhaps the solution is merely to require all workers' to be covered for workers' compensation. They would build that cost into the price of their efforts, as do all other businesses with all other costs. This socializes the cost of injuries, and places the responsibility upon whatever industry or business in which the worker is engaged. Whether the cost of that is included in the price of goods or services, or reflected in some surcharge, seems of less importance. And, with such a simple solution at hand, the federal involvement and the "seed money," seems unnecessary at best. 

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 socializes cost. The simpler solution still seems to 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. Some form of enforcement would likely be necessary to assure participation in workers' compensation. But that is something states already do with regard to the employers already mandated to participate.  

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, or be the responsibility of the taxpayer?

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