Warner’s Warning: Jobs In “Gig Economy” Have Hidden Perils

By Bill Bartel The Virginian-Pilot.

Sen. Mark Warner -- never shy about telling his own rags-to-riches story as a young tech entrepreneur -- will sound the alarm today about technology-driven changes in the working world that he says threaten the social safety net built to protect workers and their families.

At issue: the rise of what is dubbed the "gig economy" or "sharing economy," involving tens of millions of millennial workers -- ages 18 to 34 -- who increasingly are turning to independent or freelance work that offers income but no benefits.

They are part of a growing army of freelancers of all stripes who work for cash, share and trade their skills and cobble together various gigs to make a living.

"It is the fastest-growing part of our economy," Warner said.

This phenomenon is evolving out of a combination of expanding smartphone technology, an unyielding recession, and the fearlessness of youth, when retirement is a distant thought.

They monetize their skills, working as "hired guns" for businesses that need specialized work but don't have -- or want -- a full-time employees.

Some do it on their own, using LinkedIn or other online networks to seek out prospective customers. Many others work through a growing numbers of Web-based middlemen, stringing together a number of jobs or activities to make a living.

Examples of below-the-radar work include taxi-like driving for Uber and Lyft; renting out rooms through Airbnb; and TaskRabbit, which links those who want chores done with others willing to do them for cash.

There's no formal employer, or employee. No job security or benefits.

Estimates of the gig economy's size range from 5 million to 50 million people in the U.S. workforce of more than 160 million, based on estimates from an April Government Accountability Office report. Warner contends the true number is somewhere in the middle, and he wants the government to do more specific research.

Warner, 60, who made his fortune as an entrepreneur in the early days of cellphones, said the gig economy is an exciting universe, but not without its perils. He wants his speech today at a New America Foundation forum in Washington to begin waking up politicians to a generational change that will affect worker protections and federal spending.

"The problem is, this is all fine and well -- until it's not," Warner said. "If you have no social insurance and all of sudden you go from 100 grand to nothing and you've got no unemployment ... you're going to end up falling back upon the responsibility of the state."

With no formal employers, gig economy workers have no unemployment insurance, no worker's compensation coverage, and no 401(k)-type retirement plans, he said. The lone exception is health care, which is now required under the Affordable Care Act.

Many of those protections, built into the workplace in the 20th century, don't fit with the gig economy, Warner said. At the same time, younger adults -- many of whom carry large college debts -- are delaying major life decisions such a buying a home or starting a family. Those delays also have economic implications, Warner said.

Just as troubling, he said, is that this sweeping change isn't on anyone's radar in Washington.

"It stuns me that with 25 people running for president, nobody is mentioning this," he said in an interview.

Millennials are expected this year to overtake baby boomers as the largest living generation. By year's end, boomers will number 74.9 million, and millennials will top 75.3 million, according to the Pew Research Center.

Holding down more than one job or working for cash is not a recent phenomenon, Warner said. "Part of this is how poor Americans have lived for years. They have three jobs because they have to put food on the table."

But the rapid adoption of this approach by millennials is new.

Although older folks might be wary of the way gig economy workers make their living, 24-year-old Ace Caldwell says it's no more unstable than many traditional jobs.

Caldwell points to millions of Americans with office jobs who were laid off after the recession began in 2007.

The Richmond resident developed websites targeted to gig economy workers, including one that assists them with taxes. He also mentors students at Virginia Commonwealth University.

There's freedom in not being tied down to a single company.

"The question now becomes: 'If there is no job security, why should I be doing something I don't like?' " Caldwell said. "Really, the only thing missing are the benefits."

The gig economy can be unsettling to baby boomers who have spent their lives in jobs that came with benefits. Leaving that behind can be a scary proposition, especially in a recession.

But for many children of boomers -- who came of age during the recession and now are having trouble starting traditional careers -- working as independents for hire isn't a problem.

"I've actually never had a full-time job, myself," said 29-year-old Ian Taylor of Norfolk. "I'm doing well. I have a house and wife ... I love being my own boss."

Taylor, who has worked as an adjunct economics professor at Old Dominion University, first parlayed his talents into creating a bicycle delivery service, called Carry Norfolk. A newer venture is specialized software development.

That isn't to say he doesn't think about life on the other side of the economy: "I definitely worry about this all the time," said Taylor, who adds that he's optimistic about the future and relies on his Christian faith for strength. "I want to have a kid soon ... I need health insurance."

Warner is pressing for more than prayers. He wants Washington to take a harder look at how to configure benefits and insurance coverage so that in another economic downturn, the government doesn't run up more debt to help those with no financial support system.

Perhaps, he said, there needs to be a new category of protected workers -- a hybrid between traditional employees and independent contractors.

While the focus can be on younger people, the gig economy includes a good number of middle-age folks or those nearing retirement who are trying to bolster their incomes, Warner said.

While some websites that work with freelancers have sparked legal battles over proper compensation, Warner contends litigation will take too long to iron out. The better solution, he said, is for Washington to begin adopting rules to reflect the gig economy.

Warner and Aneesh Chopra, former U.S. chief technology officer and Virginia's former secretary of technology, said the solution may come from among the same entrepreneurs driving changes in the workplace.

If a new system has to be developed to collect money for a safety net and retirement benefits for these workers, web-based entrepreneurs can help, Chopra said. They'll be eager to find a way to make money by doing it more efficiently than the government, Chopra said.

"The hope is that in solving it for this group, we might actually improve the social safety net for even the full-time employees," he said.

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