It’s 9 a.m. on a Monday morning at the Gigster HQ in San Francisco, but it would be easy to mistake it for late on a Friday afternoon. There are almost no workers around the lofty, cubicle-less office in SoMa, a favorite neighborhood for tech startups. Even the CEO is absent, running a bit late for our interview. But this is not a company built on people showing up at the stroke of a clock so much as checking in whenever they have the time. “There’s always going to be the type of person who wants to work for a bigger company. I think those benefits are great for them,” says CEO Roger Dickey, freshly arrived and describing how his company has attracted hundreds of freelancing developers who craft software on demand. “We’re trying to build the best system for everyone else.”
The metrics are complex but increasingly unmistakable: the nature of work is shifting. Work arrangements are becoming more fluid, economists say, with a single worker less dependent on a single firm for one long career. That presents opportunities for new kinds of work arrangements like the one taking off at Gigster, but it also threatens to undermine the social safety nets that America has built up around the traditional employment relationship. While the shift will take decades to play out, a new survey, sponsored in part by TIME, digs into what is going on in the minds of the people who do the hiring and firing (or the contract-terminating) right now. And it appears that there is some cognitive dissonance.
Polling firm Penn Schoen Berland randomly sampled 800 employers in June, for the survey conducted in partnership with strategic communications firm Burson-Marsteller, the Aspen Institute Future of Work Initiative, the Markle Foundation and TIME. The survey found that the majority of employers currently use independent contractors. The majority also believe the social contract should be reformed for such workers, people who generally don’t have access to the same kind of benefits as America’s W-2 employees — yet they don’t want the government getting involved. And while they’re lured by the quick availability and low cost of freelancers — with nearly 60% who use them now saying they plan to use more — employers still believe that dependable, controllable employees provide more value.
The big questions
The trade-offs are well established, as is the fact that in America there are two classes of workers and there will inevitably be disputes about who belongs in which category. But academics, think tankers and executives are increasingly asking bigger questions: isn’t there a way to rethink the system so it’s not such either-or situation for everyone involved? Can’t America find a way to protect contract workers so that taxpayers don’t have to foot the bill when they get sick or hurt or too old to work? And, as Saint Louis University law professor Miriam Cherry says, “How much regulation is necessary or even good?”
According to the survey, more than 80% of companies that use independent contractors say that they do so because they can quickly adjust the size of their workforce, save money on benefits and tailor the worker to a specific task. But more than half of the firms polled said that contingent workers are not as invested or loyal as employees, and that they’re not always around when needed. Nearly half say they’re harder to retain.
Yet enticing them to stick around can be a slippery slope. Decades of lawsuits have proved that people are willing to sue over their classification as workers, a very expensive question that led Uber to recently offer drivers a settlement of $100 million. As NYU business professor Arun Sundararajan explains, if companies offer contractors the kind of things they use to keep employees happy and successful—trappings of the employment relationship like job training—they can run the risk of a worker classification lawsuit. “We have to somehow loosen those constraints,” he says, a position he elaborates on in The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism.
Renewing the social contract
The ideas about what should be loosened — and by how much — are many. Some argue that cities and states should experiment with different ways to extend safety nets to contractor workers, with the hopes that this might lead to reform on the federal level. Some have advocated developing a hybrid third class of worker, a so-called dependent contractor. Others believe there should be only one. And heaps of business leaders and some politicians see potential in portable benefits, those that are attached to a person rather than a job, so they can accrue gig by gig without any one particular company footing the whole bill.
Employers, according to the survey, do agree that change is needed. Nearly 70% of them say the social contract — “whereby health, retirement, and other benefits are generally tied to traditional, full-time W2-based employment” — should be reformed as more people move to making a living through alternative arrangements. A similar proportion believe that businesses, not the government, should determine whether contractors’ version of the social contract looks the same as full-time employees’. Yet there’s little agreement on who should be responsible for making it happen. While one-third of employers say they should be responsible for providing those benefits, the rest are split among other options like the workers themselves (22%), private companies (18%), the government (9%) and worker associations and unions (10%).
The likes of Sundararajan believe that competition for workers, the kind that has driven Lyft to offer $1,000 bonuses for driver referrals, would naturally drive the market to provide many benefits to those workers voluntarily. Experts say that regardless of who offers, tracks or manages the benefits, it would be the workers themselves who pay for them in some way. “In labor negotiations, it’s all really wages,” says David Rolf, an advocate of portable benefits and the president of SEIU 775 in Seattle. “The role that government needs to play is mandate the benefits and provide a regulatory environment for them, [but] it should be delivered by the private sector.”
Going both ways
There is already some proof that the market is willing to get creative in solving these problems. At Gigster, for example, software developers are matched with clients to build websites or machine learning algorithms, but they aren’t given healthcare or advice about taxes. Dickey says the company is careful not to do anything that could cause legal trouble. But he did set up a fund, with equity from both Gigster and its clients, which developers get a slice of each month they work. “Clients feel like freelancers don’t really care, they just clock in, clock out,” he says. “And freelancers want the same thing, they want exposure to upside if they do a really good job.” Giving them some financial crossover, he says, not only brings them into “alignment” but sets up something that looks a bit like a retirement fund and entices workers to stay active on the platform, without needing to exit the more hands-off contractor relationship.
Yet there is also proof that the lures of traditional employment remain strong. Even though employers in the TIME-Burson-Marsteller-Aspen Institute-Markle survey said they feel more pressure than five years ago to offer employees competitive pay and benefits, 58% of all employers said that hiring a full-time employee is still better for their organization in the long run. There is less uncertainty, as a startup down the block from Gigster learned.
Shyp, an on-demand shipping startup that launched in 2014, started with all its couriers classified as contractors—in part because other Silicon Valley darlings were doing it. But, says CEO Kevin Gibbon, the company couldn’t make workers accept packages when customers summoned someone for a pickup. After all, contractors have the right to do the jobs they want, when they want, how they want. The company couldn’t train them on the delicacies of, say, transporting paintings and couldn’t schedule them to be in certain areas of high demand at certain times. So they made the switch, terminating all the couriers’ contracts and offering them all W-2 jobs. “There is an increased cost structure. You have to pay for worker’s comp now. But we’re able to make gains in efficiency,” Gibbon says.
Most, but not all the couriers, made the change. “At the end of the day, they decide what they want to do,” he says of workers today. “The beautiful thing is people have options now.” What remains to be seen is how those options spur reform that stretches far beyond Silicon Valley.