Etsy, the online handicraft retailer, published a detailed report this week proposing what it calls a “social safety net” for gig economy workers in the US, including Etsy sellers as well as on-demand workers such as Uber drivers. The premise of their public policy proposal is that gig economy participants need three things they currently don’t have:
A single place to manage benefits, regardless of income source
Tying benefits to employment excludes too many workers and results in economic inefficiencies. We propose creating a Federal Benefits Portal, which would tie all benefits (retirement, health insurance, paid leave, tax-advantaged savings accounts, disability, etc.) to the individual, providing a single marketplace to view, choose and pay for their benefits, regardless of where or how they earn income.
A simple, common way to fund those benefits
Although payroll has been a useful way to administer benefits, it excludes everyone working outside traditional employment. We propose using tax withholding as the universal means to administer benefits contributions, enabling both employees and 1099s to withhold their Social Security and Medicare taxes from their pay, as well as an additional percentage of pre-tax income to fund benefits. All withheld pay and matching contributions would be routed to an individual’s account on the Federal Benefits Portal, where they could allocate consolidated contributions across plans.
A way to manage income fluctuations
Those outside traditional employment often experience considerable income volatility, and lack income protections like minimum wage or unemployment insurance. We propose combining all existing tax-advantaged savings accounts (health, dependent care, parking and transportation) into a single MyFlex Account, which anyone could use to manage short-term income fluctuations throughout the year. To manage more catastrophic income loss, we propose expanding the Earned Income Tax Credit and allowing it to be administered quarterly.
Benefits are indeed one of the big question marks around the future of the gig economy: Employer-based systems for health insurance, unemployment insurance, and retirement savings start to make less sense in an environment where many workers are no longer closely affiliated with a single employer. Other organizations in the gig economy have begun thinking about this problem as well: Care.com recently launched a “peer to peer” benefits program that allows families who hire caregivers through the platform to contribute to their health care and other expenses.
Etsy has cultivated an image as a progressive organization—earlier this year, it introduced a gender-neutral, 26-week paid parental leave policy. In releasing this paper, the company aims to “broaden the scope of the current debate about the future of work in the US, and put forward ideas upon which others might build.” The report takes a firm position, however, on the need for tax policy and employment regulations to change to fit the evolving nature of how Americans work. “Ultimately,” the report concludes,
no matter how you work or who cuts your paycheck, everyone should have a social safety net that protects them in times of need. As work changes, more people will be able to pursue their passions and support themselves and their families on their own terms. But we need to give them the financial security and protection to do so. If we are to fulfill the promise of a people-centered economy, we need a social safety net that works for everyone who works.