Designing benefit plans for ‘platform workers’
The work is flexible so the benefits should be, too
THE TWENTY-FIRST CENTURY has seen significant growth in the “platform workforce:” workers who complete tasks via apps or platforms that allow them to control their own schedule. As of August, 2021, 16 percent of Americans had performed platform work.
This new form of work raises a number of challenging issues for labor market policy. Among them are how to ensure that platform workers have access to what have typically been employee benefits, such as health insurance, pensions, vacation time, and sick and family leave. These benefits are essential to protecting one’s health and financial security.
Creating a parallel model for benefits for platform workers is complicated. In the traditional labor market, employers provide these benefits to their full-time workers after some period of employment. But workers in the platform economy value the flexibility of choosing when, how much, and with which platforms they work each week. This raises a host of difficulties around applying the traditional benefits model. So how should we protect platform workers?
In an attempt to answer that question, I worked with Uber to carry out a survey of rideshare and food delivery workers, which gathered data on their work arrangements, income (from Uber and elsewhere), and existing benefits coverage. Respondents were also asked how they would value a suite of benefits – retirement savings contributions, health benefits, and paid sick and family leave – relative to cash. The results of this survey reveal some important lessons for how to design benefits for this large and growing population.
Second, workers value retirement savings more highly than other benefits, including health insurance coverage – partly because 80 percent of workers have health insurance from another source, but partly since workers appear to value the ability of retirement accounts to help “commit” them to savings. There is even substantial enthusiasm for an option that allows workers to devote a share of earnings from high earning weeks towards a retirement savings account; if such contributions were matched, 80 percent of workers would like to use such a mechanism. Given strong evidence that such “default” savings plans can raise savings rates, policymakers should seriously consider facilitating such an option.
Third, platform workers spread their time widely across apps. Seventy-five percent of Uber workers have worked with at least one other platform company, and more than 40 percent have worked with two or more. This suggests that a benefits provision in the platform economy is best shared across multiple platforms. Contributions from platform companies in proportion to worker earnings could equitably fund the benefits.
These findings have important implications for policymakers considering how to design benefits for this sector. Workers are definitely interested in having benefits, and appear, on average, willing to sacrifice the equivalent amount of income to get them. These benefits create advantages for society above and beyond the value to the worker — for example, through reducing the cost of caring for the uninsured or indigent retirees.
As a result, there may be a role for the government in ensuring that workers have access to benefits through platform work, either through mandating benefits, ensuring tax subsidization, or helping offset setup and coordination costs across companies. Any government action, however, should take into account the diversity of preference among these workers. A flexible fund would likely be more appropriate than mandating particular benefits.
Such flexibility could ensure worker protection while respecting the fact that more than 60 percent of those surveyed work in a traditional job or as a student, and that fewer than 20 percent of the workers surveyed earn half or more of their income from platform work.This is directly relevant for the Commonwealth because of two developments. The first is a ballot initiative that asks whether platform employers should be required (among other things) to provide specific health benefits, paid family leave, and sick leave. The second is HR 1234, which would set up a flexible benefits fund to which the platform employers would have to contribute for paid leave, income loss, health care premiums, or retirement contributions. Both are good steps towards providing the necessary protections for platform workers against risk. But my research suggests that the legislative approach would be much more valuable to platform workers in that it would reflect their diverse tastes for benefits, so it is incumbent on legislators to account for this in their debates.
It’s evident that platform work is here to stay. This has been a positive development for workers who value flexibility in their work. But it has come with a cost of eroding the protection of employee benefits, with negative implications for workers and society. A flexible benefits fund that is made available across multiple platforms could go a long way towards remedying this deficiency while delivering value to platform workers.