Sen. Warner: Gig economy chance to 'reimagine whole social contract'

Fueled by technology and global in scope, the gig economy is underway. Making it work will require a new social contract.

The name for it hasn't been settled. But that's the least of the uncertainties about the future of work. If the gig economy, on-demand economy, sharing economy -- call it what you will -- augurs the new way in which work will get done in the 21st century, then we have our work cut out for us.

According to leading experts in the gig economy, a confluence of technologies, from smartphones to big data to human resource analytics to the name-brand, gig-enabling "platforms" -- hello, Uber and Airbnb -- will bring about a workplace transformation, the likes of which we haven't seen in nearly a century.

A full-time workforce, while still the norm for most large companies, will eventually look more like employment arrangements long familiar to the working poor and increasingly the norm for Millennials -- i.e., individuals working multiple jobs simultaneously or on a project-to-project contract basis. As this mode of work becomes more prevalent -- and many believe it will happen fast -- traditional 20th century work compacts, such as they still exist, won't apply.

Sen. Mark Warner (D-Va.)Sen. Mark Warner (D-Va.)

"For 75 years, we had a social contract that provided a level of security that worked pretty well -- unemployment, disability, workman's comp, health insurance, some level of retirement," said Sen. Mark Warner (D-Va.), speaking to an audience of employment experts and technology entrepreneurs at a recent event in Cambridge, Mass., hosted by the MIT Initiative on the Digital Economy and Institute for Work and Employment Research.

"Now, we see in the on-demand economy more and more people, even on the 1099 side, operating with absolutely no social contract," said Warner, who became interested in this issue last year.

Hailed as the third or fourth Industrial Revolution, depending on who's counting, this gig/on-demand/sharing economy will disrupt the allocation and pace of work; require lifelong retraining; exacerbate the gap between the haves and have-nots; necessitate new kinds of social safety nets; put income instability, in addition to income disparity, atop political agendas; and foment -- not curb -- global trade, Warner said.

By the time the new president comes, the whole notion of a gig economy and social contract is going to be front and center. And if we're not ready with policy ideas, chances are this is going to be relitigated on 20th century terms, and we won't get it right.
Sen. Mark Warner (D-Va.)

Many of the key players and participants destined to grease the wheels of this new economy, including politicians, labor unions and the platform businesses aiming to make money on this model, have not yet begun to seriously consider how a gig economy might work in a way that benefits more than a tiny slice of the labor workforce.

"We start talking about labor classifications in this whole new sector, and many state and federal and local-level policy makers just don't understand this transformation," Warner said, adding that now is the time to grapple with the gig economy.

"If you don't think there is a lot at stake with the presidential election, listen to the debate -- by leaders in both political parties, neither one of which seems to be leaning into the future," Warner said. "By the time the new president comes, the whole notion of a gig economy and social contract is going to be front and center. And if we're not ready with policy ideas, chances are this is going to be relitigated on 20th century terms, and we won't get it right," he said, and that, in his view, will ultimately hurt both workers and employers. 

More data needed

What's required? For starters, more, better and new data, Warner said. The last time the federal government looked at the area of contingent work was in 2005. Current numbers on the size and scope of the on-demand marketplace, while probably skewed by "self-selection," he said, underscore that a workplace transformation is under way.

An online survey of 3,000 adult Americans conducted in November by Burson-Marsteller in partnership with the Aspen Institute's Future of Work Initiative and TIME, for example, showed that 42%, or 86.5 million Americans, have accessed at least one on-demand economy service -- e.g., ride-sharing services, accommodation-sharing services, platforms that connect people looking for services, like a babysitter or mover, or food delivery -- and 22%, or 45.3 million people, have offered services. The findings, available here, shed light on some of the concerns people have about the new on-demand economy. While most users (74%) of on-demand services rate their experiences as positive, the traditional job holders and on-demand economy workers alike pointed to cracks in the gig economy:

  • 72% said on-demand workers should be given more benefits;
  • 68% believe on-demand workers have the financial safety net other workers do; and
  • 56% believe on-demand companies don't invest in training of their workers.

Rethinking the social contract

Warner, who is active in the Aspen Institute's Future of Work Initiative and has conducted "town hall" discussions throughout his state on the new gig economy, urged the audience to look at the gig economy as an opportunity to level a seriously unlevel playing  field for many workers.

"We really have a chance to reimagine the whole social contract," he said.

His father, who worked for the same company for 40 years, did not make a lot of money, but had a safety net in the event of sickness or injury and for retirement, he said. Lifetime employment disappeared during the baby-boom generation, but a safety net of sorts came in the form of defined contributions. As globalization swept through the economy starting in the 1990s, however, and companies outsourced jobs that were not core to the business mission, many of those outsourced jobs -- from janitorial and cafeteria staffs to customer service call center workers -- came with no employment benefits.

Companies need to invest in human capital, and not treat labor strictly as a cost. "As someone who has benefitted a great deal from American capitalism, I don't believe American capitalism with its focus on short-term results is really serving the vast majority of Americans right now," said Warner, who before entering politics made a fortune in cellular technology as an early investor in Nextel and co-founder of Capital Cellular Corp.

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