It is so good to be here with all of you. And yes I will be call­ing on peo­ple. Mostly those of you stand­ing in the back. I always know why peo­ple are stand­ing in the back. That’s what teach­ers do.

But thank you. And thank you for the intro­duc­tion, Anne-Marie [Slaughter]. Thank you to the New America Foundation for invit­ing me here today to talk about the gig econ­o­my. This is actu­al­ly speech I’ve want­ed to give for a long time, so I’m glad I have the chance to do it. It’s some­thing we’ve been work­ing on. You know, across the coun­try, new com­pa­nies are using the Internet to trans­form the way that Americans work, shop, social­ize, vaca­tion, look for love, talk to the doc­tor, get around, and track down ten-foot feath­er boas, which is actu­al­ly my lat­est search on Amazon. It’s a long sto­ry. It’s actu­al­ly true.

These inno­va­tions have helped improve our lives in count­less ways, reduc­ing inef­fi­cien­cies and lever­ag­ing net­work effects to help grow our econ­o­my. And this is real growth. For exam­ple, increas­ing broad­band pen­e­tra­tion boosts GDP. And increas­ing 3G con­nec­tions increas­es mobile data use, which in turn increas­es GDP. The most famous exam­ple of this is prob­a­bly the ride-sharing plat­forms in our cities. The taxi cab indus­try was rid­dled with monop­o­lies, rents, inef­fi­cien­cies. Cities lim­it­ed the num­ber of taxi licens­es. They charged dri­vers steep fees for taxi medal­lions. They required dri­vers to pay addi­tion­al fees to pick up pas­sen­gers at the air­port. They micro-managed paint jobs for indi­vid­ual cars, and even out­lawed price competition.

Uber and Lyft, two ride-sharing plat­forms came onto the scene about five years ago, rad­i­cal­ly altered this mod­el, enabling any­one with a smart­phone and a car to deliv­er rides. They also enabled cus­tomers to find a ride any time of day with the touch of a but­ton. The result was more rides, cheap­er rides, and short­er wait times.

The ride-sharing sto­ry illus­trates the promise of these new busi­ness­es. And the dan­gers. Uber and Lyft fought against local taxi cab rules that kept prices high and lim­it­ed access to ser­vices. But as the dis­pute in Austin, Texas has demon­strat­ed, the com­pa­nies have fought just as vig­or­ous­ly against local rules designed to cre­ate a lev­el play­ing field between them­selves and their taxi com­peti­tors. And they have also resist­ed rules designed to pro­mote rid­er safe­ty and dri­ver accountability.

And while their busi­ness­es pro­vide work­ers with greater flex­i­bil­i­ty, com­pa­nies like Lyft and Uber have often resist­ed efforts of those very same work­ers to try to access a greater share of the wealth that is gen­er­at­ed from the work that they do. Their busi­ness mod­el is, in part, depen­dent on extreme­ly low wages for their drivers.

Now look, it is excit­ing and very hip to talk about Uber and Lyft and TaskRabbit and a whole bunch of oth­er new plat­forms out there. But the promise and the risks of these com­pa­nies isn’t new. For cen­turies, tech­no­log­i­cal advances have helped cre­ate new wealth and have increased GDP. But it is pol­i­cy, rules and reg­u­la­tions, that will deter­mine whether work­ers have a mean­ing­ful oppor­tu­ni­ty to share in the wealth that is generated.

A cen­tu­ry ago, the Industrial Revolution rad­i­cal­ly altered the American econ­o­my. Millions moved from farms to fac­to­ries. These sweep­ing changes in our econ­o­my gen­er­at­ed enor­mous wealth. They also wreaked hav­oc on work­ers and their fam­i­lies. Workplaces were mon­strous­ly unsafe. Wages were pal­try. Hours were grueling.

Now, America’s response was­n’t too aban­don tech­no­log­i­cal inno­va­tions and improve­ments from the Industrial Revolution. We did­n’t send every­one back to the farms. No. Instead we came togeth­er, and through our gov­ern­ment, we changed pub­lic poli­cies to adapt to a chang­ing econ­o­my, to try to keep the good and get rid of the bad. The list of new laws and reg­u­la­tions was long. Think about it: min­i­mum wage, work­place safe­ty, work­er com­pen­sa­tion, child labor laws, the 40-hour work week, Social Security, the right to union­ize. But each of those changes made a pro­found dif­fer­ence. They put guard rails around the abil­i­ty of giant cor­po­ra­tions to exploit work­ers, to gen­er­ate addi­tion­al prof­its at any cost. They helped make sure that part of the increased wealth that was gen­er­at­ed by inno­va­tion would be used to build a strong mid­dle class.

The changes, by the way, were not all focused on work­ers. Antitrust laws and newly-created pub­lic util­i­ties addressed the new tech­no­log­i­cal rev­o­lu­tion’s ten­den­cy toward con­cen­tra­tion and monop­oly, and kept our mar­kets com­pet­i­tive. Rules to pre­vent cheat­ing and fraud were added to make sure that bad actors in the mar­ket­place could­n’t get a leg up over folks who played by the rules.

Now, those changes did­n’t hap­pen overnight. There were big fights over decades to estab­lish that bal­ance. But once in place, these poli­cies under­wrote the widely-shared growth and pros­per­i­ty of the 20th cen­tu­ry. I just want to put one num­ber in front of you. From 1935 to 1980, the 90% of America, every­body not in the top 10%, got 70% of all income growth gen­er­at­ed in this econ­o­my. In oth­er words, as the econ­o­my grew and became more pro­duc­tive, so did the aver­age work­er’s wages. Instead of all the wealth going to a hand­ful of giant com­pa­nies, fac­to­ry own­ers, and investors—the rob­ber barons of the ear­ly 20th century—the growth cre­at­ed by our man­u­fac­tur­ing econ­o­my sup­port­ed the growth of a pros­per­ous, secure mid­dle class. And this dis­tri­b­u­tion occurred because of a new­ly emerg­ing, basic bar­gain for workers.

A hun­dred years ago, nobody grap­pling with the rapid changes in tech­nol­o­gy and work seri­ous­ly enter­tained the idea of ban­ning man­u­fac­tur­ing advances. And today, nobody seri­ous­ly enter­tains the idea of pulling the plug on the Internet. Massive tech­no­log­i­cal change is a gift, a byprod­uct of human inge­nu­ity. And it cre­ates extra­or­di­nary oppor­tu­ni­ties to improve the lives of bil­lions of people.

But his­to­ry shows that to har­ness those oppor­tu­ni­ties, to cre­ate and sus­tain a strong mid­dle class, pol­i­cy also mat­ters. To ful­ly real­ize the poten­tial of this new econ­o­my, laws must be adapt­ed to make sure that the basic bar­gain for work­ers remains intact. And that work­ers have a chance to share in the growth that they helped produce. 

Now, the chal­lenge today is dou­bly dif­fi­cult. At the same time that we need to adapt to new work rela­tion­ships in a gig econ­o­my, the basic bar­gain of the old work rela­tion­ships has become bad­ly frayed. Over the past three decades, work­ers have been under mer­ci­less attack. For decades now, big busi­ness has tried to squeeze more prof­its out of work­ers by duck­ing and dodg­ing reg­u­la­tions and by tak­ing advan­tage of loop­holes in employ­ment pol­i­cy, by skirt­ing enforce­ment efforts, and even by fla­grant­ly vio­lat­ing the law. Giant cor­po­ra­tions have deployed armies of lob­by­ists and lawyers to freeze, to lim­it, to dis­man­tle, as many work­er pro­tec­tions as they could. And the result is that for decades the guard rails that once served to build a robust mid­dle class no longer offer the same kind of protection. 

More and more of today’s jobs have sharply-limited pro­tec­tions and ben­e­fits. Look, long before any­body ever wrote an arti­cle about the gig econ­o­my, cor­po­ra­tions had dis­cov­ered the high­er prof­its they could wring out of an on-demand work force made up of inde­pen­dent con­trac­tors. Labor laws make sharp dis­tinc­tions between employ­ees on the one hand and inde­pen­dent con­trac­tors on the oth­er. And the con­se­quence of this is that many employ­ers fig­ured out how to exploit that dis­tinc­tion between the two. They hired peo­ple who once were char­ac­ter­ized as employ­ees, now to become inde­pen­dent con­trac­tors. And the result was that these work­ers lost their ben­e­fit, they lost the sta­bil­i­ty of guar­an­teed work, and they lost the abil­i­ty to form a union and bar­gain collectively.

But the employee/1099 divide is not the only way that the basic bar­gain is fray­ing. Employees, par­tic­u­lar­ly low wage employ­ees, face chal­lenges that are not unlike the chal­lenges fac­ing gig work­ers and inde­pen­dent con­trac­tors. They too have lost both the ben­e­fits and the sta­bil­i­ty of a guar­an­teed work sched­ule and a steady income. As employ­ers have moved to just-in-time staffing, more hourly work­ers are trapped in part-time jobs or stripped down full-time jobs. An increas­ing num­ber of work­ers are in sub­con­tract­ing or fran­chise arrange­ments, where their employ­ment con­di­tions are con­trolled by firms they can’t bar­gain with, they can’t hold them account­able for even basic safe­ty or wage pro­tec­tion. They may not even actu­al­ly know the name of their employers.

At the same time that the bar­gain with work­ers has become increas­ing­ly one-sided for mil­lions of inde­pen­dent con­trac­tors and hourly employ­ees, yet anoth­er part of the basic eco­nom­ic bar­gain has also begun to fray. The safe­ty net (unem­ploy­ment insur­ance, work­er’s comp, Social Security) has­n’t been updat­ed to fill in the holes that employ­ers have cre­at­ed. Temporary work­ers, con­tract work­er, sea­son­al work­ers, per­matemps, and part-time work­ers rarely have access to these ben­e­fits. Which means that the work­ers who most need the safe­ty net are the very ones who are least like­ly to have it.

Let’s be clear. The gig econ­o­my did­n’t invent any of these prob­lems. In fact, the gig econ­o­my has become a stop­gap for some work­ers who can’t make ends meet in a weak labor mar­ket. The much-touted virtues of flex­i­bil­i­ty, inde­pen­dence, and cre­ativ­i­ty offered by gig work might be true for some work­ers in some con­di­tions. But for many, the gig econ­o­my is sim­ply the next step in a los­ing effort to build some eco­nom­ic secu­ri­ty in a world where all of the ben­e­fits and wealth are float­ing to the top 10%.

The prob­lems fac­ing gig work­ers are much like the prob­lems fac­ing mil­lions of oth­er work­ers. An out­dat­ed employ­ee ben­e­fits mod­el makes it all but impos­si­ble for tem­po­rary work­ers, con­tract work­ers, part-time work­ers, and work­ers in indus­tries like retail or con­struc­tion, who switch jobs fre­quent­ly, to build any eco­nom­ic secu­ri­ty. So, just as this coun­try did a hun­dred years ago, it’s time to rethink the basic bar­gain between work­ers and com­pa­nies. As greater wealth is gen­er­at­ed by new tech­nol­o­gy, how can we ensure that the work­ers who sup­port the econ­o­my can actu­al­ly share in the wealth?

Well, I believe we start with one sim­ple prin­ci­ple. All work­ers, no mat­ter where they work, no mat­ter how they work, no mat­ter when they work, no mat­ter who they work for, whether they pick toma­toes or build rock­et ships, all work­ers should have some basic pro­tec­tions and be able to build some eco­nom­ic secu­ri­ty for them­selves and their fam­i­lies. No work­er should fall through the cracks. And here are some ideas about how to rethink and strength­en the work­er’s bargain.

We can start by strength­en­ing our safe­ty net so that it catch­es any­one who has fall­en on hard times, whether they have a for­mal employ­er or not. And there are three much-needed changes right off the bat on this.

First, make sure that every work­er pays into Social Security, as the law has always intend­ed. Right now, it is a chal­lenge for some­one who does­n’t have an employ­er that auto­mat­i­cal­ly deducts pay­roll tax­es to pay into Social Security. This can affect both a work­er’s abil­i­ty to qual­i­fy for dis­abil­i­ty insur­ance after a major [injury], and it can result in much low­er retire­ment ben­e­fits. If Social Security is to be ful­ly fund­ed for gen­er­a­tions to come, and if all work­ers are to have ade­quate ben­e­fits, then elec­tron­ic, auto­mat­ic, manda­to­ry with­hold­ing of pay­roll tax­es must apply to every­one, gig work­ers, 1099 work­ers, and hourly employ­ees. That’s the start­ing place.

Second, every work­er should be cov­ered by cat­a­stroph­ic insur­ance. Workers who have seri­ous acci­dents or suf­fer from ill­ness­es that knock them out of the labor mar­ket for an extend­ed peri­od need a back­stop. And every­one means every­one. Even work­ers who haven’t built up enough cred­it for dis­abil­i­ty insur­ance. Even work­ers who don’t have tra­di­tion­al work­er’s com­pen­sa­tion. This type of insur­ance should be rel­a­tive­ly cheap if it is pooled across the entire work­force through small, reg­u­lar, automatically-deducted contributions. 

And third, all work­ers, no mat­ter where they work or who they work for, should have some paid leave. Any work­er should be able to stay home when they’re sick, or take off some time to care for a sick baby with­out wor­ry­ing that that means they won’t be able to make the rent. We can debate where to draw the lines, but let’s start with two ideas. First, each work­er should be able to accrue pro­por­tion­al cred­its toward a cer­tain num­ber of days a year, for any pur­pose. And sec­ond, work­ers should have some paid fam­i­ly and med­ical leave to insure against longer absences, such as more seri­ous ill­ness­es, or to care for a new­born baby.

These three, Social Security, cat­a­stroph­ic insur­ance, and earned leave, cre­ate a safe­ty net for income. Together, they give fam­i­lies some pro­tec­tion in an ever more volatile work envi­ron­ment. And they help ensure that after a life­time of work, peo­ple will face their retire­ment years with some dignity.

Now, the sec­ond area of change to make is on employ­ee ben­e­fits, both for health­care and retire­ment. To make them ful­ly portable. They belong to the work­er, no mat­ter what com­pa­ny or plat­form gen­er­ates the income, they should fol­low that work­er wher­ev­er that work­er goes. And the corol­lary to this is that work­ers with­out for­mal employ­ers should have access to the same kinds of ben­e­fits that some employ­ees already have. 

I want to be clear here. The Affordable Care Act is a big step toward address­ing this prob­lem for health­care. Providing access for work­ers who don’t have employer-sponsored cov­er­age and pro­vid­ing a long term struc­ture for porta­bil­i­ty. We should improve on that struc­ture, enhanc­ing its porta­bil­i­ty, and reduc­ing the man­age­r­i­al involve­ment of employers. 

There is no sim­i­lar­ly portable struc­ture for retire­ment ben­e­fits. One change that would make a real­ly big dif­fer­ence here is a high-quality retire­ment plan for inde­pen­dent con­trac­tors, self-employed work­ers, and oth­er work­ers who have no access to retire­ment ben­e­fits, to sup­ple­ment their Social Security. This plan should use best-in-class prac­tices when it comes to asset allo­ca­tion, gov­er­nance struc­ture, and fee trans­paren­cy. It should be oper­at­ed sole­ly in the inter­est of work­ers and retirees, and those work­ers and retirees should have a voice in how the plan is run.

Instead of an employer-sponsored 401k, this plan could be run by a union or oth­er orga­ni­za­tion that could con­tract invest­ment man­age­ment to the pri­vate sec­tor, just like com­pa­nies like General Motors con­tract with providers like Fidelity to offer 401k in the employ­ment set­ting. And because of the amaz­ing advances in online invest­ment plat­forms and elec­tron­ic pay­roll sys­tems, indi­vid­u­als could set up auto­mat­ic con­tri­bu­tions. It’s time for all work­ers to have access to the same low-cost, well-protected retire­ment prod­ucts that right now only some employ­ers and unions are able to provide.

The ben­e­fits to work­ers from gain­ing access to health insur­ance into retire­ment plans are pret­ty obvi­ous, but I also want to note the ben­e­fits to employ­ers are also sub­stan­tial. Those employ­ers can shed man­age­r­i­al respon­si­bil­i­ties that are periph­er­al to their busi­ness­es. And small busi­ness­es and star­tups can com­pete for work­ers with­out need­ing to get into the health insur­ance and retire­ment busi­ness. That is how com­pet­i­tive mar­kets should work.

And the third big area. It’s time to cre­ate some legal and reg­u­la­to­ry cer­tain­ty in the labor mar­ket. If it is done right, it will be pos­si­ble to reduce the red tape for large employ­ers, small busi­ness own­ers, and entre­pre­neurs. We can cut their costs and make it eas­i­er for them to employ peo­ple. Less ambi­gu­i­ty will also help make sure that some employ­ers don’t exploit loop­holes to gain com­pet­i­tive advantages.

And here are four ways to make progress in that area. Okay, you want­ed it all. We’re going to do it all at once.

First, enforce the laws already on the books. Can I just have an amen around that? Employers should not be mis­clas­si­fy­ing work­ers to keep labor costs down, because they should­n’t have the chance to hide behind com­plex arrange­ments like fran­chis­ing and sub­con­tract­ing to skirt their respon­si­bil­i­ties to their work­ers. The many employ­ers who treat their employ­ees well should­n’t have to com­pete against the ones who don’t. That’s not a lev­el play­ing field. That’s a bro­ken system.

Second, stream­line the labor laws. Currently, there are end­less legal def­i­n­i­tions of an employ­ee, depend­ing on the work­er’s indus­try and occu­pa­tion. The bound­aries between employ­ees, con­tract work­ers, and gig work­ers are com­plex. Providing a wider safe­ty net and more con­sis­tent access to retire­ment and health ben­e­fits will reduce the huge impact of dif­fer­ent clas­si­fi­ca­tions. But at the same time, har­mo­niz­ing these def­i­n­i­tions will mean less reg­u­la­to­ry bur­den for busi­ness­es and few­er oppor­tu­ni­ties for mis­clas­si­fy­ing workers. 

And third, wher­ev­er pos­si­ble, stream­line laws at the fed­er­al lev­el, so that employ­ers oper­at­ing across state lines don’t have to jump through crazy num­ber of hoops when they employ work­ers from more than one state. A small busi­ness own­er with work­ers in sev­er­al states should­n’t have to spend her valu­able time strug­gling to mas­ter dif­fer­ent state regulations. 

And fourth, every work­er should have the right to orga­nize, peri­od. Full-time, part-time, temp work­ers, gig work­ers, con­tract work­ers, you bet. Those who pro­vide the labor should have the right to bar­gain as a group with who­ev­er con­trols the terms of their work. And they should be pro­tect­ed from retal­i­a­tion or dis­crim­i­na­tion when they do so. Government is not the only advo­cate on behalf of work­ers. It was work­ers, bar­gain­ing through their unions, who helped intro­duce retire­ment ben­e­fits, sick pay, over­time, the week­end, and a long list of oth­er ben­e­fits, for their mem­bers and for all work­ers across this coun­try. Unions helped build America’s mid­dle class, and unions will help rebuild America’s mid­dle class.

And one more thing. A 21st cen­tu­ry econ­o­my, once again can grow a thriv­ing mid­dle class, but only if we make a few oth­er changes. It will require mak­ing invest­ments in edu­ca­tion and train­ing. In infra­struc­ture and basic research and devel­op­ment. Today’s high-tech jobs might be locat­ed on the fac­to­ry floor or in a med­ical lab. But what­ev­er the work sites look like, the work­ers increas­ing­ly need post-secondary education. 

So let’s be clear: to build a well edu­cat­ed ver­sa­tile work­force that this coun­try will need in the 21st cen­tu­ry, it is crit­i­cal that we stop sad­dling tomor­row’s work­ers with stu­dent debt. Student loan debt has now bal­looned to $1.3 tril­lion. Today, 70% of col­lege grads must bor­row mon­ey to make it through school. That is not a leg up, that is an anvil drag­ging work­ers down. 

But I want to make it clear, this is about more than tra­di­tion­al col­lege. American work­ers will need access to afford­able life-long work­ing and retool­ing for their jobs. Jobs that emerge long after they’ve left school, but long before they retire. I know New America is mak­ing impor­tant con­tri­bu­tions on this top­ic, with both Opportunity@Work and its edu­ca­tion pro­gram. You know, peo­ple who have worked 20+ years in a chang­ing field should have access to edu­ca­tion and train­ing oppor­tu­ni­ties that will offer new ways to use their tal­ents, their cre­ativ­i­ty, and their expe­ri­ence. America will need these work­ers, and these work­ers will need training.

Now for many of these pro­pos­als, gov­ern­ment may set poli­cies. But employ­ers, edu­ca­tors, unions, non­prof­its, tech inno­va­tors, all have crit­i­cal roles to play. If we’re going to rebuild America’s econ­o­my by strength­en­ing American work­ers, it’s going to take all hands on deck.

But I want to put one more thing on the table before I leave on this. Government invest­ments are one of the most reli­able sparks of tech­no­log­i­cal inno­va­tion and growth around. Building basic infra­struc­ture, roads and bridges, but also pow­er grids, com­mu­ni­ca­tion links, mass tran­sit, make it pos­si­ble for the econ­o­my to flour­ish. Investments in basic research pro­vide a foun­da­tion for tomor­row’s advances. A stronger econ­o­my will pro­duce more demand for work­ers that will cre­ate oppor­tu­ni­ties for mil­lions more Americans.

We can’t blame the parts of the gig econ­o­my that we don’t like on tech­nol­o­gy com­pa­nies, soft­ware, or smart­phones. There are plen­ty of out­sourced jan­i­tors and ware­house work­ers. Plenty of secu­ri­ty guards and man­u­fac­tur­ing work­ers who can explain that on-demand work is noth­ing new in America. In a healthy econ­o­my, dis­rup­tion is inevitable. But dis­rup­tion means it is time to adapt to chang­ing cir­cum­stances. Time for new busi­ness­es and old busi­ness­es to change. Time to rethink the deal for employ­ees, for con­tract work­ers, and for gig work­ers. Disruption cre­ates the push to rethink the basic bar­gain for the work­ers who pro­duced much of the val­ue in this economy.

My mes­sage today is straight­for­ward. Workers deserve a lev­el play­ing field and some basic pro­tec­tions. No mat­ter who they work for, where they work, or how the law clas­si­fies them. They deserve a strong safe­ty net, depend­able ben­e­fits, and the chance to bar­gain over their work­ing con­di­tions. That is the basic deal. And that’s the deal that is nec­es­sary to restore a strong and sus­tain­able American mid­dle class. 

Most work­ers aren’t ask­ing for the moon. They want to be able to take care of their fam­i­lies, to buy a home, send their kids to col­lege, save a lit­tle mon­ey for retire­ment. They want some secu­ri­ty. And they want to know their kids are going to have a chance to do bet­ter than they did. That’s the promise of America. But that promise won’t come true unless we make some real changes. 

Workers have a right to expect our gov­ern­ment to work for them. To set the basic rules of the game. If this coun­try is to have a strong mid­dle class, then we need the poli­cies that will make that pos­si­ble. That’s how shared pros­per­i­ty has been built in the past, and that is our way for­ward now. Change won’t be easy. But we don’t get what we don’t fight for. And I believe that America’s work­ers are worth fight­ing for. Thank you all. 

Further Reference

The Next Social Contract event home page.