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Real Solutions For On-Demand Worker Classification

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This past year will be remembered as the year of the on-demand economy. For many people, especially those outside of Silicon Valley, it seemed to come out of nowhere. On the consumer side, this was almost universally a welcome surprise. The impact on workers was, of course, much more hotly debated.

Headline-grabbing events, such as the class-action lawsuit over Uber’s supposed “worker misclassification,” were portrayed as nothing less than the on-demand economy on trial. Decisions by other companies to reclassify their independent contractors as employees were interpreted as an attempt to pre-empt an inevitable crack-down from regulators.

There was drama at the local level, with Florida declaring that an Uber driver was — and then wasn’t — an employee, and Seattle passing legislation that effectively paves the way for ride-sharing drivers to unionize.

I believe that in 2016 we’ll come to realize these headlines largely missed the point. Instead of worker classification, we’ll instead focus on building new solutions that support the future of work and a new generation of entrepreneurs.

Here’s why: The on-demand economy didn’t make traditional employment go away, and it isn’t creating a new kind of work that demands new regulatory action. Far from being a phenomenon that came out of nowhere in 2015, the reasons people are choosing on-demand work can be traced back 30 years, or more.

The benefits of traditional employment have been steadily eroding since the 1980s. Take, for example, the fact that:

  • In 1982, almost 60 percent of full-time workers at U.S. private sector firms were enrolled in defined-benefit pension plans. Today it’s about 14 percent.
  • The average duration of unemployment was about 8.5 weeks in 1980. In June 2015, it was 28.1 weeks.
  • Today, 37 percent of American households are home to adults working two or more jobs.

During this same time, the contingent workforce has been steadily growing. Full- and part-time contingent workers represented 17 percent of the U.S. workforce 25 years ago; they have reached 36 percent today, and are expected to grow to 43 percent by 2020.

So, the on-demand economy is simply the next iteration of an existing trend. People are choosing on-demand work because it offers them the autonomy, flexibility and frictionless access to customers they need to take control of their careers.

At Intuit, we hear this every day from the tens of thousands of freelancers who use our products to manage their personal and business finances. We’re also seeing it in the data. We recently released the initial findings of a new study of more than 4,000 people working for 11 different on-demand platforms. The study found that:

  • Only 5 percent earn all of their income from a single on-demand platform.
  • 43 percent also have a traditional full- or part-time job (defined as a W2 job).
  • On average, people spend 12 hours per week on their primary on-demand platform.
  • People generate an average of 22 percent of their household income from on-demand work.

This data shows that employment as we know it has shifted. It’s not black or white — employee or contractor — it’s a rainbow of options. Instead of trying to categorize workers, it’s time to focus on how best to enable on-demand companies to grow and thrive, while also protecting and enabling workers to find the flexibility they need to be successful.

Moving the debate in this direction will take a concerted effort. It will require a deeper empathy for the needs and expectations of on-demand workers themselves. Who are they? Why did they choose this work? How satisfied are they? What do they want?

2016 needs to be the year we shift from looking backward, trying to fit new innovations into old paradigms.

The 2016 presidential election is a great opportunity to raise the profile of the real needs of on-demand workers. It should factor in to conversations about the middle class, income inequality and the pursuit of the American dream. After all, the 2016 election may be the last one in U.S. history before people working at least part-time as freelancers comprise a majority of the working population’s vote.

The best place for government to start is to give innovators in the space the freedom to explore new ways of providing support to workers. Just as technology removes the friction of finding a job, why can’t technology remove the friction of supplementing benefits and dealing with taxes? For example, at Intuit we’re already delivering more than $3,800 in average tax savings to users of our new QuickBooks Self-Employed product.

Existing rules and regulations around employee classification discourage marketplaces from partnering closely with companies providing worker services, such as healthcare, taxes or retirement, out of fear they’ll be subject to a misclassification suit. How could we work together to better support the workers if we removed this risk?

2016 needs to be the year we shift from looking backward, trying to fit new innovations into old paradigms. It needs to be the year we look forward, embrace the future of work and find innovative ways to power the new economy.

Above all else, in 2016 we should celebrate people working on-demand jobs for their willingness to take charge of their careers, for their refusal to sit around waiting for the glory days of “traditional” jobs to return and for their determination to embrace new opportunities.

Featured Image: Huza/Shutterstock