Republicans and Democrats Face 2016 Challenge With On-Demand Economy

Uber is God! Uber is the Devil! Uber is … a transportation network provider! Political sloganeering continues today – the art of transforming complex policy issues to four words or less has hardly been lost in the Twitter age – but it will have immense influence this year in tech circles as presidential candidates grapple with the vast changes that startups have created in the jobs economy over the past few years.

Nowhere have these changes been as dramatic or politically palpable as with the on-demand economy, which is poised to be one of the defining tech-related issues of the 2016 presidential election.

For the first time in recent memory, politicians of both parties will be forced to confront the logjam of employment laws in the United States. They can’t avoid it. Startups like Uber, Handy, Homejoy, Washio, Postmates among dozens of others have already transformed the definition of work in the 21st century, inventing a whole new category of worker that blows apart the traditional divide between Democrats and Republicans.

The question is whether we can embrace these changes and find ways to create the best employment outcomes for everyone in a digital economy, or whether the candidates and thus the parties slip back into tired old debates about jobs that are increasingly irrelevant in our modern world.

A Tale Of Two Workers

In the United States today, employment law essentially recognizes a binary condition for workers: either a worker is employed by a company or they are a contractor who offers their services. These two types really represent the idealized visions of Democrats and Republicans on work.

For Democrats, employment status is a key condition in nearly all major work-related legislation passed in the past century, from overtime hours and occupational safety rules to workplace anti-discrimination laws and health care services. Contractors are not afforded these protections, and so if contracting becomes more popular, it may force other companies to consider moving toward contracting models to stay competitive, risking much of the work Democrats have fought for.

That was the context for a speech this week by Hillary Clinton on workplace protections. Clinton emphasized the need to ensure that workers have full access to benefits and workplace protections, as well as encouraging greater enforcement of provisions related to wage theft. The only way this matters is if workers are employees, and so the on-demand economy potentially threatens the Democratic position.

On the other side of the aisle, while Republicans don’t want to eliminate full employment, they certainly don’t want to do anything to hinder contracting as an acceptable business practice. The incredible flexibility of contracting ensures that companies can operate at peak efficiency, moving workers effortlessly from project to project as growth demands. That makes America more competitive in the global economy.

There is a dissonance though on the Republican side between the goals of its family-oriented policies on one side and flexibility in employment on the other. Without stable incomes, building a family is incredibly challenging, and yet Republicans are stuck supporting policies that seem at odds with each other.

A Third Way?

The problem with idealized types, of course, is that they really don’t represent the economy on the ground.

Workers are quite varied in their interests and predilections, and yet the law only recognizes two types of idealized workers. Today’s workers want access to stable jobs, sure, but they also want scheduling flexibility so that they can pick their kids up after school when they need to. They certainly want access to benefits, but they also want to be able to have multiple employers to fit their multitude of interests and passions.

Companies like Uber pose a significant dilemma for Democrats: while workplace protections and benefits are near nil, these jobs offer tremendous flexibility, and are thus popular with several of their key voter segments like working mothers and college students, who often need immediate scheduling flexibility to handle their everyday lives.

They also pose challenges to Republicans: in a world where employment has greater social status than contracting, voters will continue to feel insecure about their economic futures. Democratic messages around job security are going to resonate, no matter how much flexibility they can have in their schedules.

It’s not just workers who want to see more options, as companies would also like to see a wider spectrum of job classifications. With the global economy marching ever faster, they need greater flexibility to restructure and move resources from poor performing areas to areas of growth. Contractors are helpful precisely because of their contingent nature.

The challenge is that contractors cannot be given benefits, so companies are forced to compete against other companies with employment even though workers themselves would prefer the flexibility of contracting over the requirements of full employment.

Yet No Third Way Will Come

There has been incredible excitement about the possibility of a third way on employment, and yet, I still think the prospects are quite dim. It’s not a question of willpower or Congressional dysfunction, but rather that any additional classifications will create new pressure on companies to adjust their employment relationships with workers.

Despite the enthusiasm for flexible 1099 jobs from some quarters, the reality is that this group represents a small albeit important minority of the total workers in the United States. Most people are covered under employment, and most others would want the protections that come with full employment if they could get access to them. For these workers, employment already is the ideal they are looking for, and anything less would not be acceptable.

A third labor classification might be useful for Silicon Valley, but it could also make companies reconsider their existing employee relationships. Suddenly, workers with employment could be told their job is becoming “flexible,” and they are going to vote accordingly.

Silicon Valley’s dream of a special classification for workers designed for on-demand economy startups is ultimately a pipe dream, but that doesn’t mean they shouldn’t engage with politics. Instead, we should try to find ways of improving the existing classifications, rather than trying to invent our own.

I agree with Fred Wilson that it is well past time to have a debate on how we approach freelancing and this new labor economy. Employment is going to be the most salient issue of 2016, and startups are playing an increasingly political role as they touch on labor issues. Improving our existing laws may not be as interesting as starting from scratch, but it may just be attainable.