When Patricia Beet’s employer filed for bankruptcy shortly after the 2008 financial crisis, her job was relocated from Chicago to Los Angeles. Separated by three time zones, Patricia and her husband, David, started cooking together virtually through Skype as a creative way to connect.
Money was tight, so instead of buying presents, the couple began gifting their culinary creations, from infused sugars and salts to BBQ seasoning. Before long, they set up shop on Etsy. More than 24,000 sales later, their passion project has become a full-time income stream and allowed them to reunite in the Midwest.
Patricia and David’s story, while unique, is illustrative of the new opportunities within the gig economy that emerged in the United States in the 2000s and grew exponentially after the Great Recession. In May of 2017, 21.4 million people worked in “contingent” jobs or “alternative” jobs, according to the US Bureau of Labor Statistics. Other measurements show that more than a quarter of workers participate in the gig economy. And although the government has only recently begun attempting to track statistics for the gig economy, its economic footprint is evident. According to our newly released economic impact study, conducted by ECONorthwest, an economic consulting firm, Etsy sellers generated more than $4.7 billion in 2017 and created 1.24 million jobs in the US economy.
But not all gig economy workers see the same success that Patricia and David did, and not all gig economy jobs are created equal. In fact, gig economy workers are more than three times as likely as full-time employees to be uninsured. Additionally, self-employed workers bear the full weight of payroll taxes, and online sellers face additional costs due to state internet sales taxes.
If our newly elected representatives truly believe in positioning the gig economy for long-term success, they will take action and make America’s countless gig economy workers and microentrepreneurs a top priority. Here are some steps our representatives can take:
The gig economy encompasses a broad range of work circumstances, from people who build businesses to sell their wares, to those selling their labor via the sharing services that have exploded in popularity in recent years. But they all can face unpredictable income. An Etsy seller, for example, may experience an influx of sales around the holidays.
To combat the income volatility that both types of workers face, Congress should expand the Earned Income Tax Credit and allow it to be administered quarterly, as well as offer streamlined tax-advantaged savings accounts.
Microentrepreneurs and gig economy workers deserve a simplified tax code that eliminates many administrative burdens that owners currently face, and also gives them the chance to invest more time and money back into their businesses.
The Supreme Court’s recent decision, South Dakota v. Wayfair, Inc., expanded states’ authority to tax online purchases, and, as a result, potentially subjects microentrepreneurs to tax audits from states outside their own. There needs to be a fair, simple federal solution.
Proposed legislation, such as the Online Sales Simplicity and Small Business Relief Act, would protect microbusinesses from this onerous and chaotic tax environment — which spans tens of thousands of tax jurisdictions — by providing a simplified national sales tax solution. This would not only calm the fears of online small business leaders across the country, but also create a more manageable way for individuals to tackle business taxes.
Our representatives could also support microentrepreneurs by giving them access to a social safety net.
Members of the gig economy often lack access to employer-sponsored benefits, like health insurance, retirement savings and unemployment protection. They need portable benefits that they can fund from any job and take with them from gig to gig. That’s why we’ve proposed a series of policy reforms, from automatic tax withholding for 1099s to streamlined savings tools, which would provide a social safety net for everyone who works, regardless of how they work.
There are promising innovations that offer great models for success. For instance, Washington State launched a “Paid Family and Medical Leave” program that will cover both salaried and self-employed workers who need to take time out of the workforce due to illness or after having a child — a significant development and a model for other states and the nation at large.
Likewise, the National Domestic Workers Alliance launched an online platform — Alia — that connects housekeepers to portable benefit plans that allow workers to access and afford insurance options that were unavailable to them before. And innovative financial technology companies like Digit and Stash are now introducing features that help self-employed workers better manage income volatility, save for emergencies, and invest their money to build wealth overtime. Congress could build on these and other innovations to advance a policy agenda that supports the workforce of today and tomorrow.
The gig economy is here to stay, thanks to a number of factors that have and will continue to impact the traditional labor market, including people’s desire to have more control over their work-life balance, the rapid development of automation technology, wage stagnation and the need for supplemental income. Driven by these forces, among others, tens of millions of Americans are likely to join the gig economy in the years to come. That means we have an imperative to strengthen and improve the success of it for the next generation.