The Staffing Industry’s Instrumental Role in Guiding the Trump Gig Economy
President-elect Donald Trump hosted his first press conference in 167 days on Wednesday morning. On the issue of business and talent, Mr. Trump discussed plans that may increase the power of the gig economy -- and which some workers fear could lead to reduced stability. However, David Weil, Obama’s former wage enforcer at the U.S. Department of Labor, believes the sharing economy can work equitably for everyone involved. Let’s look at some of Weil’s ideas and see how the staffing industry can aid in the success and proper guidance.
How Trump’s Plans Could Shape the Gig Economy
Well out of the campaign season, yesterday’s meeting with the nation’s journalists was intended to set the tone for Mr. Trump’s presidency, which will become official at his inauguration on January 20. As with any new administration, substantive changes to the U.S. workforce are likely to arise. In that regard, Mr. Trump discussed two of his key policies for domestic businesses: repealing the Affordable Care Act and penalizing companies that open shops abroad to the detriment of American workers. What impact could these proposals have? In many respects, they could add momentum -- and worries -- to the already growing gig economy.
Affordable Care Act Replace and Repeal
Responding to questions of healthcare, Trump criticized the ACA and stated that “some states have over 100 percent increase [sic]” in premiums. The ACA is responsible for extending medical coverage to nearly 20 million Americans, with half receiving insurance through an expansion of Medicaid. The remainder purchase coverage through state-run exchanges. For talent who are ineligible to receive employer-sponsored benefits, the ACA has provided the ability to secure individual care. That’s one of several wins for ACA.
Regarding Mr. Trump’s statements, insurers in some states have hiked their premiums or pulled out of the market. In Arizona, for example, the average premium rose by 145 percent. Yet that marks the only state where premiums soared above the 100-percent threshold. Still, the nationwide figures indicate an average 22-percent raise in costs. Despite the increases, more Americans than ever enrolled in ACA during November’s registration.
Industry professionals, employers and workers will have their own opinions about the merits or impediments of the ACA. The fact remains, repealing the current policies and replacing them with a yet-to-be-revealed alternative is top of Trump’s agenda. For freelancers, independent contractors and agency temps between assignments or staffing firms, concerns about medical insurance could grow in the Trump gig economy.
Offshore and Nearshore Crackdowns Imminent
One of Mr. Trump’s controversial promises comes in the form of a physical wall along the southern border, to crackdown on immigration. During Wednesday’s address, Trump reiterated his commitment to begin construction of the Mexico wall “immediately” after he takes office.
The notion of a wall goes beyond building a concrete barrier. Conceptually, this structure also involves imposing restrictions and penalties on U.S. companies that ship jobs to other countries. To date, Trump’s efforts have relied on cutting deals with those businesses. Moving forward, he has stated that strict penalties will replace dealmaking:
You’re going to pay a very large border tax. So if you want to move to another country and if you want to fire all of our great American workers that got you there in the first place, you can move from Michigan to Tennessee and to North Carolina and South Carolina -- you can move from South Carolina back to Michigan. You can do that anyway. You have a lot of states at play. A lot of competition. So it’s not like oh, gee, I’m taking the competition away. You got a lot of places you can move. And I don’t care. As long as it’s within the United States, the borders of the United States. There will be a major border tax on these companies that are leaving and getting away with murder.
Legislators on both sides of the aisle agree that immigration reform is necessary. In the Trump gig economy, this issue will become more prominent. However, an overly broad and sweeping ban could hinder business and economic performance. Immigration is vital to a productive society. As we wrote in October, immigration fosters diversity and opens companies to fresh perspectives that spur innovation. Atlantic Magazine also explored how immigration has proven to be a revitalizing force in the U.S. labor market:
From 2006 to 2012, more than two-fifths of the start-up tech companies in Silicon Valley had at least one foreign-born founder, according to the Kauffman Foundation. A report by the Partnership for a New American Economy, which advocates for immigrants in the U.S. workforce, found that they accounted for 28 percent of all new small businesses in 2011.
Immigrants also hold a third of the internationally valid patents issued to U.S. residents, according to University of California (Davis) economist Giovanni Peri. In a 2012 article published by the Cato Institute, the libertarian (and pro-immigration) think tank, Peri concluded that immigrants boost economic productivity and don’t have a notable impact—either positive or negative—on net job growth for U.S.-born workers. One reason: Immigrants and native-born workers gravitate toward different jobs.
In terms of the gig economy, Trump’s border-crossing penalties could influence companies to hire significantly fewer traditional employees. That means they will rely more heavily on contractors, freelancers, independents, temps, consultants, part-time workers and others. Businesses relocate to mitigate overhead costs for facilities, operations and labor. If they are pressured to operate on an exclusively domestic basis, they will look to cut costs elsewhere -- especially publicly traded organizations seeking to maximize shareholder value in fiercely competitive markets.
Mr. Trump’s stated goal is to preserve American jobs. Yet, this move may not save the kinds of jobs traditional workers would envision. Containing overhead remains one of the most appealing aspects of contingent work to employers. And with the possibility of higher operating costs, businesses may find themselves dramatically increasing the role of complementary talent.
Greater Reliance on Contingent Workforce Programs
According to economists at the National Bureau of Economic Research (NBER), 15 percent of the workforce is now populated by contingent talent: agency workers, on-call workers, contractors, independents and freelancers. In fact, almost all net job creation between 2005 and 2015 came from “alternative work arrangements” rather than traditional employment.
As we noted last week, the gig economy abounds with opportunity. More Americans are choosing freelancing to supplement their incomes, or as a regular career option. Up to 55 million people, or roughly 35 percent of U.S. labor, plan to freelance. Over 80 percent of traditional talent expressed a desire to “do additional work outside of [their] primary job if it was available and enabled [them] to make more money.”
David Weil, Obama’s wage-and-hour enforcer, also sees the value. “I think it’s terrific we have agile new businesses on the web,” he told Fast Company’s Ben Schiller. Weil also pointed out some of the ongoing challenges.
“He’s seen restaurants fire kitchen staff only to rehire them through a third-party firm,” Schiller writes. “He’s seen construction companies compel workers to become 'member/owners' of their own limited liability companies, thus losing federal and state protections. And he’s seen the retail industry increasingly shift from paying workers in stores to contracting e-commerce deliveries to outside firms.”
Still, Weil believes that regulators, legislators and businesses can find a creative solution that “ultimately gets back to the principles of protecting workers in a way our laws have always stated.”
Building a Better Platform for the Platform Economy
Portable Benefits
Weil’s primary recommendation is a portable benefits program for on-demand and contingent talent. As Schiller explains, these are “systems that could make switching between jobs and projects easier, allowing workers flexibility while prorating contributions based on hours put in. (New York politicians have been exploring such ideas and could bring proposals to vote this year.)”
Steven Hill, a senior fellow with the New America Foundation, drafted a compelling plan for Individual Security Accounts (ISAs), predicated on existing models such as the multiemployer plans already in place for construction workers, health care professionals, miners and even some Silicon Valley independents between projects. Already mandated statutory costs are still covered, and the program would incentivize insurance companies to participate as providers of ISA plan elements, further reducing costs as economies of scale come into play.
Multiple employers pay a few dollars per hour that’s invested in the ISA. The amounts are prorated according to the number of hours worked, or a percentage for contracts based on the completion of work. All statutories are accounted for in the ISA, ensuring that the IRS receives its share.
Advocacy
In the States, freelancing in a sharing economy remains a gray area -- yet countries such as Canada and Sweden have already conquered it. In those countries, a new class of worker exists -- the “dependent contractor.” This concept is gaining traction. Technology leaders are already working to build the foundations of this labor category for state legislators and Congress to consider. A dependent contractor status would empower talent who are seeking independence while preventing organizations from taking advantage of that relationship. Although we as staffing professionals can’t make the laws, we can lobby for this progress through advocacy groups such as the American Staffing Association.
Compliance
With the gig economy, compliance becomes more imperative. Fortunately, contingent workforce leaders have been cultivating procedures for years, which extend beyond assignment length and breaks in tenure. Many have specific solutions for independent contractor qualification, worker classification, exempt vs. non-exempt policies, Statement of Work (SOW) management and more. Continuing to help clients maintain compliance will be mission-critical as the sharing economy expands.
Beyond that, contingent workforce leader should continue to fight for diversity, especially as big tech players still struggle with inclusion. And because some newly proposed policies could forgive certain levels of discrimination by removing protections, the staffing industry must continue to push for evolving diversity efforts.
Leading the Charge
Lawmakers, regulators and labor experts are working to revise outdated rules and design new structures. Contingent workforce leaders need to be an instrumental part of that dialog. Their role will expand with the gig economy, elevating their importance in curating the on-demand talent marketplace, job placement and oversight. As new employment shifts unfold and discussions continue about an updated social contract, staffing leaders should be at the front of the charge.