Gig Workers' Safety Net Gap: The Case for Portable Benefits

Roughly 75 million Americans — 46% of the workforce — now perform some form of independent work each year, according to industry tracker MBO Partners, yet most of them receive no employer contributions toward health coverage, Social Security, unemployment insurance or workers' compensation. That gap is the core compliance and policy problem behind a renewed push for "portable benefits," a proposal that would require every hiring business to pay into a benefits account that follows a worker across jobs.

The scale of the shift is measurable. The Bureau of Labor Statistics counts about 12 million independent contractors — 7.4% of 162 million US workers — plus another 2.8 million on-call workers, or 1.7%. Together that exceeds 9% of the total workforce under the BLS's narrow definition. Broader definitions push the estimate far higher, from 16.5 million to more than 30 million, depending on whether researchers count occasional side gigs and secondary jobs. MBO Partners also found that 22% of independent workers now treat that work as their primary full-time career — more than double the 10% who did so in 2019.

Why employers lean on the contractor model

The financial incentive is concrete. An employer can cut labor costs by roughly 30% by classifying a worker as a contractor rather than an employee, evading contributions for health benefits, Social Security, Medicare, unemployment insurance, workers' compensation, lunch breaks, paid sick days and vacation leave. A McKinsey report cited in the analysis found that independent contractors are paid 20-30% less than employees doing comparable work.

The human cost surfaces in specific cases. Many Uber drivers earn below minimum wage once vehicle expenses, gas, maintenance and unpaid waiting time are counted, and Uber, as the hiring platform, carries no obligation to provide healthcare or safety-net contributions. On Fiverr, where micro-gigs start at $5, one worker completed 27 orders and earned $176 in total. "I've seen panhandlers get more money outside of the 7-11," she said.

The pattern extends into conventional manufacturing. Chris Young works an assembly line at a Nissan plant in Tennessee, building the same Infiniti SUV as Nissan's direct employees. He works for Yates Services, a private contractor supplying a majority of the plant's workers, and earns half the salary with less job security and fewer benefits. Some temps have worked at the same company for as long as 11 years — the origin of the term "perma-temp."

What would portable benefits change?

The proposal works like this. Each business that hires an independent worker would contribute a set amount above the worker's wage, prorated by hours worked. Those contributions would flow into an Individual Security Account, or ISA, tied to the worker rather than the employer. The accounts would route money into existing federal and state programs — Social Security, Medicare, unemployment insurance and workers' compensation — as well as health coverage and possibly paid sick days and vacation, with the worker also contributing through deductions, much as regular full-time employees do today.

The mechanics resemble systems already in place. A hypothetical worker, Donna, employed 20 hours a week by a hairdresser, contracting 10 hours with TaskRabbit and driving 10 Uber shifts, would accrue 50% of her benefits from the hairdresser, 25% from TaskRabbit and the remainder based on her Uber wages, with each company depositing funds into her ISA. The design parallels how Social Security and the Affordable Care Act track accounts by personal ID number across multiple employers.

Where the political coalition stands

The idea has drawn unusual cross-partisan backing. Forty business, government, labor and NGO leaders from the right and left have endorsed a portable safety net as a necessary foundation for the 21st-century economy. President Barack Obama endorsed portable benefits in his 2016 State of the Union address. Uber and Lyft supported legislation in New York, Washington and New Jersey.

That support proved shallow. The bills died in all three states after Uber and Lyft offered a contribution of only 2.5% of a worker's wage — far below the roughly 20% advocates say an adequate safety net requires.

What are the implications for HR?

For people-process leaders, the proposal would eliminate the classification fights that now drive much contractor-related litigation, because all workers would carry coverage regardless of status. It would also remove the incentive to replace employees with cheaper contractors to undercut competitors, a dynamic the analysis calls a race to the bottom. Businesses across an industry would face identical contribution rules, so no single employer would lose competitive ground, and the analysis argues companies could pass costs to customers — the largest pool able to absorb them, and in many cases the same workers receiving the benefits.

Advocates also frame portability as particularly urgent now, citing the Trump administration's deep cuts to Medicaid, Medicare, SNAP and other programs, which they say have increased the affordability burden on individuals and families that a portable safety net would help relieve.

The author of the analysis, Steven Hill, was policy director for the Center for Humane Technology, co-founder of FairVote and political reform director at New America. With independent work now a primary career for more than one in five participants, and state legislatures already having tested — and abandoned — portable benefits bills, the next legislative session will show whether the 2.5%-versus-20% funding gap can close enough to turn the framework into law.