One senator thinks it's time to upend the 20th-century economic model, thanks to Uber

There’s a battle brewing for the American worker.

On the one side is Silicon Valley — companies like Uber, Handy, and Airbnb, which are upending the way the economy runs — and on the other is a sort of vague group of labour advocates and workers who believe that these companies are unfairly depriving the people who do work for them of a safety net by refusing to call those people employees.

On Thursday, the Labour Department released a 15-page document that concluded that many “independent contractors” in the economy are misclassified and should be considered employees.

That is a blow to companies like Uber.

But a lot of discussions about this “on-demand economy” are leading in an entirely different direction. People on all sides of the political spectrum are starting to talk about a third class of worker: the dependent contractor.

The dependent-contractor model recognises the flexibility of workers, such as Uber drivers, who can choose when and how much to work, but also builds in some of the worker protections that full employees get.

It’s a classification that already exists in some countries, like Germany and Canada, but would require an overhaul of the way we look at worker protections here. An article in The Wall Street Journal lays out the issues:

Employers would need explicit guidance about which protections would be extended from the patchwork of laws that currently govern employment — from the right to unionize, to minimum-wage and overtime eligibility under the Fair Labour Standards Act, to Occupational Safety and Health Administration rules and antidiscrimination statutes.

And an overhaul like this would need to be taken on by Congress, according to Virginia Sen. Mark Warner (D). Warner, who was an early player in the mobile-phone business and has spent more time as a venture capitalist than as a politician, talked about these issues Thursday in an interview with Business Insider.

“I don’t have a full-fledged proposal at this point, but the old 20th-century model doesn’t work,” he said. “That’s yesterday’s thinking — there are a whole series of people who don’t fit neatly into those categories.”

The problem, he said, is to figure out how to deal with this new sector of the economy, which is growing rapidly, but not “squash the innovation” going on in Silicon Valley. This is a thorny issue for politicians and regulators. On the one hand, you want to protect workers, but on the other, you don’t want to over-regulate a fledgling industry before it has time to develop.

Warner thinks it is time, though, not least because people have started suing to get answers. This is where Congress needs to step in to clarify matters, he says. “These platforms that connect people, they don’t want to have 50 different answers coming from 50 different litigations.”

His ideas seems to revolve around public-private partnerships like the Affordable Care Act’s healthcare exchanges, where outside companies offer insurance for things like workers’ compensation and disability insurance, and then each worker is free to pick an option. He also likes the idea of an hour bank, where a third party keeps track of how many hours a person works every month, then they qualify for insurance based on those hours.

What about universal basic income? That idea — that every adult should be given a small amount of money so their basic needs are met and they can focus their working hours on what they really want to do — has proponents on both the libertarian right and the socialist left. Albert Wenger, a partner at venture-capital firm Union Square Ventures, floated this idea as a solution in a blog post earlier this week.

Warner said that he knew about this argument. “I don’t think that’s where our political system is moving the short term,” he said. “I’m not ruling that out, but that’s not where I think this debate is going to start.”

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