Report

Wage insurance in an era of non-traditional work

31 Aug 2016
Description

As inequality has markedly risen over the past few decades, so has economic volatility. Abundant research demonstrates that both individuals and households have faced much greater instability in income since the 1970s – a trend dubbed by Jacob Hacker as the “Great Risk Shift.” Income insecurity can lead to problems and crises like bad credit and losing one’s home, which then further exacerbate a family’s economic vulnerability. As the market restructures, relying on more independent contract work than ever before, we expect these vulnerabilities to be exacerbated even further.

The moniker “1099 economy” refers to the trend in the American labor market in which companies are contracting independent workers for short-term arrangements rather than hiring full-time workers. Jobs aren’t just being replaced with lower paying jobs, but instead are being replaced with what are essentially non-jobs – contracts that come with no tenure, security or safety net.

As our economy endures seismic changes, policymakers are beginning to explore compelling ideas to help Americans adjust to the 1099 economy. After President Obama elevated the idea in his last State of the Union address, wage insurance has attracted the attention of policy wonks, who believe it could help displaced workers transition quickly back into the job market. But is wage insurance a useful policy idea for a job market that is increasingly reliant on 1099 employment?

This paper argues that while wage insurance may not be suitable as a long-term support system for 1099 workers, it could be extraordinarily helpful as transitional assistance to workers who have lost their full-time jobs and are moving into 1099 work. Ultimately, a full safety net for 1099 workers will require the development of a number of new protections and programs, such as universal portable benefits. We recommend further research and exploration of wage insurance as part of a potential suite of policy options for helping the 1099 worker develop and maintain economic security in the new economy.

Publication Details
Issue: 
Fresh Perspective Series
Access Rights Type: 
Open
Language: 
English
Published year only: 
2016
9
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