Potrable Benefits - April 2025

Overview: For the last seven decades, the onus of providing basic benefits and protections has been assigned to employers. The New Deal, wage controls during WWII, and various acts of Congress leading up to the Great Society led to employment-centric benefits as well as guaranteed protections for workers. These benefits and protections include retirement savings, disability pay, unemployment compensation, and workplace safety, which offer value to employees beyond mere compensation. Since the New Deal era, the protections afforded to employees have expanded with the introduction of various laws like the Affordable Care Act, which expanded mandatory benefits to encompass health coverage. In addition to these legally mandated benefits and protections, voluntary benefits (also called fringe benefits) are similarly tied to employment, and employers often receive preferential tax status for contributions to such benefits. However, this decades-long practice of shifting the burden to employers has led to the unintended effect of increasing the cost of accessing basic coverage as an unemployed individual or independent contractor. This mechanism has also created a potent barrier to people seeking new professional opportunities, not only because of the costs involved for a potential employer but because of the cost to an employee when switching jobs and losing their existing benefits. Even after continued innovation, static employer-offered benefits are still predominant. Moreover, innovations in the labor market like the gig economy, with its emphasis on entrepreneurship and self-employment, create a gap in coverage for nontraditional workers. This gap is not a market failure but shows that the static mechanism for the provision of benefits relied on for decades is no longer sufficient. One solution that is likely to close the gap for gig workers is Portable Benefits.

Background: Portable Benefits are worker benefits that are not tied to any particular job or company, meaning a worker “own[s] their own benefits.” This is different from traditional arrangements where benefits are attached to a specific job. Portable Benefits arrangements could be utilized by all types of firms, with or without dedicated employees on payroll. But in the gig economy, benefit portability is particularly well-suited for workers who may switch between multiple jobs in a single week rather than finding opportunities through a single employer or platform. The three core components of a portable benefits system are:

Portability – Again, workers’ benefits are not tied to any job or company as they have been traditionally. Our current system increasingly does not match the reality of work for many in today’s economy who may derive their income from multiple sources simultaneously or who may regularly switch jobs or employers. A worker should be able to select and maintain their benefits from year to year, and their protections should not depend on the “gig” they are currently undertaking.

Pro Rata – Each company contributes to a worker’s benefits at a fixed rate depending on how much he or she works or earns. People are earning income from a variety of sources, so any model of Portable Benefits should support contributions from companies that can be pro-rated by dollars earned, jobs done, or time worked, covering new ways of micro-working across different employers or platforms. For example, if a person works an hour for a delivery platform and an hour for a housecleaning platform, both will contribute an equal amount toward that worker’s benefits on a per hour basis.

Universal – Benefits cover independent workers, not just traditional employees. All workers must have universal access to the critical benefits they need. Today, it can be difficult if not impossible for an independent worker to access a critical protection such as disability or workers compensation insurance. Other benefits of employment, such as paid time off and unemployment insurance, simply don’t exist for independent workers. Any viable benefits system for the new economy must cover individuals working outside of a traditional employment relationship.

A Portable Benefits system could apply to any type of worker, though it is designed for workers who do not have access to affordable benefits, namely independent contractors and part-time workers. The system should likely provide at least a core of health insurance, retirement, and insurance for injured workers, but could be expanded to cover optional types of insurance (like vision, dental, life, etc.), paid time off, education and training, and potentially even novel products like income-smoothing tools or wage insurance. It could also form the basis of an effective and resourced worker voice organization in an era where traditional collective bargaining is increasingly inaccessible to most private sector workers.

Current Political Environment: Traditionally, the labor community has – correctly – seen the gig economy as an existential threat to their business model. They have reacted by simultaneously pushing back on the gig economy legislatively and politically (AB 5 in California and expensive ballot efforts in both California and Massachusetts) while ramping up efforts to organize the workers themselves. They view Portable Benefits through the lens of those fights and have been in fervent opposition to the concept because it further undermines the attractiveness and benefits of joining a labor union. As Portable Benefits continue to gain traction, the unions have softened their rhetoric somewhat. In reaction to federal legislation that has been introduced in the last two Congresses by Sen. Mark Warner (D-VA), the National Employment Law Project (NELP), a leading labor advocacy organization, stated “a properly structured, widely accessible, and well-funded portable benefits program provides working people with the freedom to choose the jobs that best suit their needs or start independent businesses without worrying about access to critical benefits, thereby strengthening worker mobility and building worker power. We urge Congress to center the needs of workers—not powerful corporations seeking to degrade workplace standards – when designing these programs.” On the other side of the political divide, Republicans have increasingly embraced Portable Benefits and the only two laws enacted so far this year were in deep red Alabama and Tennessee. The Republican angle is twofold – they also correctly view Portable Benefits as an existential threat to the labor community which is reason enough for them to champion them – but secondly, it is part of the increasing policy shift by present-day Republicans to reach out to working class voters and involve themselves in workplace benefit issues – just as they have done with paid leave. Additionally, private companies like DoorDash and Shift have gotten into the act and created pilot programs in partnership with the governors of both Pennsylvania and Georgia.

The direction of the modern gig economy has made programs like Portable Benefits inevitable – it was always a question of when, not if. But the “when” has come faster than most experts predicted, likely in large part because of the COVID lockdown. Over the last couple of years, the issue has reached an inflection point and more states are going to go down this road ultimately leading to calls for federal action, namely from the business community.

Summary: Overall, society stands to gain from a system of Portable Benefits and protections because this new approach could forge what may be the future of the social safety net. However, there is not universal agreement on many of the fundamental questions about Portable Benefits and some advocates have raised concerns about whether implementing this type of system would create a second-tier safety net while further incentivizing companies to shift low-income employees to less stable work arrangements. Regardless, the conversation is now front and center and ripe for smart engagement by the employer community. While short-term costs will look differently to each employer, the long-term benefits should not be overlooked. For entry-level employers in particular, the issue is rife with opportunities. First, they have an opening to ensure their entire workforce has some level of safety net protection making them advocates for their employees instead of adversaries – and removing the opportunity for the labor community to play that role. Secondly, from a policy and political perspective, it gives those industries something to be “for” which is a rarity. And lastly, it removes a significant reputational cloud around the business model that hampers their ability to be seen as honest brokers and responsible employers in the eyes of elected officials, policy makers and opinion leaders.

Appendix:

Resource Library:

National Conference of State Legislatures – https://www.ncsl.org/labor-and-employment/portable-benefits-for-independent-contractors-a-framework-for-state-policymaking

Aspen Institute – https://www.aspeninstitute.org/publications/portable-benefits-in-action-a-roadmap-for-a-renewed-work-related-safety-net/

James Madison Institute – https://jamesmadison.org/wp-content/uploads/IssueCommentary_Benefits_Dec2024-web-v03.pdf

Mercatus Center – https://www.mercatus.org/research/policy-briefs/policy-spotlight-how-states-can-support-flexible-benefits-independent

Libertas Institute –