Something interesting is happening in the American labor market, and lawmakers are paying attention.
On the Hill, Senate HELP Committee Chair Sen. Bill Cassidy’s (R-La.) new Unlocking Benefits for Independent Workers Act is gaining bipartisan attention, and similar efforts are moving forward in the House.
Many Democrats and Republicans agree that it’s time to remove what are essentially old legal loopholes that deny access to affordable benefits to millions of self-employed Americans.
But there’s something more to the idea: Portable benefits could help all workers to better leverage their own economic power.
At the heart of this potential shift is something often overlooked or even scoffed at: More Americans are earning income from multiple sources.
Whether it’s driving part-time for Uber, running an online business, freelancing or teaching on the side or doing high-level consulting, the rise of the multi-earner economy is changing how workers think about security and leverage.
Critics like to dismiss these opportunities as inferior, but with plenty of open jobs in the U.S. economy, it seems that large numbers of workers genuinely prefer less dependency on a single employer and less of the power imbalance that comes with it.
That’s why I find the negative narrative about independent work puzzling. For some workers, it truly might be a symptom of economic precarity. For others, it’s clearly empowering.
By building multiple income streams, they reduce their reliance on any one company. That increases their bargaining power.
Indeed, the Economic Policy Institute has published extensively on how low quit rates are evidence of an imbalance called “monopsony power.”
Workers feel stuck because the cost of leaving is too high, and it means employers can underpay them. According to the institute’s research, a 10 percent pay cut causes only about 20 to 30 percent of workers to quit.
That’s not due to complacency. Employer-sponsored health insurance plays a major role. One survey found that 73 percent of workers cite employer-provided coverage as a “very important” reason for staying with a job.
Stability is important, but dependency can act as a trap. For chronically ill workers reliant on employer-provided coverage, job mobility drops 40 percent. It drops by 20 percent when workers become vested in employer pension plans.
These are people acting in their own best interests. But imagine a world where benefits don’t have to be tied to a single job.
This is the promising bipartisan movement that Cassidy and other legislators are instigating.
There are solid reasons why employer-sponsored benefits emerged and will continue — like group-based risk pooling and lower administrative costs. The problem is that the law artificially restricts these advantages to traditional W-2 employment relationships.
Tax incentives and regulations all favor employer-sponsored plans, restricting independent alternatives or making them prohibitively expensive. While the Affordable Care Act created individual marketplaces, it didn’t eliminate the advantages that make employer plans more affordable.
Portable benefits — including the necessary tax reforms — could help create viable alternatives that harness the same structural advantages without requiring job-based dependency.
That would allow workers to be more flexible and diversified without losing access to the financial tools they need to live securely.
Those who maintain one primary workplace — which includes the majority of independent workers, who merely supplement income — would gain real power simply by having more benefit options.
Others could use the new safety net to explore lucrative independent opportunities more seriously. While the dominant narrative paints gig work as low-wage and unstable, most people who supplement their income with independent work are high earners. They aren’t stuck in gig work — they’re opting in because they can, and because the opportunities are worth their time. Portable benefits could afford the same opportunities to more people.
Of course, this doesn’t mean the independent-work system is working perfectly or that portable benefits would solve everything. Some independent contractors remain vulnerable and deserve thoughtful policy protections.
It’s about fixing one obvious hole in America’s labor system — imagining a labor market where workers aren’t stuck at one company for basic financial security.
And it’s about exploring what true freedom at work might look like — where peace of mind isn’t a privilege controlled and granted by your employer.
Liya Palagashvili is a senior research fellow at the Mercatus Center at George Mason University and author of “Flexible Benefits for a Flexible Workforce.” She recently testified before Congress about portable benefits.
