Why the Government Won’t Provide the Social Safety Net of the Future

Or, Why social enterprises need to step up, and stand up, for all of us

The way we work is changing. There are debates over how fast it’s changing but there is general consensus that things are changing. Very few of us will be working 9–5 for the same, single employer for most of our careers in 20 years’ time. I believe that this shift in the nature of work has far reaching implications. Arguably the biggest of these is what will happen to the social safety net. As we shift from a one-to-one to many-to-many relationship between organization and worker, the government no longer becomes the best organization to provide social security to this portion of the workforce. The talent platforms that will act as intermediaries will be better placed to provide this security. To fulfill their promise to their constituents, governments should be looking to support socially conscious platforms who will fulfill this role.

Ever since FDR and the New Deal — in the United States at least — a central role of government has been to provide social security to its citizens. In fact, the definition of ‘social security’ is any government system that provides monetary assistance to people with an inadequate or no income. There may be differences of opinion in how far governments should go with this provision, but let’s all agree that a society not letting its poorest citizens starve is a good thing.

Economists have written countless academic papers on how this should be done. What matters for us is the main tool governments use to provide this monetary assistance. Unemployment Insurance.

When that term was introduced in 1935, the working population could be (somewhat) neatly divided into the employed and unemployed. A single employer was 100% responsible for the livelihood of each of their employees. This made it easy for the government. They could protect the employed through regulation of their employers (think minimum wage rules). They could protect the unemployed through unemployment insurance.

Photo by Jomar on Unsplash

Seemingly simple. But remember the countless economic papers all focused on making this system work.

Fast forward one-hundred years. Imagine, it’s 2035 there is no clear delineation between the ‘employed’ and ‘unemployed’. In fact, both terms were dropped from the dictionary in 2028 for being archaic. Some are still unable to work, but the rest of the working population are independent contractors. They work however many hours they like and rarely for a single client. They are all affiliated with online talent platforms that feed them suitable work they can complete from anywhere with an internet connection (which in 2035, is just called anywhere). There is a huge reduction in the number of people earning no income, but an explosion in those earning inadequate income.

The ghost of FDR appears to provide social security but faces a problem. These people don’t qualify for unemployment insurance — some of them are working for six companies for heaven’s sake. Time to regulate these shady companies then. Well chances are the government doesn’t know who they are. If they did (by making tax forms 100x more painful) then what? Assuming they all pay a fair wage, there would be no fair way to force any of these companies to pay more to an individual worker. Doing so would fly in the face of the specialization and utilization trends that led to increased efficiency for businesses and greater freedom for workers. That doesn’t score a government any votes.

As the workforce shifts from single-employer to multiple-client, there is no single point of accountability to ensure worker welfare, other than the worker themselves. As the ghost of FDR showed, government support on an individual basis will be an administrative nightmare.

If the government were the only actor that could provide social security then this administrative burden would have to be overcome. But thankfully there is another player that can take on this role and relieve the government of this burden.

Government isn’t best placed because it is coming from a position of relative information asymmetry. The information relevant to worker welfare in 2035 will be held by the online talent platforms acting as intermediaries between the workers and their clients. They know exactly how much each of their workers is earning each month. Which clients they are working for. What skills the worker possesses. The demand for these skills now and in the future. Which skills are in high demand should it look like a worker would benefit from reskilling.

Think of the paperwork it would take for the government to find out all of that information.

Photo by Christa Dodoo on Unsplash

These platforms also have all of the instruments to provide social security. They can ensure all clients on the platform pay a fair rate for the work conducted, as a government could. But they can also provide a salary and benefits to the workers despite them conducting piecemeal tasks. This is because they will have sufficient scale to smooth out the variance that each individual will face. A worker on the platform can receive sick pay as the platform knows they will be able to pay it back at a later date. A platform can fund the reskilling of a worker knowing the worker will be able to pay it off at a later date.

That isn’t to say there is no role for government in the transition to this state of the world. There will still be the cases of people who can’t work or who do not receive sufficient work. Here there is a role for the government and — if the demand for human work becomes low enough — a form of universal basic income. I’m sure I will write in more detail on that topic at another time, but for now I will just say that I think the most effective government program would interface with the talent platforms to understand exactly who needs the support.

In the nearer term, the government should feel obliged to regulate these emerging online talent platforms rigorously. When they have the potential to play such a pivotal role in the society of the future, we need them to be up to the task. Too many of the existing platforms have been seen to be exploiting their workers in some way. We need platforms that are worker-centric and mission-driven. The best thing government can do is make sure those platforms succeed.

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