There’s a promising policy development sweeping the nation: portable benefits.
Rather than tethering benefits to a single employer, these proposals ensure that benefits — such as health care, dental coverage, and retirement savings — travel with the individual, not the job. This is a vital innovation for today’s labor force, in which nearly 60 million people choose independent contracting over traditional, full-time employment.
For half a century, lawmakers insisted that benefits must be tied to W-2 employment. This thinking is rooted in a bygone era of 9-to-5 jobs. It’s also out of step with the preferences of millions of workers who value flexibility and independence.
While the outgoing administration went out of its way to cater to the demands of the union bosses who insist on keeping everyone in last century’s work arrangements, and the new administration seems union-curious, to say the least, some states are pushing back and embracing these more modern approaches.
In 2023, Utah passed a law that removed the presence of benefits as a means of determining if someone was an independent worker or a W-2 employee. This allows organizations to give benefits to independent workers without fear that they are breaking the law. After the law was passed, Target’s delivery service Shipt launched a pilot benefits program in Utah, partnering with the benefits company Stride. In December of last year, Lyft joined the movement and launched a pilot program, contributing 7 percent of a driver’s quarterly earnings into a flexible benefit fund.
It’s not just Utah that’s acknowledging the importance of these portable benefits programs. Last April, DoorDash launched a portable benefits pilot program with the support of Pennsylvania’s governor. This program allowed DoorDash workers to receive deposits of 4 percent of their earnings into a flexible benefit fund. This program is also administered by Stride.
There is still plenty more to be done to protect independent workers. My colleague Liya Palagashvili and her co-author Jonathan Wolfson outline some ideas ranging from equalizing tax treatment between self-employed workers and traditional workers to reforming health insurance policies to make it easier for workers to access health insurance.
Critics of these programs believe that it would be “better” for these workers to be W-2 employees, but this is a misguided and paternalistic view. The vast majority of these workers do not want to be W-2 employees and value the flexibility that independent contracting gives them. Despite lauding themselves as “pro-worker” they are only “pro–traditional work” — an archaic view of work indeed.
When states have attempted to forcibly reclassify workers as employees, it has backfired. In California, the implementation of Assembly Bill 5 resulted in fewer independent work opportunities but it did not translate into more employees being put on payroll. In other words, workers lost their contracting jobs but did not get rehired full-time.
We shouldn’t tolerate well-intentioned but misguided regulations that take away flexible work without producing equivalent full-time jobs. It’s time we let workers have the work style they choose for themselves rather than force them into a model that many of them have left.
Thankfully, the “portable benefits revolution” has only just begun. States continue experimenting with reforms that recognize and support independent contracting. There’s growing awareness that the federal government, too, should foster policies that enable workers to thrive on their own terms.
This is the real pro-worker agenda: acknowledging and supporting the changing nature of work, rather than clinging to a decades-old model that no longer serves many Americans. Let’s ditch the idea that only one way of working is “valid” and instead explore how to expand freedom and prosperity for all. Three cheers for portable benefits!