Shared Security: A New Deal for the New Century

July 6, 2015

If Social Security, the minimum wage, unemployment insurance, and the 40-hour workweek laid the foundation for the middle class in the 20th century, what would be the equivalent for the 21st century? The odd couple of a billionaire entrepreneur and a labor leader have come up with what could be a breakthrough proposal for rebuilding the middle class.

Nick Hanauer, who made his fortune as an early Amazon investor, and David Rolf, the head of an SEIU local that has successfully organized tens of thousands of home care workers, detailed their plan for Shared Security in Democracy Journal.  The proposal aims to restore the foundation of the middle class: economic security.

Hanauer and Rolf create a fictional young worker named Zoe to personify how working people in the new economy live in constant economic insecurity. Zoe works part-time as a hotel manager and supplements her income driving for Uber, working as a gardener, and renting her apartment on Airbnb. Still, she has no benefits and struggles to pay the rent and keep her car running. She doesn’t have the time or money to finish her college degree and wonders whether it would be worth the loans even if she did. When Zoe rents out her apartment, she stays with her parents, who also did not go to college. But her parents, who have had regular full-time employment over the course of their lives, look forward to a retirement made secure by a modest pension, some savings, Social Security, and Medicare.

As Hanauer and Rolf write, “Zoe’s parents entered the workforce with the expectation that hard work would be rewarded with decent pay, improving prospects, and a comfortable retirement…This was the social contract of the 1950s, ’60s, and ’70s…But for Zoe’s generation, this contract no longer exists.”

The new 21st century social contract they propose is based on giving Zoe’s generation middle class security, which they emphasize is the engine of our economy.  Hanauer and Rolf write, “the middle class is the source of all growth and prosperity in a modern, technological economy and economic security is the essential feature of what it means to be included in the middle class.”

Just as FDR’s New Deal was founded on raising labor standards and providing social insurance, Hanauer and Rolf’s plan is based on Shared Security Standards and a Shared Security Account. The two combine to modernize basic labor standards and to extend existing and new social insurance to all workers, including part-time employees and those who employers consider independent contractors.

The new labor standards would include: a livable wage (a higher minimum wage) and guarantees of overtime pay; pay equity; fair scheduling of work; and the right to use paid sick time, family leave, and vacations, which would be financed from each employee’s Shared Security Account.

The breakthrough innovation in the proposal is establishing a Shared Security Account for every worker. Each employer would pay the share of benefits earned by each worker into those workers’ accounts based on a 40-hour week. In other words, an employer would pay all the benefits for a full-time employee while paying half the benefits for someone who works for that employer 20 hours a week.

Each employer would pay its share of existing benefits required by the federal government or states, including Social Security, Medicare, an employer contribution toward health care, unemployment insurance, workers’ compensation, and disability. In addition, the employer would be required to pay for new benefits, including paid sick days, family leave and vacation, and a contribution to a 401(k)-type retirement account.

The authors rightly celebrate the positive impact of their proposal for American workers. It would turn the trend toward contingent, part-time, temporary, and shared work from a recipe for continuous financial insecurity to a foundation for middle-class security.

What they don’t explore is how their Shared Security system would significantly slow down the work trends that their proposal addresses. Looking again at Zoe, the hotel management company keeps her at 29 hours a week to avoid paying benefits. But when that financial advantage is taken away, or reduced significantly if the company voluntarily offers a higher benefit level to full-time employees, the company would be much more likely to employ Zoe full-time. In doing so, the company would gain the advantages that come with a full-time employee: less need for training, lower turnover, a better work attitude, and company loyalty.

As The New York Times reported last month, we are already seeing some startup tech companies, which Hanauer and Rolf say use the contingent model to support innovation, realizing that it makes better business sense to hire full-time employees. For both low-wage employers and startups, Shared Security will lead firms to use the contingent work model more when it makes sense for delivering a better product and less as a way to cut labor costs.

All of which reinforces the authors’ potent economic and political analysis, which is that assuring that every job is a good job is not only fair, it is the driver of economic growth. Raising wages, providing time to care for yourself and your family, and having affordable health insurance and retirement security is not just about being fair, and it’s not just about rewarding workers for their contributions to a business. It’s the exact opposite of conservative economic theory. At its root, it recognizes that people with the security of a good, middle-class job drive our economy forward.