The Benefit System Must Be Fixed for Gig Workers
At the beginning of the pandemic, the federal government made unemployment benefits eligible for so-called gig workers (also called non-traditional workers) for the first time in history. It was a tremendous achievement — and one of many new policies and practices designed to support workers during a time of economic turmoil.
But as we review the impact of these new programs, it’s become increasingly clear that they often didn’t live up to their lofty promises. In fact, despite the fact that an estimated 57.3 million U.S. workers are in non-traditional employment relationships, our systems are still not designed to serve them — and we aren’t keeping up with the pace of change.
Providing safety net benefits to non-traditional workers has presented countless administrative challenges for states in the past two years. One of the biggest challenges was making sense of and verifying income from gig work, which can often be generated from multiple sources, multiple times, and sometimes all in one day. For instance, a driver for a rideshare company earns money from each ride, but they never receive a W-2 form that aggregates all that income into a single number — which means that to qualify for UI, they have to send every single ride receipt (often as a stack of printed pages!) to their state workforce agency. As a result, it can take months for these workers to actually receive the benefits for which they’re qualified — if they receive them at all.
Over the last year, state leaders have begun working to address this challenge by automating the process of verifying income in the administration of unemployment benefits. Alabama and Louisiana both now use a tool known as an “income passport”, developed by The Workers Lab and the financial intelligence platform Steady, to make the process of administering unemployment benefits easier and more efficient for both government staff and non-standard workers in these states. The technology allows workers to consent to safely and securely connect their financial institutions and payroll accounts to comb through income and expenses related to work. The income data is validated to only include work-related transactions. The technology then provides states with the required information, in each state’s preferred format, to process claims.
As pilot programs in these two states wrap up, there’s a lot we’ve learned about how automating the process of verifying income can have a transformative impact on economic mobility in this country.
First, automatic income verification reduces the potential for fraud. Because income data is safely and securely pulled directly from trusted sources and then transmitted directly to the state, it leaves very little room for fraudulent activity. The data from these sources of truth also allows for the detection of potentially fraudulent activity through machine learning algorithms. In Louisiana, Steady’s data found that 100% of unemployment applicants who did not complete their income passport either would not have qualified at all or turned out to be fraudulent.
Second, the tool also increased accuracy in the determination of benefit amounts. Because it can tailor income reports to match states’ specific formatting and time period reporting requirements, the income passport technology offered a level of granularity that enabled states to more accurately provide workers with the funds they are owed. It also provided gig workers with unprecedented access to their past income from multiple sources — in turn, giving them more control over how that income is reported.
Last, the technology makes the process efficient in ways that have not previously been possible. Instead of waiting months to receive benefits, applicants were often getting unemployment insurance in their bank account in a matter of days or even hours. Tools like the income passport enable states to reduce human error in the determination of benefits and increase throughput, while also mitigating against the creation of large claimant backlogs that produce unnecessary overhead. Gig workers, in turn, receive a simplified user experience that means they do not have to remember, organize, and report income from non-standard work.
It’s important to note that these new approaches hold promise beyond temporary pandemic assistance programs. State leaders are now working to automate the verification of income from gig work across the entire menu of public benefit programs (e.g., SNAP, Medicaid), in states all around the country. And the federal government has a role to play as well — helping to identify and evaluate potential solutions to prevent fraud and increase accuracy and efficiency in benefits administration; financially supporting states that want to test those new ideas; and establishing federal guidelines that incentivize states to adopt innovative, worker-centered technologies.
By leveraging worker-centered and worker-informed solutions, it’s possible to advance the speed and efficiency of benefits distribution in ways that help workers everywhere get the support they and their families need. Our experience shows us that automating the process of verifying income in the administration of unemployment benefits can be a win-win for workers and policymakers alike. The challenge before us now is to take what we’ve learned and expand it to help more workers navigate the path to economic opportunity.
Adrian Haro is CEO of The Workers Lab, a nonprofit venture fund that gives new ideas for and with workers a chance to succeed and flourish.
