LIKE MILLIONS OF other US workers, Charlie Burke and Mutwaly Hamid were used to getting up in the morning and putting in long days on the job. But when the coronavirus pandemic shut down huge parts of the economy, they weren’t just left out of work, they were left on their own.
As two of the nearly 9 million US workers considered self-employed or independent contractors, Burke and Hamid had no claim on unemployment benefits and quickly found themselves in an economic free fall. Burke, who runs seminars for sales agents and brokers in the real estate industry, says his income is poised to drop by 90 percent this month. For Hamid, the $1,000 or so a week he was making by driving up to 60 hours for Uber and Lyft has gone overnight to zero, leaving him unable to pay his rent for April.
The pandemic has exposed big holes in the country’s social safety net, openings that millions of people are now falling through. With nearly 10 million people filing unemployment claims in the past two weeks alone, the federal government is mounting an unprecedented emergency expansion of that safety net for workers.
The $2.2 trillion emergency CARES Act approved 10 days ago includes a $350 billion loan program for businesses and extends unemployment pay to self-employed workers, independent contractors, and others not usually eligible for such benefits. Unlike most workers, who are covered by basic protections including unemployment insurance, these people “operate a high wire act with no safety net,” said Mark Erlich, the former head of the New England Regional Council of Carpenters, who is currently a fellow at the Labor and Worklife Program at Harvard Law School.
For Burke and Hamid, the new federal aid can’t arrive soon enough. A bigger question will be whether the economic convulsions caused by the pandemic will lead to any permanent resetting of the safety net based on all the ways work has changed in the 80 years since the Great Depression gave rise to the unemployment insurance system.
“My hope is that we realize how constrained the current unemployment system is, that it is so inadequate in terms of covering the full range of workers we have now,” said Monica Halas, an attorney at Greater Boston Legal Services who specializes in unemployment law.
The CARES Act makes independent contractors like Hamid eligible for up to 39 weeks of unemployment assistance. Meanwhile, businesses like Burke’s can seek loans, which could be converted to outright grants, to keep their firms going. But as rent and other payments came due with the start of the month, both of them were struggling to figure out how and when they could apply for the expanded benefits.
The loan program for businesses that Burke is applying for got off to a rocky start on Friday, with participating banks overwhelmed by the surge of applicants and lots of confusion and uncertainty over the terms of the borrowing. For Hamid, the promised help is still on hold. Although the state waived the usual one week waiting period for standard unemployment benefits, it hasn’t opened the program to those who are self-employed or independent contractors, because the federal Department of Labor has yet to provide the eligibility guidance needed by states to begin processing applications.
When the first of the month arrived last week, “honestly, I did not make the payment,” Hamid said of the rent that was due for the house he shares with four others in Lynn. “I don’t have any other options. It’s really important for me to get money right now.”
ON THEIR OWN
The Massachusetts Academy of Real Estate, even with the economy’s ups and downs, has provided a good income for Burke since he launched the business in 2001. The affable 57-year-old, who lives in South Boston with his wife and 20 year-old-son, leases 1,600 square-feet of space in a Braintree office building where he conducts classes for those looking to become licensed real estate sales agents and brokers as well as continuing ed classes that those already in the business must take to maintain their licensing.
But the building is now closed to classes. “I’ve had people say go online,” Burke said of the idea of live streaming the seminars. “But people who don’t have money aren’t going to take classes.” On Saturday, he put together his first online class, via Zoom, but for a course that would normally draw 40 people he had nine.
“The ripple effect is huge,” he said of the ways the crisis is reverberating through the economy.
Burke’s son was diagnosed at age 10 with leukemia, which is in remission, but he is still being closely monitored by doctors at Dana-Farber Cancer Institute. Burke’s family health insurance premium is $2,850 per month. “It’s due today,” he said on Wednesday, “and they’re not going to say you don’t have to pay it.” Also due was his $2,500 monthly rent on the office space now lying dormant in Braintree.
Burke applied on Friday for a loan through the Paycheck Protection Program, part of the CARES Act set up to help small businesses. He’s eligible to borrow up to two-and-half times the business’s monthly income plus rent and utility costs for that time. Burke is the sole employee of the business, and the loan will convert to a grant if he keeps all employees on his payroll for eight weeks, but he’s still nervous about meeting all the requirements of the quickly rolled out program. If he gets the loan but it doesn’t end up getting converted to grant, Burke said, “I’m just in debt.”
For Hamid, a 31-year-old Sudanese immigrant, driving for Uber and Lyft for the past three years has provided enough of a foothold to support himself and regularly send money back to his family in Sudan. “I love driving for Uber. I like meeting different people,” he said. But that all changed over the span of a few weeks.
With most commerce and movement by people in Greater Boston at a standstill, there is little demand for ride-hailing services. Hamid decided to forego what little business there might be after considering the dangers of ferrying strangers around in his nine-year-old Camry. “I think it’s better than to go out and catch the virus or help spread it,” he said.
Ride-hailing drivers are treated by Uber and Lyft as independent contractors, not employees, a status that is being challenged in a number of court cases across the country. California enacted a new law last year that reclassifies many independent contractors as employees, but Uber and Lyft are resisting the designation.
The new California law is modeled on a 2004 Massachusetts statute prompted by a study showing rampant “misclassification” of workers in the state’s construction sector as independent contractors and not employees. The Massachusetts law has led to improvement in practices in the construction trades, but legal efforts have failed so far to get courts to declare that gig workers like ride-hailing drivers must be treated as employees.
Henry DeGroot, director of the Boston Independent Drivers Guild, an organization of ride-hailing drivers, said that status could have dire consequences amid the COVID-19 epidemic. “Drivers’ lack of access to paid sick time will almost certainly be responsible for driver deaths and passenger deaths,” he said. “That’s no joke.”
Boston labor attorney Shannon Liss-Riordan, who has battled against worker misclassification for 15 years, filed parallel federal lawsuits last month on behalf of Uber and Lyft drivers seeking an injunction that would declare them employees and therefore eligible for state-mandated paid sick leave. Attorney General Maura Healey filed briefs in support of the suits. Those petitions are still pending.
With pressure mounting on ride-hailing companies, Uber announced a program granting drivers two weeks pay, based on their average earnings, if they have a COVID-19 diagnosis or a doctor’s order to quarantine. But many drivers don’t have regular access to a health care provider, and the program doesn’t cover those who may be at high risk for COVID complications or who have other illnesses.
“I just got a message from a driver who has diabetes,” said DeGroot. “He said, ‘I’m really scared, but I need to make money. I’m going back out today.’”
Liss-Riordan calls the move by Uber “a PR smokescreen” to deflect attention away from their effort to block drivers from winning full employment protections. “They’ve been fighting tooth and nail on this. They have been arguing that they’ve created a new way of work for the 21st century that makes all the labor protections invented in the 20th century old fashioned and out of date.”
On Monday morning, Sen. Elizabeth Warren addressed an online rally convened by the Boston drivers guild calling for paid sick time for ride-hailing drivers.
“While you’re putting yourself at risk, the companies you work for are denying you basic job protections by misclassifying you as independent contractors,” Warren said. “I want to be loud and clear on this one: You are employees and you should have all of the rights and protections that come with that. These companies are boosting their profits by denying you basic protection, and it is putting your health and your economic safety at risk and it is putting the health and economic safety of your families at risk.”
STOPGAP FIX OR LONG-TERM CHANGE?
No one knows until the federal guidelines are issued how much independent contractors like Hamid will be eligible to collect under the CARES Act. Halas, the Greater Boston Legal Services attorney, speculates that it will be modeled after a federal program called Disaster Unemployment Assistance, first authorized in 1974, that has extended benefits to independent contractors and others in the aftermath of things like hurricanes.
Halas said getting the benefit program up and running on such a massive scale will be extraordinarily challenging. “It’s never been applied to a recession or to the entire country,” she said.
If it follows the disaster relief program model, she said, self-employed workers and independent contractors would be eligible for half the average weekly benefit in a state, which would be $268 in Massachusetts. That would be on top of the additional $600 per week that all unemployment beneficiaries will get under the CARES Act.
The share of the workforce laboring outside the traditional employment system is not huge. As of February, there were 147 million “wage and salary” workers and just under 9 million people who were self-employed in one way or another, said Paul Harrington, director of the Center for Labor Markets and Policy at Drexel University. In Massachusetts in 2018, the last year for which figures were available, there were 3.5 million wage workers and just under 200,000 people who were self-employed.
Though the share of full-time “gig” economy workers with companies like Uber or Instacart remains small, they’ve have had an “outsized influence on discussions because some see them as the workforce of the future,” said Erlich, the former carpenters union leader, who is a board member at MassINC, the public policy think tank that publishes CommonWealth.
State Sen. Eric Lesser, who cochairs the Legislature’s Committee on Economic Development and Emerging Technologies, says the coronavirus crisis has created an opening to rethink policies in an economy that has seen an erosion of traditional employment protections.
“Seventy percent of the US economy is services, yet we still have a social safety net based on the industrial employment model from 50 or 70 years ago,” he said. The emergency federal funding measures are an acknowledgement of that, Lesser said, and “it would be a tremendous loss to revert back to the way things were.”
Harrington, the Drexel University labor market specialist, said unemployment coverage has been expanded at various points, growing to include government workers and nonprofit employees in the 1980s, for example. “It wouldn’t stun me to see an expansion of the unemployment insurance system to include self-employed people,” he said of possible long-term effects of the coronavirus crisis. “A lot of these federal programs, they evolve over time, but they evolve with a lag. Things happen and then we adjust.”
But he points out that such an expansion would also mean having those workers and firms pay into the unemployment insurance system, something that not only companies but also lots of independent contractors might resist.
“I’m hoping after the crisis is over this creates a lot of impetus for change,” said Halas, the unemployment attorney.
While some hope such a reappraisal might be one silver lining to the public health tragedy now unfolding, there are also fears of movement in the opposite direction. Erlich said he worries that as the new work-from-home standard takes root amidst a deep recession, companies could try to shed costs by treating more workers as independent contractors, not as employees with the traditional protections and benefits that go with that.
“Every time there has been a recession, there has been an uptick in misclassification,” Erlich said. “This either could resuscitate a spirit of workers fighting for protections or it could give license to employers to further decimate the social safety net.”
For Charlie Burke and Mutwaly Hamid, the long-term implications are less pressing than the current need to pay bills in a downturn that has no precedent and no clear end in sight.
“I went through bad times,” Burke said of the recession in 2008 and 2009. “That was nothing compared to this.”
“A lot of people are facing the same problem,” said Hamid. “Honestly, I really do not know what to do.”