Empowering American Workers
Mercatus scholars are helping to deliver policy outcomes that improve people’s lives. Liya Palagashvili’s research focuses on empowering independent workers through portable benefits—benefits that aren’t tied to a specific employer but travel with the worker. Liya believes the issue of portable benefits will be central to the American workforce of the 21st century: “The portable benefits revolution has arrived!” She has driven a niche policy idea to the top of the congressional agenda; the story below shows the difference this idea is making in the lives of everyday Americans.
“How can we ensure that American workers remain secure and prosperous in the modern economy?”
That’s how Rep. Kevin Kiley (R-Calif.) opened an April 11, 2024, Capitol Hill hearing entitled “Unlocking Opportunity: Allowing Independent Contractors to Access Benefits.” In starting with this question, he recognized two realities: (1) Growing numbers of Americans no longer earn a living in the ways they once did. (2) It’s time for policymakers to catch up to this fact.
Today’s Dynamic Labor Market
More than 30 million American workers now engage in independent work, choosing it over (or in addition to) W-2 employment. Independent workers come in many forms. They are writers, marketing directors, caregivers, direct sellers, truckers, construction workers, musicians, actors, software designers, and physicians. They also include Uber drivers and other participants in the “app economy,” as well as entrepreneurs of all sorts.
These forms of independent work take a variety of names. They can be called gig jobs, contracting, freelancing—or simply self-employed work. And one issue unites the majority of independent workers: More than 80 percent of them would like access to portable benefits.
What Workers Want
Independent workers typically operate outside traditional employment relationships. As a result, they lack access to job-based benefits such as health insurance, retirement plans, paid time off, and sick leave.
Why does this state of affairs exist? It’s not necessarily because companies refuse to offer benefits. Rather it is because outdated laws, written nearly a century ago, prohibit the provision of benefits to nonemployees without risking legal consequences. Offering benefits to an independent worker can trigger legal reclassification of the worker as a full-fledged “employee,” which means higher costs, misclassification fees, and additional hurdles for both companies and workers, who often desire the contracting relationship over an employment one. That legal risk makes it nearly impossible to build new benefits models that match a flexible workforce.
Moreover, it’s not what independent workers want: The vast majority would prefer to maintain their current “nonemployee” classification. According to the Bureau of Labor Statistics, less than 8 percent of independent workers say they want a W-2 job.
My own family has experienced this dilemma firsthand.
One Size (Job) Does Not Fit All
In January 2020 my dad lost his job. He had been a driver his whole life, even as a young man back in the Soviet Union before he emigrated to the United States. But one day the company he contracted with told him they were moving away from an independent-contractor model and toward an employment-based model. That meant things for everyone were about to change.
After the switch, the company did offer my dad a full-time W-2 position. But it’s not what he wanted, and he turned it down, even though he didn’t have another job opportunity lined up. So the outcome was a lose-lose: He lost a good job and they lost a good worker. My dad remained without work until he found another independent contractor job—in a win-win for him and the other party involved.
When Policies Unintentionally Hurt Workers
Independent workers value the flexibility and autonomy they enjoy. For some, like my dad, it gives them freedom to work on side projects and side businesses. For others, it’s a matter of necessity—they may have disabilities or life circumstances that hinder their participation in the labor market. And for the vast majority, independent work is simply an opportunity to make extra income to meet financial needs.
But in addition to valuing flexibility, workers also want the security that comes with access to benefits. State policymakers are experimenting with ways to make that happen. Of course, experiments do not always play out as planned. And good intentions do not guarantee good outcomes. What has happened in California is a case in point.
A W-2 Job, If You Can Keep It
California policymakers have tried to “solve the benefits problem” by reclassifying a huge swathe of independent workers in the state. The effort backfired.
The state codified a strict version of the “ABC test” into law—called California’s AB5—that raised the legal threshold for independent self-employment. Be they gig workers or realtors, writers or financial advisers, more workers were intended to be considered employees, entitled to the benefits that come with that classification. That is, if they were able to keep their jobs after the law went into effect. As it turned out, many of them were not.
After AB5 went into effect, workers in California lost their freelancing and contracting jobs, but did not get rehired as W-2 workers. Overall employment declined by 4.4 percent on average in affected occupations, with no corresponding increase in W-2 jobs. (The California law has since been partially rolled back.)
A broader analysis by my research team here at Mercatus confirms this trend: In states that adopt ABC tests, traditional W-2 employment declines by an astounding 4.8 percent. Self-employment drops even further, by 6.5 percent.
Coercing Workers to Do What They Don’t Want to Do
There has been interest in reclassifying independent workers at the federal level too.
I testified about the merits of portable benefits at the April 2024 “Unlocking Opportunity: Allowing Independent Contractors to Access Benefits” hearing chaired by Rep. Kiley. A Georgetown University academic testified against them and in favor of reclassifying independent workers—even when those workers are genuinely independent and do not want to be employees. During the hearing, Kiley asked the Georgetown academic if she supported reclassifying workers against their will. “For those workers that work in the gig economy,” she replied, “absolutely.”
My father was seated right behind me during the hearing. But I didn’t have to be that close to him to hear his sigh of exasperation at her answer.
Again, the real issue is that most independent workers (who are already properly classified) don’t want to be employees. They’re asking for a system that reflects how they actually work—one that offers support without forcing them into a one-size-fits-all model. This flexibility is especially important not just for those who rely primarily on independent work, but for the vast majority of app-based workers who already have a traditional job and use these platforms to earn extra income. For example, about 90 percent of DoorDash workers use the app less than 10 hours per week. They’re not looking for another W-2 job—they’re looking for something flexible they can turn to for a few extra hours when they need it.
Encouraging Developments in Congress
Less than a year after Rep. Kiley’s hearing, he introduced a portable benefits bill in the House. Moves were underway in the Senate as well, and in April 2025, Senator Bill Cassidy (R-La.) released a white paper on portable benefits, citing our research and laying the groundwork for legislation. His office told us it was the senator’s No. 1 policy priority.
By this stage, our team had been informing Sen. Cassidy’s staffers directly on the issue for more than two years. On July 7, Senators Cassidy, Rand Paul (R-Ky.), and Tim Scott (R-S.C.) released a legislative package empowering independent workers to access portable benefits. Portable benefits had just become mainstream!
Two days later, I held an event on Capitol Hill to promote a better understanding of portable benefits, with Sen. Cassidy providing the keynote remarks—an effort that helped us take a great step forward.
One of the senator’s statements during the event really drove home the importance—and urgency—of the portable benefits issue. After we had made our case for the merits of portable benefits, Sen. Cassidy looked out over our audience. Many of the attendees were young congressional staffers. He knew they were living in a labor market and economy that was changing—and very different from what he had grown up with. So he told them: “This isn’t an issue for me and my generation. This is an issue for you and your generation.” Indeed, surveys increasingly show that Gen Z is more interested in self-employment and entrepreneurial work than were previous generations at the same age.
Don’t Just Protect Workers—Empower Them
Federal legislators seeking encouragement in this area can look to the states. There, policymakers are driving progress in ways that are already improving people’s lives.
In 2023, Utah became a leader in this area when it passed a portable benefits bill. The legislation allows companies to pay into portable benefits accounts for their contractors, without classifying them as employees. Companies began to launch pilot programs as a consequence.
One beneficiary of access to portable benefits is Lyft driver and aspiring musician Dallin Wilson. He still has what he calls “the joy of having a flexible schedule” but now has benefits as well. “I can find peace of mind that my needs are being met beyond the driver seat,” says Dallin. “This program allows me to pursue my passion of writing music without worry. Whether on the road or at the drum set, I know I can achieve my goals.”
Another independent worker whose life improved is Mindy Howard. She’s a shopper for Shipt, the Target-owned grocery delivery platform. Mindy and her husband already got traditional benefits through his employer. Now she also has the option of extra benefits through her company’s portable benefits program. “I’ve used it to create long-term savings,” Mindy says. “I’ve also used it for paid time off,” which is something she needed to plan her daughter’s wedding. “Having the flexibility to be there, to make dreams come true for my family, is just wonderful.”
A Model Spreading to Other States
In Pennsylvania, DoorDash rolled out a pilot portable benefits program that is proving its value to independent workers. “It allows me the flexibility to take a day off that is paid,” says one Dasher. “And the extra money comes in handy for emergencies.” In addition to paid time off, the top desired benefits among Dashers? Retirement savings and sick days.
The Pennsylvania pilot is part of a much broader state trend. What began as a novel policy idea is now gaining real traction in state legislatures. Utah enacted the first voluntary portable benefits law in 2023. Alabama and Tennessee followed in 2025. In 2026, five more states enacted portable benefits legislation: Georgia, Idaho, Kansas, West Virginia, and Wyoming. Altogether, 20 states have now either launched pilot programs or introduced or enacted portable benefits legislation. At the heart of these efforts is a straightforward idea: Companies or clients should be able to contribute to benefits for independent workers without that contribution being treated as evidence of employment status. What was once a niche reform is quickly becoming a model other states are beginning to follow.
Another state ripe for portable benefits reform is Florida. It’s home to more than three million freelancers, contractors, or other types of self-employed workers. And US Census Bureau data show that this is a growing workforce, one that generates more than $170 billion annually in revenue or sales for the state.
Among that workforce is trucker John DeCillo, an owner-operator based in Jacksonville. For John, work has always been central to his pursuit of the American Dream.
“A Life-Changer for Me”
John DeCillo has spent most of his career working in “regular jobs” in sales, engineering, and manufacturing. Then, in 2020, the pandemic hit, and like many other American workers, John got laid off. But he knew exactly what was next for him, and he quickly turned to trucking.
Trucking is something John had long wanted to do. He understood the opportunities it offered. Trucking was a way for him to start his own business, provide for his family, and carry him toward his retirement years. So that’s what he did.
John spends long hours behind the wheel of his tractor-trailer. During a recent long-haul job from his home all the way up to Sterling, Virginia, he spent an hour talking to us about what he does for a living and what could make it better.
Q: The best part of John’s job?
“I’ve been independent for five years. And I’m able to do what I want. But of course, with that freedom comes risk. So there’s a tremendous amount of freedom—but there’s also the freedom to fail. Most truck drivers are one failure away from disaster.”
Q: What has his job given him?
“It’s the chance to build something, which you don’t get in corporate America. And that’s what I’ve been able to do—to build and own my own business. It’s always been my dream. Eighty to ninety percent of truckers on the roads today are small businesses. People like me.”
Q: John’s largest expense every month?
“What I have to pay for healthcare coverage. It’s a couple of thousand dollars a month. That’s brutal! It’s my number 1 issue.”
Q: What would make his life better when it comes to benefits?
“I need to be part of a bigger pool. An exchange could pool us all together. And it doesn’t seem like a difficult problem to fix.”
Q: What if he had the opportunity to become a regular employee? Wouldn’t that solve the benefits problem?
“I work hard, and the way I work now is what suits my family and me. I wouldn’t give that up.”
Q: What if he had access to a portable benefits package through the firms that hire his services?
“So I would still be an independent contractor with the option of getting benefits? That would be a life-changer for me.”
The Future of Work: Flexible Benefits for a Flexible Workforce
While America’s workforce is dynamic, our benefits system is not. Most benefits remain tied to a single employer and a traditional job structure, leaving millions of independent workers without access. The portable benefits option can help workers flourish. Portable benefits can modernize our labor policy in a way that supports how people actually work today.
And there’s another upside here for an increasingly mobile workforce: When benefits are portable and not tied to a specific job, workers can receive contributions from multiple companies into a single worker-owned account managed by a bank or third-party platform.
But portable benefits are not just good for workers. They’re good for businesses too. A voluntary, opt-in model for portable benefits avoids mandates for resource-constrained businesses. And it empowers better-resourced companies to attract and retain a more reliable and engaged independent workforce.
In short, portable benefits support a modern, inclusive economy that enables businesses to innovate and workers to thrive. Win-win.
