The Side Hustle Economy: Government’s Role in America’s New Work Reality

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The “side hustle” has evolved from a niche activity into a defining feature of the modern American economy. For millions, it now represents a fundamental shift in how they earn a living, structure their lives, and plan for the future.

This trend is motivated by everything from urgent needs to cover rising living costs to entrepreneurial desires for greater flexibility and personal fulfillment.

This presents challenges to governmental frameworks built for 20th-century models of stable, long-term employment. The question for citizens and policymakers is what can and should now be done about it.

In This Article

The article examines America’s growing side hustle economy, where millions supplement income through gig platforms like Uber, DoorDash, and Etsy. It highlights a “measurement gap”: official BLS data counts 8.4 million multiple jobholders (5.2%), but surveys suggest 27–45% of Americans (up to 80 million) have side hustles.

It explores:
• Why people pursue gig work (financial necessity, flexibility, entrepreneurship).
• Typical earnings (median $200–400/month).
• Policy challenges, especially worker classification as employees vs. independent contractors.

California Proposition 22 illustrates ongoing battles over gig worker rights and protections.

So What?

The side hustle economy exposes a mismatch between 20th-century labor frameworks and 21st-century work, with major social and economic implications. Millions rely on income outside traditional safety nets, lacking unemployment, workers’ compensation, and retirement benefits. Worker classification debates pit flexibility against protection: employee status offers security but reduces gig freedom, while independent contractor status leaves workers exposed.

Proposition 22 risks fragmenting labor law into industry-specific carve-outs that weaken universal protections. American policy faces a choice: develop portable benefits that preserve flexibility, or accept a growing class of workers cycling between financial strain and instability.

Understanding the Modern Workforce

A significant gap exists between official data collected by government agencies and the reality experienced by millions of Americans. This discrepancy highlights the challenge of capturing work that often blurs the lines between a formal job, a hobby, and a small business.

The Data Disconnect

The federal government tracks Americans working more than one job through the Current Population Survey (CPS), a monthly household survey conducted by the U.S. Census Bureau for the Bureau of Labor Statistics. The key metric is the “multiple jobholding rate,” which measures the proportion of all employed workers who hold two or more jobs.

A multiple jobholder is typically defined as someone who has a primary job as a wage or salary worker and holds at least one other job, which could be another wage and salary position or a self-employed venture.

Historically, this official data tells a surprising story. The multiple jobholding rate is not at an all-time high. It peaked at 6.8% in summer 1995 and has been on a general downward trend since, falling to 5.0% by 2013.

The rate dropped sharply during the COVID-19 pandemic, reaching a low of 4.0% in April 2020, corresponding to about 5.4 million workers. Since then, the rate has rebounded, climbing back to around 5.2% by 2024, representing approximately 8.4 million people. While this is an increase from the pandemic-era low, it remains below the mid-1990s peaks.

This official government view stands in stark contrast to the cultural narrative and private survey data on “side hustles.” Recent surveys paint a picture of a much larger and more pervasive trend. Depending on the survey and methodology, anywhere from 27% to 45% of American adults report having a side hustle. One 2025 survey found that 39% of U.S. adults—roughly 80 million people—are balancing a side gig.

This vast difference between the BLS’s 8.4 million multiple jobholders and survey estimates of up to 80 million side hustlers reveals a critical “measurement gap.”

Why the Numbers Don’t Match

This gap exists because the term “side hustle” captures a much broader and more informal range of income-generating activities than the government’s definition of “multiple jobholding.” A person earning a few hundred dollars monthly selling crafts on Etsy, driving for a rideshare app on weekends, or doing occasional freelance graphic design work may not consider that activity a formal “job” when responding to a government survey.

This measurement gap represents a significant policy blind spot. When policymakers rely solely on traditional labor statistics, they likely underestimate the scale of non-traditional work and the number of people economically dependent on it. This can lead to failure in designing appropriate social safety nets, from unemployment insurance to portable benefits, because the true size and nature of the target population remain obscured.

A related concept is the “gig economy,” often used interchangeably with “side hustle” but with a more specific meaning. The gig economy refers to markets where providers are matched with consumers on a short-term, task-by-task basis, often facilitated by digital platforms like websites or smartphone apps.

The BLS refers to this as “electronically mediated work.” The first and only official government study on this specific workforce, conducted in May 2017, found that 1.6 million people, or 1% of the U.S. workforce, engaged in this type of work. This figure is now widely considered an undercount, as it was a one-week snapshot and the platform economy has grown exponentially since 2017.

The global gig economy, valued at over $556 billion in 2024, is projected to more than triple by 2032, underscoring the rapid expansion of this model.

The Modern Side Hustle Landscape

The modern side hustle is incredibly diverse, but data reveals clear patterns in the types of work people are doing, how much time they’re investing, and what they’re earning.

Popular Platforms and Activities

The most popular entry points into the side hustle economy are dominated by digital platforms that have lowered barriers to entry for on-demand services. Food and grocery delivery services like DoorDash, Uber Eats, and Instacart, along with ridesharing services like Uber and Lyft, are consistently ranked as the most common side hustles.

DoorDash is the top hustle in 21 states, while Uber leads in 15. Beyond delivery and transport, other popular categories include online freelancing (writing, graphic design), creating and selling items through e-commerce platforms like Etsy, social media influencing, and providing pet care services through apps like Wag!.

The dominance of these platform-based jobs creates new and concentrated pressure points for regulation. Unlike traditional freelancing where a worker might have many disparate clients, a huge portion of the modern side hustle economy is intermediated by a handful of powerful technology companies that control pay rates, customer access, and working conditions through their algorithms.

This concentration of power makes these platforms natural and highly visible targets for policy debates and regulatory action, as seen in states like California.

Financial Reality Check

The financial reality of side hustling is often more modest than aspirational social media posts might suggest. While the average monthly income from a side hustle is reported to be around $885, the median income is significantly lower, typically between $200 and $400 per month.

This large gap indicates that a small number of very high earners pull the average up, while the typical side hustler earns more modest supplemental income. For the majority, this is a light financial buffer, not a second salary. 58.6% of people with a side hustle report earning less than $250 a month.

This aligns with data on time commitment. The largest group of side hustlers, 54%, spend five hours or less per week on their gig. Another 24% work between five and ten hours per week. Only a small fraction treat it as a near full-time endeavor.

However, there’s a clear correlation between time invested and income. The 2% of hustlers who commit over 40 hours a week are most likely to cross into the $5,000+ per month earnings category, effectively transitioning from a “side hustle” to running a full-fledged business.

Who’s Side Hustling?

Participation in the side hustle economy is widespread across the U.S. but is particularly concentrated among certain demographic groups.

The most significant trend is generational. Younger Americans are far more likely to have a side hustle than older counterparts. Surveys consistently show that Gen Z (ages 18-28) and Millennials (ages 29-44) lead the pack.

One 2025 survey found that 34% of Gen Zers and 31% of Millennials had a side job, compared to just 23% of Gen Xers (ages 45-60) and 22% of Baby Boomers (ages 61-79). Nearly half of all Gen Z workers report some form of side gig.

This generational divide can be attributed to several factors, including greater digital nativity, which makes engaging with platform-based work more intuitive, as well as facing unique financial challenges, such as student loan debt and high housing costs, that necessitate supplemental income.

Other demographic patterns emerge from the data. Parents with children under 18 are significantly more likely to have a side hustle (34%) than parents of adult children (23%) or non-parents (28%), suggesting a need to cover high family costs.

There’s also a positive correlation with education. Individuals with a post-graduate degree (32%) or four-year degree (30%) are more likely to have a side hustle than those with a high school diploma or less (23%). This may reflect the ability of more educated workers to monetize specialized skills through consulting or freelance work.

Official BLS data on multiple jobholders provides additional insight into racial and ethnic patterns. In 2024, the multiple jobholding rate for Black or African American workers was 6.1%, higher than the rate for White (5.2%), Asian (3.8%), or Hispanic or Latino workers (3.5%). Women also have a slightly higher multiple jobholding rate (5.5%) than men (4.7%).

Why People Side Hustle

The explosive growth of the side hustle economy isn’t driven by a single cause but by a powerful confluence of economic necessity, changing career expectations, and transformative technology. For some, a side hustle is a lifeline in an economy of rising costs and stagnant wages. For others, it’s a launchpad for entrepreneurial dreams and a way to achieve more flexible and fulfilling work life.

Economic Necessity

For a large and growing number of Americans, the primary driver for taking on a side hustle is straightforward financial need. Surveys consistently show that covering regular living expenses and paying bills are top reasons for seeking extra work.

In one survey, 35% of respondents said they started their side hustle because they needed extra money for living expenses, while another 29% needed it for bills and 24% to pay down debt. The sentiment is stark: 61% of those with a side hustle say their life would be unaffordable without that supplemental income.

Many explicitly point to macroeconomic factors, with 49% citing the current economy and 42% citing inflation as direct drivers for starting their gig.

This feeling of being financially squeezed is rooted in the long-term relationship between wages and inflation. While there have been recent periods of positive real wage growth, many households are still recovering from years where their purchasing power eroded.

For example, between July 2024 and July 2025, nominal average weekly wages grew by 4.2%, outpacing the 2.7% inflation rate. This resulted in a 1.5% increase in real (inflation-adjusted) wages, meaning workers had slightly more purchasing power.

However, this recent positive trend follows periods of significant strain. In June 2022, for instance, inflation hit 9.1% while nominal wage growth was only 4.8%, creating a massive 4.3 percentage point gap where paychecks fell far behind the cost of living.

Looking at the longer-term picture reveals an even more challenging reality. Since March 2006, the nominal average weekly wage in the U.S. has risen by 82.3%, from $686 to $1,250. However, once adjusted for inflation, that same wage only grew by 12.7% in real terms, from $1,109 to $1,250 (in July 2025 dollars).

This means that over nearly two decades, a nominal pay increase of $564 per week translated to a real purchasing power increase of just $141 per week. This long-term pressure on real wages helps explain why, even in moments of positive economic news, so many Americans feel the need to supplement their primary income.

The Pursuit of Passion and Flexibility

While necessity is a powerful motivator, it’s far from the whole story. The rise of the side hustle is also deeply intertwined with a cultural shift in what Americans want from their work. For many, a side gig isn’t just about making ends meet—it’s about pursuing passion, developing new skills, gaining entrepreneurial experience, and achieving greater control over their lives.

Surveys show that a significant portion of side hustlers are motivated by non-financial goals. About 28% use the money for discretionary spending, 16% started because it was a hobby they enjoyed, and 23% see it as a creative outlet or a way to follow their passion. This is particularly true for higher earners, who are more likely to cite enjoyment as their top reason for having a side gig.

A side hustle can also serve as a low-risk “entrepreneurial incubator.” It allows individuals to test a business idea, build a client base, and learn the fundamentals of marketing and finance without the immense pressure of quitting their stable day job. The primary job’s salary provides a crucial financial safety net, which paradoxically can help the side business grow faster by removing the desperate need for immediate profit.

For a growing number of younger workers, this is the explicit goal: 21% of Gen Z side hustlers hope to eventually turn their gig into their full-time occupation.

The Flexibility Revolution

Perhaps the most powerful non-financial driver of the side hustle economy is the profound and growing demand for workplace flexibility. The COVID-19 pandemic accelerated a shift in worker expectations, and flexibility in both work hours and location is now a top priority.

A remarkable 58% of all employed Americans now have the option to work from home for all or part of the week. When offered this flexibility, 87% of workers take it.

This desire is so strong that it has become a key factor in talent attraction and retention. Workers now rank workplace flexibility options as one of the most important non-salary components of compensation, with 65% rating it as a top priority—higher than competitive bonuses, paid time off, or even healthcare plans in some surveys.

The gig economy is uniquely positioned to meet this demand. Its core value proposition is autonomy—the ability to choose when, where, and how much to work. This level of control is something that even the most flexible traditional jobs often cannot match.

This dynamic is actively reshaping the broader labor market. Traditional 9-to-5 employers are no longer just competing with each other for talent—they’re competing with the very concept of self-directed gig work. This competitive pressure is a key force behind the increase in hybrid and remote work options offered by traditional companies.

The Technology Catalyst

The modern side hustle boom wouldn’t be possible at its current scale without the technological revolution of the past two decades. Digital platforms—the websites and smartphone apps that connect providers with customers—have fundamentally democratized entrepreneurship.

These platforms serve as powerful intermediaries, drastically reducing the traditional costs and barriers associated with starting a business. In the past, a freelance driver, craft-maker, or handyman would have had to invest significant time and money in marketing, advertising, building a customer base, and setting up payment systems.

Today, platforms like Uber, Etsy, and TaskRabbit handle these functions, allowing an individual with a car, skill, or product to start earning income almost immediately. This technological infrastructure has made it feasible for firms to organize workforces on a project-specific basis and for individuals to easily monetize their skills, time, and assets.

The Double-Edged Reality

While the motivations for starting a side hustle are clear, the actual impact on an individual’s life is far more complex and often contradictory. For some, it’s a source of financial stability and personal fulfillment. For others, it leads to a grueling cycle of stress, burnout, and precarity.

Financial Security vs. Uncertainty

The financial impact of a side hustle varies dramatically depending on the individual’s goals and circumstances. As previously noted, with a median monthly income around $200, for the majority of participants, a side gig provides a modest but often crucial financial buffer. It might be the difference that covers an unexpected car repair, pays for a child’s extracurricular activities, or allows for a small amount of savings.

However, this income often comes without the security of a traditional job. While 61% of side hustlers report that their lives would be unaffordable without their extra earnings, highlighting its role as a financial lifeline, only 44% feel that this income provides them with long-term financial security.

This points to the inherent precarity of gig work, which is often characterized by fluctuating demand, inconsistent pay, and the absence of a reliable, predictable paycheck. The income is essential, but its unreliability prevents it from forming a stable foundation for long-term financial planning.

The Physical and Mental Health Toll

The very structure of many side hustles and gig economy jobs can take a significant toll on mental and physical health. The autonomy that attracts many to this type of work is paradoxically a major source of its psychological burden.

By shifting from employee to independent contractor, a worker takes on the full weight of risks and administrative tasks that were once shouldered by an employer. This includes managing unpredictable income streams, constantly seeking the next “gig,” covering all business expenses, and navigating a complex tax system alone.

Academic research consistently links these characteristics of gig work to negative health outcomes. Studies have found that gig workers report higher rates of stress, anxiety, and symptoms of depression compared to those in traditional employment. The constant income insecurity is a primary driver of this psychological distress.

One study found that earners of insecure income reported a 50% increase in poor overall health and psychological distress compared to salaried workers.

Beyond mental health, there are significant physical and safety risks. Platform-mediated work, particularly in transportation and delivery, is associated with a higher incidence of safety issues and workplace injuries. Because these workers are classified as independent contractors, they’re typically not covered by workers’ compensation insurance, leaving them to bear the full financial and physical cost of any on-the-job accident.

Furthermore, the nature of gig work can lead to profound social isolation. Unlike a traditional workplace that provides a built-in community and stable social networks, gig work often consists of a series of transient interactions with customers. This lack of connection to colleagues and a supportive work environment can lead to increased feelings of loneliness, which is a strong predictor of poor mental health.

The Psychology of Multiple Roles

Despite the significant risks, side hustles can also be a source of profound psychological benefit. Successfully running a side business can boost confidence, provide a much-needed creative outlet, and foster a sense of purpose and control that may be lacking in a primary job. For many, the act of pursuing a passion and seeing it generate income is deeply fulfilling and can improve their overall mood and life satisfaction.

This creates a new and complex challenge for the modern worker: it’s no longer just about balancing “work” and “life,” but about balancing “Work 1,” “Work 2,” and “life.”

Recent research in management studies has begun to unpack this dynamic, revealing that a side hustle’s effect on a person’s main job isn’t uniformly positive or negative. Instead, “side-hustle thriving” acts as a double-edged sword.

On one hand, thriving in a side hustle can create a “resource gain” for the primary job. It can foster psychological detachment, allowing an employee to mentally switch off from their main job’s stressors and return more refreshed. It can also boost overall affective well-being, leading to a more positive and engaged attitude at their full-time role.

On the other hand, it can create a “resource loss.” This can manifest as “attention residue”—where thoughts about the side hustle intrude and distract during the main job’s hours—and general resource depletion, as the time and energy devoted to the side gig leave less available for the primary career.

Crucially, the research identifies a key psychological skill that determines whether the net effect is positive or negative: boundary segmentation. This is the ability of an individual to create and maintain strong mental and practical boundaries between their different work roles.

Employees who are skilled at compartmentalizing—who can fully “switch off” from their side hustle when at their main job and vice versa—are able to amplify the resource gains while mitigating the resource losses. Those who let the roles bleed into one another are more likely to experience burnout and a decline in performance in both areas.

Government’s Regulatory Challenge

The rise of the side hustle economy forces a fundamental re-examination of the legal and social frameworks that govern work in the United States. The core of the debate revolves around a single, high-stakes question: Is a gig worker an employee or an independent contractor?

The Classification Battle

The distinction between an employee and an independent contractor is the central battleground in the regulation of the gig economy. This isn’t a mere semantic debate—it’s a distinction with profound financial and legal consequences for both workers and companies.

Why Classification Matters

Employees in the United States are protected by a suite of federal and state laws designed to ensure fair and safe working conditions. These protections, established over decades, include:

• Minimum Wage and Overtime Pay: Guaranteed under the Fair Labor Standards Act (FLSA)
• Workers’ Compensation: Provides medical benefits and wage replacement to employees injured on the job
• Unemployment Insurance: Offers temporary financial assistance to workers who lose their job through no fault of their own
• Employer Contributions to Social Security and Medicare: Employers are required to pay half of these payroll taxes (FICA)
• Protection from Discrimination: Laws like Title VII of the Civil Rights Act protect employees from discrimination and harassment
• The Right to Organize: Employees have the right to form unions and collectively bargain for better wages and working conditions under the National Labor Relations Act

Independent contractors, who are considered to be in business for themselves, are not entitled to any of these protections. They must cover their own work-related expenses, purchase their own health insurance, fund their own retirement, and pay the full amount of self-employment taxes.

For companies, classifying workers as independent contractors can result in significant cost savings on labor, benefits, and taxes, which is a primary reason the classification is so fiercely defended by many gig economy platforms.

The Federal Standard

Under the federal Fair Labor Standards Act, the determination of whether a worker is an employee or independent contractor is based on the “economic realities” of the relationship. The goal is to determine whether the worker is, as a matter of economic reality, economically dependent on the employer for work (making them an employee) or is truly in business for themselves (making them an independent contractor).

Courts and the U.S. Department of Labor (DOL) use a multi-factor “totality of the circumstances” approach to make this determination. A 2024 DOL rule codified six key factors that guide this analysis:

1. Opportunity for Profit or Loss Depending on Managerial Skill: This factor considers whether the worker can make decisions that meaningfully affect their profit or loss, such as by negotiating pay, deciding which jobs to take, hiring help, or investing in marketing. Simply working more hours at a fixed rate isn’t considered an exercise of managerial skill.
2. Investments by the Worker and the Potential Employer: This looks at whether the worker makes capital or entrepreneurial investments in their own business. Costs for tools required for a specific job or costs unilaterally imposed by the employer are generally not considered investments that point toward independent contractor status.
3. Degree of Permanence of the Work Relationship: A relationship that is continuous, indefinite, or exclusive points toward employee status. A relationship that is project-based, sporadic, or non-exclusive, where the worker markets their services to multiple entities, suggests independent contractor status.
4. Nature and Degree of Control: This crucial factor examines who controls the key aspects of the work. If the company sets the worker’s schedule, supervises performance (including through technology), limits the worker’s ability to work for others, or controls prices, it suggests an employment relationship.
5. Extent to Which the Work Performed is an Integral Part of the Potential Employer’s Business: If the worker’s function is critical, necessary, or central to the company’s primary business (e.g., drivers for a rideshare company), this weighs in favor of employee status.
6. Skill and Initiative: This factor looks at whether the worker uses specialized skills in connection with business-like initiative (e.g., marketing their services to grow their business). The mere presence of a specialized skill isn’t enough; it must be used in a way that demonstrates the worker is operating an independent business.

No single factor is determinative. The DOL and courts weigh all of them to assess the overall economic reality of the relationship. Furthermore, what a worker is called in a contract or the fact that they receive a Form 1099 instead of a W-2 doesn’t decide their status under the law.

Tax Obligations for Side Hustlers

For individuals, one of the most immediate and often confusing interactions with the government regarding a side hustle involves the Internal Revenue Service (IRS). In the eyes of the IRS, if you’re a freelancer, gig worker, or otherwise self-employed, you’re considered a small business owner with specific tax obligations that differ significantly from those of a traditional employee.

Understanding Your Obligations

The first critical point is that all income from a side hustle is taxable and must be reported to the IRS, regardless of whether you receive a tax form for it and no matter how it’s paid (cash, property, or virtual currency).

Filing Threshold: The filing requirement for self-employed individuals is much lower than for wage earners. You must file a tax return if your net earnings from self-employment are $400 or more in a year.

Self-Employment Tax: In addition to regular income tax, self-employed individuals must pay self-employment (SE) tax. The SE tax rate is 15.3% on net earnings. This tax covers both the employee and employer portions of Social Security (12.4%) and Medicare (2.9%) taxes. While this rate may seem high, you can deduct one-half of your self-employment tax when calculating your adjusted gross income (AGI), which helps lower your overall tax bill.

Quarterly Estimated Taxes: Because an employer isn’t withholding taxes from your paychecks, you’re responsible for paying your income and self-employment taxes throughout the year. If you anticipate owing $1,000 or more in tax for the year, the IRS requires you to make estimated tax payments quarterly. These payments are typically due on April 15, June 15, September 15, and January 15 of the following year.

Deducting Expenses and Keeping Records

One of the benefits of being self-employed is the ability to deduct business expenses, which lowers your net earnings and, therefore, your tax liability. Meticulous record-keeping is essential to legally claim these deductions.

Common deductible expenses for side hustlers include:

• Home Office Expenses: If you use part of your home exclusively and regularly for business, you may deduct a portion of your rent or mortgage interest, utilities, and insurance
• Vehicle Expenses: If you use your car for business (e.g., for delivery or rideshare service), you can deduct the actual costs of using your car or take the standard mileage rate
• Business Supplies and Equipment: The cost of items like laptops, software, tools, and other necessary supplies is generally deductible
• Other Expenses: This can include a portion of your internet and phone bills, marketing and advertising costs, and fees for professional services like accounting or legal advice

Key IRS Forms for Side Hustlers

California’s Policy Laboratory

Nowhere is the conflict over worker classification more pronounced than in California, which has become a national laboratory for gig economy regulation. The state’s legislative and electoral battles provide a crucial case study of competing interests and potential policy paths for the rest of the country.

The ABC Test Arrives

In 2019, California passed Assembly Bill 5 (AB5), a landmark law that dramatically changed how workers are classified in the state. AB5 codified a legal precedent from a 2018 California Supreme Court case, Dynamex Operations West, Inc. v. Superior Court, which established a much stricter standard for classifying workers as independent contractors.

This standard is known as the “ABC test.” Under the ABC test, a worker is presumed to be an employee unless the hiring entity can prove that all three of the following conditions are met:

(A) The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract and in fact.

(B) The worker performs work that is outside the usual course of the hiring entity’s business.

(C) The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

The “B” prong is the most difficult for many gig economy companies to meet. For example, it’s hard for a rideshare company whose core business is providing rides to argue that its drivers are performing work “outside the usual course” of its business.

The law was intended to reclassify millions of gig workers as employees, granting them access to minimum wage, overtime, workers’ compensation, and other benefits. The law was met with both praise from labor advocates and fierce opposition from business groups and many freelance workers.

Opponents argued that the rigid test would destroy flexible work opportunities and lead to job losses. Some studies suggested that AB5 did lead to a significant decline in self-employment and overall employment in affected occupations in California, without a corresponding increase in traditional employment.

Proposition 22’s Response

In response to AB5, a coalition of app-based companies, including Uber, Lyft, and DoorDash, funded a massive $205 million campaign for a ballot initiative called Proposition 22.

Passed by California voters in November 2020, Prop 22 created a specific exemption from AB5 for app-based transportation and delivery drivers, effectively creating a new, third category of worker.

Under Prop 22, these drivers are classified as independent contractors but are granted a novel set of benefits that fall short of full employee status:

• Guaranteed Minimum Earnings: At least 120% of the local minimum wage for “engaged time” (from accepting a ride or delivery request until completion), plus $0.30 per engaged mile for expenses. A key criticism is that this doesn’t include the time drivers spend waiting for a request.
• Healthcare Stipends: For drivers who average a certain number of engaged hours per week.
• Accident Insurance: To cover medical expenses and lost income from injuries sustained while on the job.

Prop 22’s success demonstrated a politically viable, albeit extremely expensive, path for creating a new legal category of worker. It provides a blueprint for companies in other industries and states to lobby for similar, industry-specific carve-outs.

This has raised concerns that U.S. labor law could become fragmented into a “patchwork quilt” of different rules for different industries, moving the country away from universal labor standards and potentially creating a race to the bottom where each sector lobbies for the least restrictive classification.

Policy Solutions on the Horizon

The intense debate surrounding worker classification has spurred a search for alternative policy solutions that could provide security for workers without completely upending the flexible business models of the gig economy.

Portable Benefits

One of the most prominent policy ideas is the creation of a “portable benefits” system. The core concept is to create a safety net where benefits—such as retirement savings, health insurance, paid time off, and workers’ compensation—are tied to the individual worker rather than a single employer.

In this model, multiple companies could contribute to a worker’s benefit fund on a pro-rated basis (e.g., per hour worked or per dollar earned), and the worker could carry these benefits with them from gig to gig.

Proponents argue this is a pragmatic 21st-century solution that acknowledges the reality of portfolio careers. It could provide a crucial safety net for independent workers while preserving the flexibility that both workers and companies value.

Several legislative proposals have been introduced at the federal level to advance this idea. For example, bills introduced by Senators Bill Cassidy and Tim Scott aim to create a “safe harbor” that would allow companies to voluntarily offer or contribute to portable benefit plans without that action being used against them in court as evidence of an employer-employee relationship.

Other proposals include creating tax-advantaged flexible benefit accounts for independent workers, similar to the Section 125 “cafeteria plans” available to traditional employees, and reforming rules around Association Health Plans (AHPs) to make it easier for self-employed workers to band together to purchase health insurance.

However, this approach is met with significant skepticism from labor unions and some worker advocates. They argue that portable benefits proposals are a “Trojan horse” that would institutionalize a second-tier status for workers, providing a weaker set of benefits while allowing companies to permanently avoid their obligations as employers.

The fear is that creating this alternative system would relieve pressure on companies to correctly classify their workers as employees and would ultimately undermine the century-old foundation of American labor law.

Supporting Entrepreneurship

While the policy debate over classification and benefits continues, existing government resources can provide valuable support to the millions of Americans operating as sole proprietors through their side hustles.

The U.S. Small Business Administration (SBA) offers a range of services designed to help small-scale entrepreneurs start, manage, and grow their ventures. These resources include free business counseling and training through a network of partner organizations like Small Business Development Centers (SBDCs).

These partners can provide expert advice on everything from writing a business plan to navigating the complexities of marketing and finance. The SBA also guarantees loans made by partner lenders, making it easier for small businesses to access capital.

While the SBA doesn’t provide grants for starting or expanding a general business, it does oversee grant programs for specific purposes, such as scientific research and development (SBIR/STTR programs) and for community organizations that support entrepreneurship.

For the millions of Americans whose side hustle is their first foray into entrepreneurship, these existing government programs can offer a crucial source of guidance and support.

Our articles make government information more accessible. Please consult a qualified professional for financial, legal, or health advice specific to your circumstances.