From minimum wage to mandatory paid leave, politicians are making it increasingly more expensive for many companies to hire workers. California’s recent attack on the “gig” economy is a perfect illustration of this kind of ostensibly “pro-worker” regulation that actually ends up hurting the very working-class people it is, ostensibly, supposed to help.
And Nevadans should be paying attention, because such policy ideas are already taking root in the Silver State.
The brainchild of the state’s politically powerful labor unions, California’s Assembly Bill 5 took direct aim at the gig economy — with a clear objective of changing the way companies like Uber and Lyft depend on independent contractors, by reclassifying those workers as “employees.”
From the beginning, it should have been obvious to almost everyone that AB5 would result in even more Californians struggling to earn a “livable” wage in an increasingly expensive state. The first sign that the reclassification would result in massive job losses was the way politically connected lobbies (lawyers, physicians and insurance salespeople, for example) rushed to have their industries exempted from the new law. For the industries that didn’t have the political pull necessary for a carveout, however, the law means a fundamental change to how freelancers are used — if at all.
In fact, that disruption is already happening. New York based Vox Media, for example, had a robust network of writers in California that had previously operated as independent contractors and freelancers — precisely the way Uber drivers, tattoo artists, web developers and other “gig” workers operated prior to AB5. Despite being a vocal cheerleader for the law, however, even Vox wasn’t prepared to take on the added financial burden of reclassifying hundreds of writers as fulltime, benefit-receiving, employees. And so, instead of suddenly being showered with employer-provided benefits, those journalists now find themselves out of work after having their contracts canceled by the New York office.
The decision by Vox was a predictable one for anyone who understands how such businesses operate. After all, just like Uber or other “gig-economy” companies, contracting with freelance workers was far more financially viable to Vox than investing in a large full-time workforce. From newspapers to tech and app companies, freelancers offer an inexpensive way to build out a business or a service — and it also offers more flexibility, more autonomy and generally more freedom for the workers themselves.
After all, many Uber drivers, for example, are merely looking for supplemental or part time work on their own schedule, as is evidenced by their driving habits. The average Uber driver spends less than 17 hours a week driving for the ridesharing company — a decidedly part-time gig that offers more freedom than picking up an extra shift at a more traditional direct employer. The flexibility and autonomy of such contract work is it’s main draw for many workers. Companies like Uber understand this so well, they’ve even used such flexibility as a main component of their recruiting efforts.
Of course, freelancing opportunities have their downside as well — the lack of insurance, paid time off and other benefits among them. Tradeoffs that many workers seem willing to tolerate, given the sheer number of people trying to take advantage of such work arrangements. Nonetheless, California’s AB5 was sold to the public as a way to address some of these tradeoffs for many gig workers. In practice, it’s merely outlawing such arrangements for large swaths of workers and companies.
Understanding and articulating how California workers struggle under the state’s decision to effectively outlaw the gig economy is going to be critical for Nevada in the coming years. In 2019, Nevada’s Democrat legislature put together a task force to look at the “misclassification” of contract and freelance workers — precisely the issue AB5 was ostensibly passed to address in California. And with unions feeling emboldened by Nevada’s partisan political landscape, it quite possible many freelancers in the Silver State could soon face the same fate as their now-unemployed counterparts to the west.
If Nevada is serious about diversifying our economy and expanding economic opportunities for the state’s residents, it would be a massive mistake to follow California’s lead by regulating away opportunities for workers. We should be welcoming and encouraging any and every opportunity for individuals to earn a living — even if it is as a freelancer.
Michael Schaus is Communications Director for Nevada Policy Research Institute.
