Handcuffing Freelancers Is Bad For Economy And Small Business
Addressing the persistent problem of inflation requires pro-growth fiscal and regulatory policies in addition to concerted tightening by the Federal Reserve. Unfortunately, President Biden’s plan to address inflation, as outlined in his recent Wall Street Journal editorial, would implement the exact opposite.
Instead of empowering entrepreneurs to accelerate growth and improve prosperity, President Biden’s plan calls for government-driven growth that imposes more regulations and increased government spending on an already volatile economy. The higher federal spending is simply unsustainable and will, one way or the other, burden the economy with an unaffordable increase in the tax burden.
The results from anti-entrepreneur economic policies, exemplified in states like California, demonstrate the folly of President Biden’s approach. These states handcuff their risk-takers by enacting policies that make it harder for entrepreneurs to succeed. Their policies set taxes high, heap on the regulation, and make it hard to obtain professional licensing and business permits.
In fact, when President Biden champions the PRO Act, he is pushing legislation that is already law in California, Assembly Bill 5. Under AB 5, freelancers, particularly those working in the gig economy, have been reclassified in a way that makes it difficult for most of them to work as independent contractors. It’s anti-worker, anti-job, anti-entrepreneur, and anti-freedom.
The benefits from the gig economy flow not only to the independent contractors who want to be a business of one, but to the owners of the local shops and companies who have found locating the right workers is one of their most pressing problems. With multi-talented gig workers free to work on a diverse array of projects by seamlessly moving from one company to another, small business owners can more easily find workers who have the skill sets they need, allowing them to better manage their operations.
California passed the anti-entrepreneurial AB 5 in 2019, but the job losses and forgone opportunities began to stack up even before the bill became law. Reflecting these costs, it was the current and potential gig workers who were the most outraged from AB 5’s implementation. Surveys demonstrate that gig workers don’t want to work traditional, 9-to-5, wait for the whistle to blow, union jobs.
Independent workers in many fields harshly criticized state lawmakers for denying them the freedom and flexibility of gig work, holding rallies at the State Capitol and across the state. The opposition to AB 5 led to broad support of Prop. 22, which essentially exempted drivers and delivery workers from AB 5 regulations. The PRO Act would do similar damage at the national level.
Unlike California, Texas takes a lighter tax and regulatory approach, which pays economic dividends. According to WalletHub, Texas is the best state in which to start a new business. The Motley Fool ranks Texas fourth for startups. On any given day, more than 400 Texans start a new business, and a shade more than half (50.9%) of them are expected to last five years. Robert Allen, president and CEO of the Texas Economic Development Corporation, says entrepreneurship is a “Texas state of mind.”
But economic vibrancy is just part of the story. Entrepreneurship also creates large economic benefits for minority communities.
Only Hawaii, at 54.7%, has a higher percentage of small businesses owned by minorities than Texas, which logs in at 39.3%. According to research from FitSmallBusiness.com and YouGov, Texas is second – Georgia is first – on a list of the best states for black entrepreneurship. Minority entrepreneurship is essential to empowering people economically, lifting those at the bottom out of poverty, and improving social mobility. Entrepreneurship, says the Hamilton Project, “may help close the gender wealth gap as well.”
Addressing the increasing economic uncertainty, rising inflation, and declining consumer confidence requires a pro-growth economic response from Washington D.C. The right policy focuses on broad-based deregulation to reduce costs on businesses, encourage entrepreneurship, and incent greater economic activity.