Microbusinesses are thriving. But for how long? They are the perfect targets to be taxed or regulated to death in California.
According to Alexis Podesta, a small-business owner who was secretary of the Business, Consumer Services, and Housing Agency under Govs. Gavin Newsom and Jerry Brown, microbusinesses are playing an “increasingly crucial role in California.”
“Anyone who lives here knows that there’s also a boom in the number of people who are starting their own microbusinesses,” Podesta wrote last month in Capitol Weekly. “These are the people opening food trucks and e-commerce sites to sell their handmade goods, and the designers and consultants putting out their own shingles.”
Now for some data:
Venture Forward says there are roughly 3.8 million microbusinesses across the state. Two-thirds are in Southern California, and almost a quarter in the Bay Area; 7% are in the Central Valley, and 2% are in Northern California. According to Cameo, “California’s statewide Micro Enterprise network,” “the multiplier effect for a small local business on a local economy is twice that of a national chain.”
“The more microbusinesses there are in a community, the better the economy works – for everybody,” adds Podesta, who also noted the state ranks fifth in the nation in microbusiness density.
The benefits of microbusinesses won’t keep policymakers off their necks, though. If they continue to grow, legislators will see them as a political opportunity to be exploited.
It wasn’t long ago that the gig economy was a welcomed trend. A Wired contributor thought in 2013 that independent contracting “could be the force that saves the American worker.” In 2014, a gig worker explained to the New York Times that freelancers were “establishing a new way to work – and in the process, they’re cultivating a new way of life.” A year later, Fabio Rosati, then-CEO of Upwork, said the 53 million Americans who were then freelancing were contributing “more than $700 billion to our national economy and help U.S. businesses compete and find the skills that they need. This is just the start: The connected era we live in is liberating our work force.”
The same gig worker quoted by the Times wrote an Atlantic piece in 2011 that was headlined “The Freelance Surge Is the Industrial Revolution of Our Time.”
Despite the benefits to workers, businesses and the economy, California attacked the gig economy and its willing participants in 2019 with Assembly Bill 5. It virtually outlawed freelance work in the state, even though independent contractors overwhelmingly prefer their arrangements to traditional jobs and companies were building profitable businesses based on work forces made up of gig workers.
So, no matter how much microbusinesses improve workers’ lives and boost the economy, they’re not immune to the shackles of Sacramento, where the majority of legislators see businesses as profiteers to punish and cash caches to plunder.
While microbusinesses can receive favorable treatment from publicly funded grants and other financial aid, some microbusinesses are already dealing with an overactive government, handcuffed by the state’s occupational licensing laws. California is “the most widely and onerously licensed state,” says the Institute for Justice, its licensing laws “the nation’s third most burdensome” due to steep fees, extensive education and experience requirements, and too many licensing exams. Any added weight on the backs of microbusinesses will lead them to join the caravan of larger businesses that are leaving daily.
Kerry Jackson is a fellow with the Center for California Reform at the Pacific Research Institute.