The future is now for gig-based entrepreneurship

The future is now for gig-based entrepreneurship

With Californian Kamala Harris as vice president, it’s clear the new Biden administration is taking its cues from the once-Golden State on labor policy.

In one of its first acts in office, the Biden Administration placed a regulatory freeze on a Department of Labor regulation enacted in the waning days of the prior administration relating to independent contractors.  The rule, according to labor and employment law firm Fisher Phillips, “aims to make it easier for businesses to classify workers as independent contractors.”

It’s unlikely this rule to give more workers freedom to be their own boss and set their own schedules will survive in a Biden administration that was heavily reliant upon labor unions for money and manpower to win the 2020 campaign.

Meanwhile, House Democrats recently re-introduced the controversial PRO Act in Congress, which “seeks to reduce the use of the independent contractor classification by companies such as Uber,” according to CNBC.

Both of these efforts followed the lead of California’s liberal legislative majority, which two years ago enacted the controversial Assembly Bill 5 to severely restrict the ability of Californians to work as independent contractors.  Their goal is to increase union membership and dues and force people to work in traditional, 9-to-5, union jobs that are relics of the past.

Doubling down on AB 5-type restrictions at the national level – which may be the Biden administration’s goal with the nomination of Julie Su, California’s chief AB 5 enforcer, as deputy Secretary of Labor – would be a tremendous mistake.  It would threaten innovation and hurt the ability of Americans who have lost their jobs to put food on the table during a global pandemic.

As documented in the new Pacific Research Institute study, “The Small Business Gig,” Americans are increasingly working in the gig economy.  They don’t want government – whether in Sacramento or Washington, DC – dictating how they can earn a living.

A 2018 Gallup survey found that 36 percent of U.S. workers have some sort of a gig worker arrangement.  Whether renting out an extra room to earn cash to pay the mortgage or using an app to earn a living on an alternate schedule, the gig economy is increasing opportunities for Americans to become entrepreneurs, while providing customers with lower cost services.

Many in California state government see the gig economy as exploitative and disruptive.  But data from the ADP Research Institute shows that 70 percent of gig workers are independent workers by choice.  Gig Economy Data Hub research found that more than two-thirds of gig economy workers are satisfied with their current work arrangement.

Government shouldn’t pick winners and losers in the economy.  New restrictions on the gig economy, like those proposed in Congress, will limit people’s freedom to become entrepreneurs while institutionalizing the old way of doing work.

Instead of adopting regulations at the federal level that 58 percent of Californians – Democrats, Republicans, and independents alike – rejected when they passed Proposition 22 in November, the Biden administration and Congress should take the opposite approach and enact market-based policies to encourage entrepreneurship and innovation.

Policymakers should reverse course and repeal harmful regulations that have made it difficult to become gig entrepreneurs.  Additionally, the playing field should be leveled so gig economy workers can access tax-free benefits including health savings accounts, just like workers at larger, legacy companies.  Rather than defend the status quo industries of the past, unnecessary regulations should be reformed, so regulatory burdens and costs are kept low for one-person startups and big companies alike.

Whether politicians like it or not, the economy is rapidly changing – accelerated by Americans largely working at home over the past year during the Covid-19 pandemic – and most workers want the freedoms the gig economy brings.  It’s about time politicians understand that the future is now for gig work and policy burdens of the past must be lifted to fuel continued innovation and entrepreneurship.

Wayne Winegarden is the author of the new study “The Small Business Gig”.  He is a senior fellow in business and economics at the nonpartisan Pacific Research Institute.  Download a copy of the study at www.pacificresearch.org.

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Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.