Last week, the California Senate passed a new bill that will cause somewhere between one million to two million workers, perhaps even more, to lose their status as independent contractors. If California governor Gavin Newsom signs the bill, an independent contractor will have to satisfy the following legally binding criteria:
The first of these three requirements highlight just how difficult it will be to qualify as an independent contractor in California. And all three requirements taken together will make it nearly impossible to be classified as an independent contractor. The obvious intent of this worker reclassification bill is to force workers who presently work as independent contractors into old-school employer-employee contracts.
Are you looking to hire a gardener, housekeeper, handyman? Be careful, because according to this new bill, all these people may be required to be treated as your formal employees.
This is an incredibly dangerous bill, and not just for gig-economy companies such as Uber and Lyft. Following the bill’s passing in the state senate, media headlines trumpeted “Big Win for Labor,” but this is about as misleading as can be. Rather, this bill is likely to be a big loss for most everyone other than unions, politicians who are supported by unions, and the state’s unemployment and disability reserves. And the biggest losers will be those whom the bill’s “winners” claim to support: immigrants, workers without advanced education, lower-income households, and women, who often require much more flexible schedules than men.
Sharply curtailing the use of independent contractors will raise business costs, which in turn will raise prices, reduce demand, increase business failures, and depress economic activity. When analyzing economic policies, there is no more of an inconvenient truth than the laws of supply and demand, which tell us that this bill will be a huge negative for the State. But the bill’s supporters are turning a blind eye to this.
Higher business costs will not be due to businesses that previously were “exploiting workers and shirking their social responsibilities,” as has been frequently argued by supporters of the bill, including Newsom. Rather, app-based businesses will have to completely change their organizational structure and create entirely different business plans.
App-based businesses such as Uber and Lyft are rightly concerned, because forcing them to hire their independent contractors as formal employees requires them to depart sharply from what they currently do, which is to create proprietary software that matches drivers with riders, and manage how that software is used.
Instead, Uber and Lyft will now become taxi companies, in which they will need a much larger human resources department, as well as a scheduling and strategy department to figure out where to send drivers and when. They would need to deal with the myriad issues that arise when managing employees, including determining which drivers get peak-demand schedules, such as Friday nights, and which get low-demand schedules, such as Sunday mornings.
Not surprisingly, Uber and other app-based companies have pledged $90 million to fight this bill should it become law.
There is no doubt that the costs of complying with this bill will be much higher for gig-economy businesses such as Uber. An important reason this bill is so dangerous is that much of our recent economic growth is from these gig-economy businesses. Forbes estimates that roughly 36 percent of today’s workers are in the gig economy, accounting for about 57 million US jobs.
These 57 million jobs have been created in just the last 10 years. The Great Recession was kept from being much worse because the gig economy developed around the same time and created new and much-needed economic opportunities when jobs across many traditional sectors, including autos, construction, and finance, were plummeting.
Governments should be thanking those who took enormous risks, particularly at the time of the Great Recession, to create these entirely new app-based businesses. They are now a fundamental part of the US economy and are creating substantial new economic opportunities, as well as providing new services that consumers desire.
But instead, California is risking killing the goose that laid those 57 million golden eggs. It is hard to conceive of a worse state-level economic policy that realistically could become law.
So who benefits from this? It is potentially a win for unions, who want the bill because it creates a large new pool of potential union members. I say “a potential win,” because unionization in the private sector is now below six percent, and there is no reason to expect that trying to unionize gig businesses will be any different. And since unions want the bill, it is no surprise that state lawmakers, who are supported by unions, want it.
But this bill can devastate economic opportunities for those who are presently independent contractors and who would be forced to become employees. A recent Los Angeles Times column included interviews with those who presently are independent contractors but who would lose that classification if the bill becomes law.
The interviews predictably show that current independent contractors value schedule flexibility very highly and are extremely concerned about scheduling difficulties should they become employees. One Uber driver noted that his wife was fighting breast cancer, and his ability to determine his own driving schedule meant that he was able to take her to all her medical appointments. He worries about what will happen if he must become an employee and lose his ability to determine his own driving schedule.
Another Uber driver, one who supports the bill, claims that his pay is too low, and hopes that this reclassification will increase his pay. And Uber, which lost $5 billion last year and is currently laying off some of its professional staff, might agree with him that his driving services are undervalued. But what matters is the market value that riders – not rideshare drivers – place on this service. Rideshare drivers who support this bill may very well be in for a negative surprise if this bill becomes law.
Not so long ago, this bill would not have seen the light of day in California. At one time, state political leaders understood that their job was to promote freedom and economic opportunities for all. Sadly, this is no longer the case, and the most vulnerable in the state are the ones who will lose the most if this bill becomes law.
One year ago this month, opponents of the FCC’s decision to loosen Title II regulations told us the Internet as we know it would end. It didn’t.
June 11, 2018, was to be a date that would live in infamy, when the Federal Communications Commission (FCC) repealed the Obama-era net-neutrality rules. It was a decision met with widespread criticism throughout the country. Fire, brimstone, throttled Internet speeds, the silencing of minority voices, attacks on the LGBTQ community, and the end of the internet as we know it were all imminent, according to liberals. We would be getting the Internet “one word at a time.”
One year after the “day the Internet died,” let’s conduct a post-mortem on the post-mortem.
Starting with Bernie Sanders (I., Vt.), who declared that repealing net neutrality would be “the end of the internet as we know it.” He added that it would be “a disastrous decision, it will impact every American. It will give huge advantages to big corporations over small businesses, to big media companies over smaller media outlets.” Has any of this come to pass?
Meanwhile, Senate minority leader Chuck Schumer predicted that the Restoring Internet Freedom Order, as the administration called it, would make it impossible to stream content on your phone, and would cause shows to lag on Netflix. Ask Netflix whether its business has taken a hit: The Sandra Bullock thriller Bird Box obliterated its records this past December.
That self-appointed bastion of truth in journalism, CNN, echoed Senator Sanders’s opinion in a headline, opining that with the repeal of net neutrality, it was the “end of the Internet as we know it.”
Senator Ed Markey (D., Mass.) said that repealing net neutrality would “create a digital oligarchy that serves the wealthy few.” Senator Tom Udall (D., N.M.) said that “ISPs would create internet toll lanes” and would stifle innovation and competition. Senator Richard Blumenthal, who has exaggerated once or twice in his life, said that students, innovators, consumers, and entrepreneurs would all suffer because of the repeal. The Twitter account for the Senate Democrats sent a vertically aligned tweet, separated by paragraph breaks, in a hyperbolic attempt to show how burdensome an Internet without net neutrality would become.
The culture industry got in on the act. Hollywood stalwarts such as Cher, Avengers actor Mark Ruffalo, and Alyssa Milano sought to convince the masses that the net-neutrality rules were necessary for Americans to enjoy a throttle-free, open Internet. The tone was apocalyptic.
The ACLU piled on, saying that the quality of Internet connection and the content available on the Internet were “at risk of falling victim to the profit-seeking whims of powerful telecommunication giants.” Inserting class warfare into the fervor, they declared that the FCC could “favor the content providers who have the money to pay for better access.” Anything but net neutrality, we were told, would result in “authoritarian” rule of the World Wide Web.
Yet we’ve seen the opposite of the Internet Armageddon these sages predicted. Internet speeds actually increased by 40 percent in the United States last year. The data show that there has been a record number of broadband deployment in U.S. homes. Investment continued to grow in 2018, as the country, says the U.S. Telecom association, an opponent of Title II regulations, “expanded on the momentum shift we saw in 2017 when the FCC initially signaled its intention to restore a forward-looking regulatory framework for broadband.”
As the United States progress toward 5G, utility-style Internet regulations impede the development of new technology. The stubborn fact is that Americans have access to faster Internet than ever before. A year after the Restoring Internet Freedom Order went into effect, there have not been any attempts to limit access of content providers. ISPs have not changed the way they charge customers, and the doomsday scenario has not come to pass of an Internet where content is provided only on an à la carte basis.
Opponents of net neutrality could have made their case without channeling a dark, ominous, apocalyptic future. For example, some have argued that net-neutrality repeal would permit ISPs greater authority to promote their own services, limiting consumer choice. However, concerns such as these were all too rarely expressed in political rhetoric. Equating the repeal of net neutrality to an attack on the LGBTQ community, an attempt to silence marginalized people, or cutting off access to reproductive rights was an outlandish attempt to mobilize the Left’s political base. A year’s time has revealed as much.
By Ramesh Ponnuru • National Review
Gorsuch confirmed, ISIS defeated, taxes cut: The Trump administration has compiled a solid record of accomplishment in its first year, one that compares well with the records of many of its predecessors.
Two of the biggest accomplishments came late in the year. The prime minister of Iraq declared victory over ISIS on December 9. Republicans reached a deal that seemed to secure passage of a tax bill on December 15. Until then, it appeared possible that 2017 would end without an all-Republican government enacting any major legislation.
Now the Republicans’ policy record looks better, at least as most conservatives see it. The tax bill advances several longstanding conservative objectives. It cuts tax rates for most Americans, slashes the corporate-tax rate for the first time in decades, expands the tax credit for children, limits the reach of the estate tax and the alternative minimum tax, and scales back the tax break for expensive homes. By scaling back the deduction for state and local taxes, it may encourage a more conservative fiscal politics in the states. And it allows drilling to proceed in the Arctic National Wildlife Refuge.
Scott Pruitt, the administrator of the Environmental Protection Agency is taking the lead on this, but expect it to spread to other agencies, including the DOJ. It’s a good start, but there are other problems in the lawfare arena that need to be addressed to ease tensions and restore order to the legal system.
Consider the attacks on Big Oil, which started with a novel legal theory that presupposed the U.S. oil and gas industry deliberately conspired for several decades to deceive the public about climate change.
That theory became an allegation which, when backed by several of the attorneys general of more than a dozen states, turned into litigation that threatens to set a number of dangerous legal precedents while undermining the nation’s economic vitality.
Elon Musk’s business model is a travesty.
Elon Musk’s SpaceX has been in recent headlines with a recent launch of a spy satellite. In fact, SpaceX is better at well managed and scripted messaging than it is at actually launching cargo into space in a timely and successful fashion. Always the public relations maestro, Musk announced that he plans to reuse every major component of the rocket by 2018. One of the themes SpaceX has carefully crafted is that it represents the future of “free-market” space flight.
The problem with this public relations hype is that it bears little resemblance to reality. Whether it is SpaceX or Musk’s electric car company, Tesla, the business model is based on lining up billions in taxpayer-provided subsidies and obtaining exclusive regulatory benefits and exceptions. Then, they engage in slick marketing to convince everyone how free-market and innovative they are.
Tesla survives on the back of hefty subsidies paid for by hard-working Americans just barely getting by so that a select few can drive flashy, expensive electric sports cars. These subsidies were originally scheduled to expire later this year, and Tesla is lobbying hard to make sure that taxpayers continue to pay $7,500 per car or more to fund their business model. Tesla even tried to force taxpayers to pay for charging stations that would primarily benefit their business. That is not what Musk’s high priced image managers will tell you, but it’s the truth. Continue reading
New burdensome regulation issued every 3 days
The federal government has imposed a new major regulation every three days since President Barack Obama took office, as the administration has shattered the record for implementing regulations costing the economy $100 million or more.
The Obama administration has now issued 600 major regulations, the center-right policy institute the American Action Forum noted in a recent report.
“One year ago, the American Action Forum (AAF) celebrated a regulatory milestone, of sorts: 500 major regulations,” wrote Sam Batkins, director of regulatory policy. “A major regulation has an economic impact of $100 million or more and can significantly affect prices for consumers.” Continue reading
By Rich Lowry • RealClearPolitics
The ride-sharing service is synonymous with the new efficiency and convenience enabled by information technology, and is anathema to regulators and entrenched interests everywhere. Add to the list of its critics the presumptive Democratic presidential nominee.
Hillary Clinton didn’t mention Uber by name but warned about the disruption caused by it and other companies in the so-called sharing economy. Her husband wanted to build a bridge to the 21st century; Hillary worries about the downsides of “advances in technology and expanding global trade.” Continue reading
The law’s perverse incentives will have the nation working fewer hours, and working those hours less productively.
By Casey B. Mulligan • Wall Street Journal
Millions of people pay a significant portion of their income for health insurance so they and their families can get good health care when they need it. The magnitude of their sacrifices demonstrates the importance that people ascribe to health care.
The Affordable Care Act attempts to help low- and middle-income families avoid some of the tough sacrifices that would be necessary to purchase health insurance without assistance. But no program can change the fundamental reality that society itself has to make sacrifices in order to deliver health care to more people. Continue reading
“Clerisy” class does the bidding of tech oligarchs to detriment of the middle class.
by Glenn Harlan Reynolds • USAToday
We’ve heard a lot of election-year class warfare talk, from makers vs. takers to the 1% vs. the 99%. But Joel Kotkin’s important new book, The New Class Conflict, suggests that America’s real class problems are deeper, and more damaging, than election rhetoric.
Traditionally, America has been thought of as a place of great mobility — one where anyone can conceivably grow up to be president, regardless of background. This has never been entirely true, of course. Most of our presidents have come from reasonably well-off backgrounds, and even Barack Obama, a barrier-breaker in some ways, came from an affluent background and enjoyed an expensive private-school upbringing. But the problem Kotkin describes goes beyond shots at the White House. Continue reading
Ride-share services benefit consumers, but the taxi commission doesn’t want to give us a good deal.
The regulatory knives are out for Uber and Lyft, two ride-sharing services that make life easier for consumers and provide employment opportunities in a stagnant economy. Why are regulators unhappy? Basically, because these new services offer insufficient opportunity for graft.
Services like Uber and Lyft disrupt the current regulatory environment. I have the Uber app on my phone. If I need a car in areas where Uber operates, it looks up where I am using GPS, matches me with participating drivers nearby, and in my experience gets me a Town Car in just a few minutes. It’s the comfort of a limo service, with the convenience of a taxicab. I get a better service, the driver gets a job, but now there’s competition for those entrenched companies. Continue reading
by Ramesh Ponnuru
This isn’t a case where the executive branch has simply gone beyond its authority. It’s a case where officials in all three branches of government have found a way to achieve their policy goals while shielding themselves from accountability.
Congress sends bills to the president and the president signs them: That’s how major policy changes are supposed to work. But Congress has never passed large-scale regulations to combat global warming. It has never even voted to authorize such regulations. Continue reading
How often have you heard a Democrat prattle on and on about how well Barack Obama has done with the economy, given the mess he inherited? Usually, it’s some version of, “Things are getting better, but the economy the President started with was so awful, so he’s done as well as anyone could expect.”
When Ronald Reagan took over from Jimmy Carter in ’81, things were actually worse economically compared to when Obama took over from George W. Bush in ’08. Continue reading
by Richard A. Epstein
The latest government labor report indicates that job growth has slowed once again. It is now at a three-year low, with only an estimated 74,000 new jobs added this past month. To be sure, the nominal unemployment rate dropped to 6.7 percent, but as experts on both the left and the right have noted, the only reason for this “improvement” is the decline of labor force participation, which is at the lowest level since 1978, with little prospect of any short-term improvement.
The Economic Logic of Supply and Demand
One might think that these figures would be taken as evidence that a radical change in course is needed to boost labor market participation. The grounds for that revision rest on a straightforward application of the fundamental economic law of demand: As the cost of labor increases, the demand for labor will decrease. There are, of course, empirical disputes as to just how rapidly wage increases will reduce that demand for labor. Continue reading
The website Regulations.gov lists 141 regulations that have been posted by federal agencies in the last three days alone. Of these regulations, 119 are “rulemaking,” meaning they establish a new rule. Twenty-three are “non-rulemaking,” meaning the regulations does not establish a new rule.
The largest group of regulations have to do with energy and environmental issues, many of them issued by the Environmental Protection Agency. Continue reading
To avoid adversely impacting the economy before the 2012 election, Obama delayed new rules and regulations on everything from ObamaCare to new environmental and workplace regulations.
by Juliet Eilperin • The Washington Post
The White House systematically delayed enacting a series of rules on the environment, worker safety and health care to prevent them from becoming points of contention before the 2012 election, according to documents and interviews with current and former administration officials.
Some agency officials were instructed to hold off submitting proposals to the White House for up to a year to ensure that they would not be issued before voters went to the polls, the current and former officials said.
The delays meant that rules were postponed or never issued. The stalled regulations included crucial elements of the Affordable Care Act, what bodies of water deserved federal protection, pollution controls for industrial boilers and limits on dangerous silica exposure in the workplace.
The Obama administration has repeatedly said that any delays until after the election were coincidental and that such decisions were made without regard to politics. But seven current and former administration officials told The Washington Post that the motives behind many of the delays were clearly political, as Obama’s top aides focused on avoiding controversy before his reelection. Continue reading