The option to work as an independent contractor is a valuable one, and the federal government shouldn’t be eliminating it as a sop to unions.
President Biden claims that competitiveness is one of his top priorities in economic policy, but when the interests of organized labor contradict competitiveness, he sides with organized labor. We’ve seen it with his support for the Jones Act, which guarantees an uncompetitive domestic-shipping industry by design but has strong union support. It’s the same story with independent contractors. The gig economy has injected competition into countless sectors over the past decade, but if restricting it makes unions happy, Biden is for restricting it.
The piece by Sean Higgins today on the Department of Labor’s proposed rule that would make freelancing more difficult gets at this important issue. The way some of the media is covering it does not accurately reflect the impact this new rule would have on the American economy.
In a Cato Institute blog post, Walter Olson gives one example of how the Washington Post isn’t giving readers an accurate account of what the rule does:
“Biden wants to let gig workers be employees,” reads the headline on a Washington Post story. The lead paragraph says the Biden Department of Labor intends to “make it easier” for independent contractors to be considered employees, “granting them access to benefits and federal labor protections.”
“Let” is truly a bizarre wording here, reinforced by words like “easier” and “granting.” The proposed Labor Department regulation doesn’t grant permission, it imposes a requirement. It would force employee status on many workers who actively wish to remain independent contractors. Unless you grasp that, you’re not going to grasp the mounting anger among many freelancers, independent truckers, and others whose livelihood is threatened by DOL’s proposal to sharply restrict independent contracting in the workplace.
As Higgins writes, one of the underlying issues is unionization. It’s much harder to unionize gig-economy workers because there was no gig economy when the National Labor Relations Act was passed in 1935. U.S. labor law is structured around the assumption of a clear employer-employee relationship, and the whole point of the gig economy, and independent-contractor work in general, is that that relationship does not exist.
Workers choose to be independent contractors for entirely sensible reasons. They get more power to determine their own work schedule, and the flexibility of contracting allows them to be small-business owners, rather than employees of a corporation. There are trade-offs to that decision; independent contractors don’t get employer-sponsored health benefits or some of the protections of labor law that apply only to employees. But workers know these trade-offs and still choose the independent-contractor route anyway.
We’ve already seen a test run of something similar to the DOL rule in California, where A.B. 5 has threatened the entire trucking industry’s business model. The U.S. trucking industry is extremely competitive and dominated by small businesses, including many single-truck owner-operators who work as independent contractors with shippers. Most truckers are happy with this arrangement, but the Teamsters are not, and since A.B. 5 has gone into effect, they have been adding new members.
The link between A.B. 5 and the DOL rule is more than mere ideological alignment. As Steven Greenhut points out for R Street Institute, the deputy labor secretary, Julie Su, was labor secretary in the California state government before joining the Biden administration. “It’s bad enough for a state with nearly 40 million people to hatch such a bad idea in its Capitol laboratory, but it’s far worse when regulators can quietly adjust the law and impose it on a nation of 330 million people,” Greenhut writes.
The option to work as an independent contractor is a valuable one, and the federal government shouldn’t be eliminating it as a sop to unions. If Republicans retake control of Congress, they need to be prepared to fight back against this rule from the DOL and allow workers who want to be freelancers to make that choice.