The Reporter (Lansdale, PA)

Biden rule costly to workers

- By Rachel Greszler Rachel Greszler is a research fellow in the Grover M. Hermann Center for the Federal Budget at The Heritage Foundation.

Whether working full time for themselves or part time as contractor­s, picking up occasional gig work, or having a side hustle, an estimated 64 million Americans performed some sort of independen­t work in 2023.

These aren’t just accountant­s or Uber drivers. They’re IT consultant­s, makeup artists, musicians, interprete­rs, fitness instructor­s, copy editors and truck drivers — just to name a few.

But their ability to be their own boss is in jeopardy. A Department of Labor rule, scheduled to take effect March 11, would significan­tly restrict the right to work as an independen­t contractor instead of being treated as an employee.

Proponents of the rule argue workers who aren’t formal employees won’t be protected by labor laws regulating things like minimum wages, work hours and unemployme­nt insurance. They assume the regulation will simply shift contractor­s to employee status without significan­t changes in their work or lifestyles.

But California shows it doesn’t work that way.

The Golden State passed a similar law, known as AB5, significan­tly restrictin­g independen­t contractin­g. It took effect in 2020 and has proved so unpopular and damaging that the state has exempted more than 100 profession­s from the law, and voters overturned its applicatio­n to ridesharin­g and delivery services via a referendum. Yet even the watered down restrictio­ns are wreaking havoc.

Freelancer­s Against AB5 compiled a list of more than 600 profession­s that have been negatively affected by independen­t contractin­g restrictio­ns, and Americans for Tax Reform documents more than 600 testimonia­ls of workers who’ve been harmed.

Karen Anderson, the founder of Freelancer­s Against AB5 testified to federal lawmakers about children’s theaters and nonprofit youth sports clubs closing their doors; sign language interprete­rs unable to provide services to the deaf; and profession­als having to move out of state to maintain their livelihood­s.

One California­n hurt by AB5 is Monica Wyman, a stayat-home mom who started her own floral business in 2009. She hired friends—fellow moms who wanted flexible work as contractor­s for events like weddings. After AB5, Monica was unable to hire contract help, including people to fill in for her when she was battling cancer. “I don’t even have words to explain how bad this has been for our family,” Monica said. “I’m at this crossroads where I’m thinking I’m going to have to dissolve my business and close my doors.”

Economists at the Mercatus Center found that AB5 reduced self-employment by 10.5% in California. Despite the law’s intent to push more people into traditiona­l employment, AB5 led to a 4.4% drop in overall employment. Job losses were most severe — a 27.9% drop in self-employment — among profession­s in which self-employment is common.

The administra­tion’s independen­t contractor rule is likely to have similar effects, devastatin­g self-employment and cutting overall employment as well. The nation can’t afford that. Employment is already 2.6 million lower than it would be if the employment-to-population ratio were the same as it was prior to the pandemic. Even weaker employment would diminish economic growth and compound America’s precarious fiscal situation.

Being an employee — having a prescribed schedule and reporting to a boss — isn’t possible for everyone, especially people with caregiving duties or health issues.

Moreover, even independen­t workers who can work as employees are likely to be worse off. Independen­t workers say

Congress should protect independen­t workers and provide much needed clarity.

their status provides better work-life balance, the same or higher income, and flexibilit­y that leads to less stress and better health. In fact, nearly half of independen­t workers say no amount of money would cause them to go back to traditiona­l employment.

Congress should protect independen­t workers and provide much needed clarity on the issue by passing a law, such as the 21st Century Worker Act, that establishe­s a clear test, consistent across all federal laws, to determine who is an employee and who is an independen­t contractor.

Instead of trying to “protect” workers by pushing them into employment terms they don’t want or can’t perform, policymake­rs should protect workers’ rights to pursue the type of work and compensati­on that is best for them.

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