California, Once Again, Shows Us What Not to Do
Maybe we should leave out musicians. And journalists. Okay, take out cartoonists too. The growing list of exemptions to California’s recently-passed Assembly Bill 5 (AB5) shows how legislation meant to protect and help workers is actually crippling their ability to earn a living. The unworkability of such regulation has been laid bare. The law should be completely repealed, and all efforts made to stop action being taken in states considering similar bills, like New York and Illinois.
AB5 was originally meant to target drivers for ride-sharing services like Uber and Lyft, which it did, but it has ended up affecting many more people. The legislation, which went into effect on January 1, 2020, requires that companies who hire independent contractors (i.e. a person performing work as a non-employee) reclassify them as employees. The idea is to provide these workers with the same benefits and protections a salaried worker might receive, such as health insurance.
But thanks to the Coronavirus pandemic, unemployment rates are still recovering from their record high, and people are turning to alternative work arrangements such as freelancing, gigs, and part-time work to supplement slashed incomes — or even earn anything at all. Of course, AB5 and similar legislation makes this far more difficult. By reclassifying gig workers as employees, these workers lose the flexibility to work when they want. They also become far less appealing to hire, potentially cutting off their income altogether.
AB5 restricts choice by taking away people’s freedom to work as independent contractors, to set their own hours and schedules, and to decide if those choices are good for them or not. For Uber and Lyft in particular, the ruling significantly increases their costs, and essentially makes their business model unworkable in California — meaning no jobs for the drivers, and no rides for those who rely on their services.
At a time when people are struggling to make ends meet, AB5 has proved even more harmful. It has likely made unemployment worse in California and is holding back COVID recovery. While the national unemployment rate was 8.4 percent, California’s was still at 13.3 percent at the time of writing.
The negative impact of the legislation is magnified two-fold in the crisis. First, a good portion of the types of jobs that got nixed were for food and grocery delivery services like Uber Eats or Instacart, lifeline services for many afraid or unable to leave home in the pandemic. Secondly, many “gig” jobs are work-from-home jobs, such as freelance writing, illustration, translation, or transcription. Without the option of these safer jobs people are pushed to work outside the home, increasing the risk of infection and spread.
It seems that California’s lawmakers are well aware of AB5’s negative effects, demonstrated by the fact that just few weeks ago, yet more exemptions were added to the list of exempt professions — a list now totaling over 100. Music industry workers, freelance writers, translators, and cartographers, to name a few, are now exempt, but this still leaves out many professions that will be unfairly punished for not having access to a legislator’s ear, such as private tutors, drivers, electricians, and chefs.
This legislation isn’t isolated to California, and other states have taken action or have considered their own gig economy laws. The Massachusetts Attorney General sued Uber and Lyft earlier this year for denying benefits to its workers, and in New Jersey a similar bill was met with resistance by a coalition of artists and writers, who claimed the bill would lead employers to fire freelancers rather than make them permanent employees. The failing of AB5 in California should be a warning to other states that regulating freelance workers out of work just isn’t the answer.
A list of exemptions is not enough. AB5 should be repealed, and shown as an example of what not to do. At such a crucial time, workers need the flexibility to work when they want and are able to, and consumers need the services provided by these gig economy jobs. It is clear that these laws hurt more than help, and that other states would do well by not following California’s example. Instead, they should look to ways they can make freelancing easier by removing confusing tax hurdles and onerous hoops to jump through, giving people greater freedom to decide their own working lives.
Alice Calder is a contributor for Young Voices and TradeVistas, writing on issues in trade, the future of work, and the intersection of economics and culture. Follow her on Twitter @AliceCalder.