Posted on 10/10/2015 9:01:57 AM PDT by Kaslin
While politicians seem to never tire of proposing new ways to regulate the workplace, I want to propose a radically different idea: get government out of the workplace altogether. If that’s too radical for you, here is a compromise proposal: allow parallel systems under which workers in the same industry can choose to work as employees or work as independent contractors in an essentially unregulated labor market.
Public awareness of the “gig economy” seems to have started with Uber, a company with 4,000 employees and 160,000 drivers who are not employees. A class action lawsuit in California seeks to have the drivers reclassified as employees so they can “get benefits” they are not now getting and be “protected” from employer abuse.
There are two big problems with this lawsuit: (1) it’s based on bad economics and (2) Uber drivers don’t want to be employees.
Let’s take the second issue first. I must have read a dozen editorials and news stories about Uber – all implying that we have a new class of workers who all of a sudden are being denied all the benefits of being employees, just like ….. hmmm … just like whom?
Did you know that just about every taxi cab driver in the United States is an independent contractor? That’s right. In this industry – that has been around for longer than any reader of this column has been alive – the drivers have never been employees. What makes Uber different is not that the drivers are independent contractors. It’s that Uber is using modern technology to compete in an industry that has become stodgy and insensitive to consumer needs.
Why are taxi cab drivers independent contractors? Because they prefer it. And so do Uber drivers. But how can that be? Employees get fringe benefits like health insurance and 401(k) matches. They are assured of a minimum wage. They get time-and-a-half for overtime – by law.
The answer is that the drivers – regardless of their formal education -- are smarter than the news reporters and the opinion columnists. The drivers know there is only so much money you can get from the passengers. If some of this money goes for fringe benefits that means less take home pay. This insight has been confirmed by just about every economic study of the issue that has ever been done. Employee benefits and workers’ wages are dollar for dollar substitutes. So becoming employees would not create any net gain for the drivers.
Meanwhile, there are tax advantages of not being an employee. Independent contractors, for example, can take deductions that employees typically cannot. And (ironically), since the tax relief for employer-provided health insurance is smaller than the tax credits being offered in the (Obamacare) exchanges for everyone who is earning a below-average income, millions of workers are actually better off buying insurance on their own.
The Fair Labor Standards Act of 1938 was passed at a time when the country was in the middle of the Great Depression. If there was once a need for it, that need has come and gone. Today we tell teenagers they can’t be employees if they can’t produce $7.25 worth of goods and services in an hour. But if you are an independent contractor – say an artist, actor, writer, musician and, yes, even a taxi cab driver – the federal government doesn’t care how much you earn.
Other labor market regulations work pretty much the same way. Employers can’t discriminate on the basis of race, religion, age and God knows what else. But if you are hiring a handyman for home repairs or a gardener or a maid or hailing a taxicab, you can discriminate all day and all night. If your employer supplies you with a ladder, there are all kind of safety regulations that apply to it. If you work for yourself and supply your own ladder, it can be as safe or unsafe as your like.
Does this mean that the non-employees are at a huge disadvantage? No, it’s the other way around. As I explained at Forbes the other day, markets are better at dealing with these issues than government. The evidence suggests that Occupational, Safety and Health administration (OSHA) regulations have had virtually no impact on actual worker safety. And there is no evidence that antidiscrimination laws have affected the average wages of women, blacks, Hispanics or anyone else.
However, these laws and regulatory agencies do add to the administrative costs of employment. Independent contractors and their clients avoid those costs.
This may be one reason why the unregulated sector of the labor market is growing by leaps and bounds. Writing in The New York Times notes that:
The number for the category of jobs mostly performed by part-time freelancers or part-time independent contractors, according to Economic Modeling Specialists Intl., a labor market analytics firm, grew to 32 million from just over 20 million between 2001 and 2014, rising to almost 18 percent of all jobs.
Another study, commissioned in part by the Freelancers Union, estimates that about one-third of the work force, or 53.7 million people, now do freelance work, an increase of 700,000 from a year earlier.
All this is being helped along by a relatively new phenomenon: computer apps. Writing in The New York Times, Natasha Singer says:
Ride-hailing apps like Lyft and Uber, odd-jobs marketplaces like TaskRabbit, vacation rental sites like Airbnb, and grocery-shopping apps like Instacart have clearly made travel, lodging, home renovation and dining more efficient for millions of people.
Add medicine to that list. Uber-like house calls are already available in several cities. Unless government gets in the way, they will soon be available to you.
I wonder how many of those hacks are Talleybahn fighters
Why have labor law if you are going to import millions of illegal laborers?
Perhaps people will wake up and decide that government is the problem. About 90% of the laws should go away. And 99% of the regulations should also go.
And then “ The Unions “ would have a growth spurt the likes of which would be beyond your wildest imaginations.
There is nothing wrong with unions so long as they do not have political sponsorship and protection. Same with monopolies. Actually monopolies are highly unlikely even to exist without government protection. To remain a monopoly a company would have to innovate and improve product at the same rate as if it had real competition. That is not really even possible and if it happened that way there would be nothing wrong with it being a monopoly.
If gov’t and unions were out of the picture, all employers, private or public, would have to compete for workers by putting their best foot forward (so to speak).
Exactly
Get rid of all functions of government except for military functions.
Get rid of unions, and allow any company who doesn’t want a union to crush them however they see fit (limited only by their budget).
This plan isn’t “too radical”. It’s the only plan which doesn’t lead to ruin.
Biz owners knowingly hire millions of illegal aliens. They'll do anything to keep those borders open and their conga-line of low wage laborers flowing. They have no desire to see their low wage golden goose killed. And they bankroll the campaigns of the corrupt to ensure this remains business as usual.
They've corrupted our system to the core. Profits regardless of consequences. These SOB's better hope Trump doesn't get elected.
Independent contractors
Contractors/Agency Work
Freelancers
Uber Drivers
Regulatory issues aside, I see this article as conditioning people for reduced expectations. That is, the author seems to advocate lesser forms of work as the inevitable. Such high prevalence of unstable work is something for Europe and Third World countries - not the US.
Parallel system
Only if one could not be obligated to be a less-than-directly-hired-FT as a condition of accepting work. If someone indeed wants to pursue a less stable path, it would be from full and pure volition - not from resolving a indecision of similarly bad choices.
The ones that choose the less stable path will end up being mostly individuals that could afford to go either way in any economy.
I went to work out of high school at 17. I worked in a number of jobs, many of which required me to join a union to have the job. I was in 5 different unions. None of them did me a bit of good. They only protected the absolutely WORST worker in the building, while telling the best workers to SLOW DOWN.
When I was about 41, in 1980, I struck out on my own. I had all my bills paid up for the month & I had about $69 in the bank account. I had been doing some bookkeeping on nights & weekends for small businesses, and I got busy finding more customers.
I never got a W-2 again. Only 1099’s. I didn’t make millions of $$$$$, but I could pick & choose clients & I dropped more than one who was giving me hair raising comments about how I was supposed to do their bookkeeping.
I am now 75, and still do books for 2 clients. I have done one client for over 45 years and the other for about 40 years. Didn’t have ‘PAID benefits” like vacations, health insurance, sick days, etc., but I controlled my own destiny.
If gov’t and unions were out of the picture, all employers, private or public, would have to compete for workers by putting their best foot forward (so to speak).”””
AND ALL EMPLOYEES would have to actually prove their worth and not slack off.
There is a big benefit to the gig economy. 1099 contractors pay their own taxes. W-2 employees tend to not notice all the taxes removed from their checks. This will have big political implications and might be one of the reasons Uber gets so much flak from the left.
It's also called "corporations dumping 'employees' as fast as they can". Dodging taxes, dumping off statutory and/or negotiated (as in, "we have a contract") obligations to employees.
More money for me, less for you. What's so hard to understand about that?
To persuade me that all this free-lancing is a good thing, please show me a few mansions built by, and yachts raced by, Uber drivers and "free-lance" house painters.
I'm a skeptic, go ahead and fire away. This planet is still the kingdom of the Prince of the Air until further notice.
Yes.
Why have labor law unless you’re interested in restricting and controlling a free people’s right to the direction and the product of their labor?
The independent contractor actually has a massive advantage over the employee: the ability to lower his taxable income. Owning your own business is the greatest tax break in the history of the country. It’s the one thing that could kill BigGov at all levels, but particularly the federal because it’s so dependent on the income tax.
As an independent contractor, your business related expenses are pre-tax and pre-FICA. Wake up. Forced unionism, labor law and all the government “help” to labor is simply entrapment. Have you ever seen the ants slave plantations where they milk the aphids? Employees are aphids and they’ve let their friends in government “help” them so much it’s impoverishing them.
Make labor as cheap or cheaper than capital and start making money.
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