Tag: Independent Contractors

Uber and the Costs of Employment Regulation

 

shutterstock_251175352Uber and its customers are rightly concerned over a recent ruling out of California that calls into question whether the company’s drivers can continue to be classified as independent contractors. As I note in my new column for Defining Ideas, however, the problem runs much deeper than just the application of California law. The entire legal framework is ill-equipped to deal with the complexities of modern labor markets:

The clear lesson to learn from this fiasco is that it is a hopeless task to apply traditional regulatory structures to modern arrangements, especially when they block the implementation of new business models. Indeed, it is necessary to go one step further: it makes no sense to apply these regulatory statutes to older businesses, too. Time after time, these statutes are drafted with some “typical” arrangement in mind, only for the drafters to discover that they must also try to apply the statutes to nonstandard transactions that do not fit within the mold. Rigidity is not just a problem today. It was a problem with the [Fair Labor Standards Act] and other New Deal labor statutes even when they were first passed.

This point is unfortunately lost on a lot of modern commentators who think that their real challenge is only to update the employment laws for the sharing economy, rather than scrap them altogether. For example, James Surowiecki, writing in the New Yorker, comes out in favor of “Gigs with Benefits,” a great title for a bad idea. He rightly notes the scads of critics who claim that Uber is disguising its employees as independent contractors are wrong, and he recognizes that calling Uber drivers employees could be the death knell for many of these gigs.

In Praise of the Sharing, Peer-to-Peer Economy

 

shutterstock_278653268Zipcar founder Robin Chase has an HBR piece, “Who Benefits from the Peer-to-Peer Economy,” where she discusses how workers are faring in the collaborative/peer-to-peer/on demand/sharing/gig economy, defining it as “marked by many platforms that engage a diversity of peers to contribute excess capacity which can be harnessed for greater impact … new platforms increasingly give the small the powers of marketing and distribution that were once reserved for the very large.” Same goes for manufacturing with 3-D printing, for instance, or MOOCs. But, she adds, policymakers must engage this new aspect of the US economy:

Governments need to recognize and prepare for this new third way of working which is neither full-time nor temporary part-time, but a new way of life. The Internet exists and everything that can become a platform will. Local and federal governments need to start tying benefits to people and not jobs, ensuring that labor is protected during this disruptive and swift transition. In a world struggling to cope with incessant disruption brought on by fast-paced technical innovation, climate change, urbanization, and globalization, Peers, Inc. is the structure for our times. It enables us to experiment, iterate, adapt, and evolve at the required pace. I’m happy this flexible new tool has come to exist. But while we are reaping the economic benefits brought on by individual contributions, we need to proactively share the productivity and innovation gains with individuals, too.

While I think the scope of the problem here has been exaggerated, Chase makes a good point, especially about tying benefits to people rather than jobs. Which is why mandating new benefits and employer costs is the wrong way to go. From my recent The Week column:

On Creating New Government Policies to Deal with the Sharing Economy

 

shutterstock_250766428Nick Hanauer and David Rolf outline a solution to what they (and Hillary Clinton, it seems) argue is a big, big problem right now: economic insecurity created by the growing sharing/on-demand/gig economy. Americans need a new social contract, one that brings more certainty and tangible benefits to all these part-timers and independent contractors. As they explain in Democracy Journal:

This is the new “you’re on your own,” benefit-free, race-to-the-bottom reality for millions of American workers. And as more new innovative businesses and business models are invented, this process will only accelerate. As the sharing economy kicks into high gear, more and more Americans will become independent contractors activated at the touch of a button on an app, working for a fleet of employers. … A robust set of mandatory universal benefits would put all employees and employers alike on an equal footing, while providing the economic security and certainty necessary for the middle class to thrive.

So what does this new social contract look like? It consists of two parts, what Hanauer and Rolf  have termed a “Shared Security Account” and “Shared Security Standards.”  here is how this system works:

The Libertarian Podcast: Uber, Lyft, and the Future of Independent Contractors

 

The left, increasingly unwilling to tolerate any social arrangements not tailored to the exact specifications of the state, has recently set its sights on dramatically narrowing businesses’ abilities to classify workers as independent contractors. In this week’s episode of The Libertarian Podcast, Professor Epstein looks at how a pair of California lawsuits against car services Uber and Lyft are advancing that goal — and what it might mean for the broader economy. Come for the legal and economic analysis, stay to hear Richard try his hardest to restrain his contempt at the mention of Robert Reich’s name.