The Law That Could Kill Millions of American Jobs - America's Future Foundation

August 3, 2020

Policy

The Law That Could Kill Millions of American Jobs

By: Ericka Andersen

Millions of independent contractors — writers, artists, singers, drivers and many more — could lose their jobs in the coming year. An antiquated, over-regulated law in California known as AB-5 cuts contractors’ legs from under them by forcing businesses to offer them full benefits. 

Californians have been vocal about their disdain already, but Joe Biden isn’t listening and recently sent a tweet threatening to take AB-5 national. Most contractors have no idea how at risk their jobs are. 

Historically, individuals picking up contract work were able to choose their work with freedom and flexibility. While the stereotype may be someone making a little extra cash on the side, many modern independent contractors make high dollar salaries working for a variety of clients.

They can take temporary positions, work for any number of businesses and make their own schedules, maintaining room for growth as they see fit. 

Many are still doing this, but now, the future of their livelihoods is at stake all under the ruse of “worker’s rights.” The AB-5 law is widely misunderstood and extremely underreported. It went into effect in January 2020 and the consequences have reverberated across the country. 

What was intended to protect workers by classifying them as employees with guaranteed minimum wage, overtime pay, and paid sick leave actually harms millions of self-employed professionals and gig employees. In California and other states where similar regulations exist, it is now much more difficult for employers to classify workers as non-employees. Rather than hire their contractors, businesses have simply dropped them all together. 

I live in Indiana, which recently began enforcing a similar measure something called the ABC-test. Because of the way it is written, I’ve been denied lucrative freelance writing opportunities at major magazine publications. As a freelancer who works for myself, especially in a fragile economic time, this is crushing for a variety of reasons. Other states have related legislation, some of which has been buried for years, but has now been dug up as AB-5 in California gains notoriety as a national platform.  

Worker’s unions championing rights claim to have the best of intentions, but the effects of the law simply mean millions of self-employed professionals will no longer have careers. It’s far too expensive for companies to take on every contractor as an employee with full benefits — and most self-employed professionals and gig workers have no interest in becoming one. 

Today, the Bureau of Labor Statistics (BLS) reports that 55 million workers make up the self-employed landscape — and most of those are or will be negatively affected by AB-5. BLS also finds that the vast majority prefer this working arrangement. 

As Kim Kavin wrote in Reason Magazine

Those benefits may sound good on paper, but they make zero sense for freelancers like me. Which of the dozen or more magazines and newspapers I write for should have to pay me sick leave? How would that time be accrued when I do not write for anyone by the hour, by the day, or on a salary? Am I unemployed if my regular clients need me to write less, but my income stays the same because I write more for other clients? There is no universe in which it’s rational for people like me to be classified as traditional employees. Changing labor laws in this way wouldn’t help us; it would do exactly what it has in California and at publishing houses such as Hearst: make our clients afraid to work with independent contractors at all.”

Unfortunately, what happens in California doesn’t stay there. Because one of the largest states in the country implemented the law, other states are clamping down on self-employment regulations that could cause them issues in the future. States like New York and New Jersey have — thus far — stopped AB-5-like legislation from moving through to law, but the fight continues. 

Most Americans aren’t aware that their livelihoods may be in jeopardy, as few media outlets have done any substantial reporting on this quiet devastation of worker freedom across the country. 

Worker’s Unions know that contractors cannot be unionized, which means they lose power and money. They are behind the push for AB-5 and similar regulations that will choke gig workers out of business and into unemployment or jobs they hate. These laws limit entrepreneurship, freedom and ambition. They stifle business, erase talent and prioritize political special interests over the American spirit of independence and freedom.