A Big Labor Plan to Undermine the Gig Economy

A Big Labor Plan to Undermine the Gig Economy

Aug 18, 2021 Debi Ghate

The gig economy is humming along with over one-third of the American workforce now taking advantage of the flexibility these “gigs” allow. By 2023, that figure is expected to reach 52%. 

If you want to stake your claim in this digital gold rush, be sure to check out a Roundtable webinar I hosted in June entitled, “Making a Living the Gig Economy Way.” But I suggest you move quickly. Because, as history has shown, whenever the private sector creates a success story, government regulators and labor unions immediately begin plotting a way to slow it down and take a cut. As Tim Hoefer, president and CEO of the Empire Center for Public Policy, writes in a recent New York Daily News op-ed, the gig economy is no exception.

In a gig economy, employment-seekers establish work arrangements as independent contractors as opposed to full-time employees. Some people use these gigs as a primary stream of income while others use them to supplement their everyday jobs. And they have been evolving in new and interesting ways as technology continues to create innovative platforms to connect customers and providers. Think Uber, Instacart and Task Rabbit.

It all seems to be working just fine for companies, customers and especially gig workers, who appreciate the autonomy and better work-life balance these opportunities provide. 

But, as Hoefer writes, it’s not working for big labor, and labor unions are actively working with allies in government to get their share of the gig pie, even if it means harming workers, taxpayers and the economy.

A push to revamp the collective bargaining status of drivers steering passenger and delivery vehicles for app-based firms like Uber, Lyft and DoorDash stalled earlier this year in the New York State Legislature. It’s time to send the idea to the scrap pile.

Ride-share companies were making about 750,000 passenger trips per day in New York City before the pandemic struck. But as the city emerges from the pandemic, a change is brewing that would rope drivers into a form of “sectoral bargaining” and impact the economy much more than advocates admit. Sectoral bargaining imposes collective bargaining on an entire sector of employees — for instance, all app-based drivers, not just those driving for Uber.

As Hoefer points out, New York is not the only state entertaining new gig economy regulations at the behest of labor unions. “Urged on by allies in the labor movement, lawmakers in California last year sought to reclassify gig workers as employees instead of independent contractors so that unions can organize them and represent them in collective bargaining,” he writes. Thankfully, California voters rejected the statewide referendum.

Hoefer also highlighted legislation at the federal level to “make independent contractors subject to unionization.” Euphemistically named the Protect the Right to Organize Act, the legislation has been called “a direct threat” to the 59 million people who do independent contract work and the 30 million small businesses who depend upon them. The bill passed the House along partisan lines but stalled in the Senate.

According to Hoefer, the brand of sectoral bargaining under consideration in New York was rejected in the United States almost 100 years ago when legislators debated the National Labor Relations Act because it was deemed unconstitutional, “an excessive intrusion into the economy,” and especially damaging to small businesses. 

Sectoral bargaining is popular in France, Hoefer notes, where “citizens suffer from perennially high unemployment and low growth.”

After our webinar “Making a Living the Gig Economy Way,” I followed up with one of our panelists, the Competitive Enterprise Institute’s Iain Murray, and asked him what would happen to the gig economy if labor unions were successful in pushing through the intrusive regulations now under consideration. 

His response: 

“If government is successful in having most gig jobs reclassified as employment, the number of opportunities in these areas would shrink dramatically. This would be particularly burdensome for those who value flexibility, such as single mothers, who would be forced to choose between having a job and being around for their children. 

“As the opportunities shrank, there would be a consequent reduction in the wealth created by the gig economy. People who would otherwise participate in it would be forced to increase reliance on the welfare system. Costs for consumers would certainly rise – a CEI study in 2019 found that AB5 would increase the cost of a rideshare ride by 30 to 50%. Finally, there would almost certainly be consolidation in the gig economy market, resulting in yet fewer options for workers and consumers.”

In summary, on behalf of the many people who depend on the growing gig economy, the gig workers, their families, the companies who “employ” them and the customers who depend on them, the message to labor unions and regulators is clear: Hands off.

Note: Debi Ghate serves on the board of directors for the Empire Center for Public Policy.