Imagine what life would be like without Uber, Airbnb, Neighbor, artists, actors, and even graphic designers. The gig economy has become an increasingly attractive option for Americans to flexibly earn additional income to support their families.
Currently, over 57 million Americans (36% of the population) work in jobs associated with the gig economy. It is clear that many Americans rely on jobs provided by the gig economy to find employment and financial support.
However, proposed federal legislation runs the risk of upending this flexible and desirable model, significantly impacting countless Utahns.
Despite the importance of the gig economy, it has become threatened in recent months. One such potentially damaging threat comes from The Protecting the Right to Organize (PRO) Act. This Democratic-led legislation, which passed in the House on March 9, intends to create a massive reclassification of workers that would have a negative impact on millions of Americans.
Specifically, this legislation limits, according to the National Law Review, “the definition of who can qualify as an independent contractor, forces American’s to pay union dues with no care for whether the individual worker wants to support the union, allows unions to create turbulent protests, and damages collective bargaining between unions and employers.”
This legislation represents potentially catastrophic changes to labor laws and will create incredibly negative economic impacts for both employers and their workers.
Primarily, the negative outcomes of this legislation will be felt by independent contractors who would no longer be able to participate in the gig economy. This legislation will inappropriately classify many independent contractors as employees. Thus, gig economy jobs, like Uber and DoorDash, could be wiped out under this legislation. This is troubling as this industry provides services that improve our quality of life and have become increasingly essential in the face of COVID-19.
Many independent contractors, like Justin Zemlyansky who delivers food for DoorDash, have even become heroes during the pandemic by helping deliver necessary food and products while minimizing citizen’s exposure to the virus. Justin typically works from 10 a.m. to 10 p.m. delivering food to those who are unable to leave their homes due to the pandemic. People like Justin illustrate the importance of the gig economy functioning at a high level.
Just by simply looking at how worker’s pay would be affected, it becomes easy to see why similar laws should be avoided in Utah.
Under the PRO Act, gig economy workers would be subject to minimum wage laws as they would be classified as employees, not independent contractors. While this may provide pay stability and seem beneficial, it could actually reduce the earnings of workers.
For example, Uber drivers could see wages halved. The average yearly income for a full-time Uber driver, when classified as an independent contractor, is $36,525. If drivers were receiving minimum wage when classified as employees in Utah, they would only make $15,080.
Additionally, the PRO Act may strip hard-working Utahns of jobs altogether. After the implementation of AB 5 in California (which the PRO Act is modeled after), thousands of people were simply let go from their contract jobs instead of being hired as employees. The largest example was at the Vice office. According to the Los Angeles Times, Vice loudly supported AB 5 but ended up laying off over a hundred of journalists serving as independent contractors after it went into effect.
Another source of attacks on the gig economy and labor laws comes from a Supreme Court ruling in the United Kingdom. On Feb. 19, a ruling against Uber made it so drivers can no longer identify as independent contractors. This ruling creates a similar problem as the PRO Act.
Since the ruling, it has been suggested that Uber could even potentially pull out of the UK. This could signal that other gig economy-based businesses would consider removing their business from places with similar laws to those established in the UK.
The PRO Act and the ruling in the UK will cause huge losses of capital for businesses and will ultimately increase the cost of business. This is serious as even a small reduction in employment from this sector could leave many Utahns unemployed. Additionally, the state could lose valuable tax revenue, and the impactful services these businesses provide could dry up.
We as Utahns must not allow this emerging industry to be wiped out due to protectionist interests from unions. If Utah wants to remain one of the United States’ economic leaders and continue to provide an abundance of good-paying jobs, it is imperative that gig-economy-related companies are unencumbered and not hindered.
Benjamin Shelton | Libertas Institute
Benjamin Shelton is a policy intern at Libertas Institute, a non-profit think tank based in Lehi, Utah.
