Legislation meant to help contract workers really hurts and limits them, yet many states are following this tragic example which cripples the gig economy.
December 23, 2019
By: Bobby Casey, Managing Director GWP
Not only has technology streamlined industry and enhanced productivity multi-fold, a natural byproduct of all this is more jobs.
If you listen to the likes of Andrew Yang, you’d think that tech is just consolidating all the jobs under robots and putting nothing back. Untrue. The invention of the light bulb hasn’t killed the candlestick industry. In fact, it illuminates their factories, so they can sell more candles!
I think society is in that frustrating middle stage with technology.
As a society, we are growing and maturing with technology. People were quick to adopt anything that made production cheaper, easier, and more convenient, but still reluctant to free people from the office and desk.
That is still a sticking point. Part of that has to do with how people’s expectations are conditioned into the 40-hour work week and minimum wage paradigm.
It used to be graduate high school, go to college, get a degree, get a career, stay in career and retire.
USED TO BE… meaning not anymore.
People have been opting out of office and desk jobs. Some go on to be entrepreneurs and call their own shots. Others go on to be contractors who have more flexibility.
One major criticism is that people need to take up side work to compensate for their full-time work. That is the port through which full-time employers are vilified for making it so that their employees can’t afford to live off the one job. That’s also the same port through which gig platforms are vilified for not having a more standardized pay structure.
That’s a very miserable outlook. First off, it focuses on those creating opportunities and defines them as the problem. Second, it takes the focus off the circumstances that lead to that situation. And worst of all, the worker themselves are used as pawns but their welfare is totally disregarded.
If someone is working at a factory for 40 hours making $15 per hour and then drives an Uber in their off hours to bring in a little extra cash, the question isn’t: “How do we make that arrangement fit into our preconceived notions of how someone should be working or compensated?” Rather, the question should be: “How do we create more opportunities for people to get multiple streams of income?”
The same can be said of factory workers in developing nations. The factory was a better alternative to whatever they were doing before. Stop trying to shut down the factories because you happen to disapprove of their working conditions and start thinking of ways to introduce new, competing and even improved opportunities.
It’s true that in some cases gig work and taking on multiple part-time jobs is the lifeline for those struggling to make ends meet. But for others it’s a way to get or keep a foot in the door to a line of work they love or a strategy to keep their independence.
As a staunch advocate and perhaps a low-key recruiter for people to divorce their sedentary office lives for a life of location independence, I’m naturally an equally strong advocate for the gig economy.
With the freedom of freelancing comes the responsibility of knowing you are going to make what you earn. Here’s where the adolescence comes into play: there are SOME who want the flexibility of contract work with the security of full-time work. They are at odds with a contingent of people who want the structure of traditional full-time work with the flexibility of paying only for the work they get.
State and local governments already impose myriad barriers to entry on people wanting to become entrepreneurs. Now, in the name of defending the workers, they are doing the same thing to contractors and gig workers.
As discussed before, California measure AB-5 was supposed to give gig workers proper steady pay and benefits. Just looking out for the little guy right? Not even in the slightest. Much like minimum wage laws that have noble intentions to help the indigent. They actually hurt them the most and the hardest.
AB-5 also hit the working class the hardest. CNBC reported on one story about a guy with a full time job at a tel com company who contracts as a cartoonist on the side. Half his income was coming from his side hustle!
Since the passage of AB-5 he’s seen a drastic drop in contracts. He’s limited to 35 gigs per customer per year before they have to put him on the payroll. That’s not a lot for someone who is a regular contributor. The same is true for writers. A writer couldn’t contribute even one piece per week to a client by this standard!
Other states either already have very strict contractor definitions like this or are looking to follow suit. A more immediate consequence is that people who reside in these states get blacklisted:
“Legislators didn’t seem to understand that companies often hire people from out of state as remote freelancers, putting freelancers in California at a disadvantage, notes Steve King, partner in Emergent Research in Walnut Creek, California, which studies the freelance economy.
“But it’s not only freelancers who are worried. Emergent Research recently discussed the law with a California-based corporation that was changing its freelance hiring policies, says King. ‘They told us they were going to stop hiring California-based independent contractors,’ he says.“
What’s even worse is this is retroactive. So even though the law doesn’t go into effect until 2020, employers will need to compensate contractors they used more than 35 times since July 2019 accordingly.
Two major production sucks in the developed world: tax filing and commuting.
Studies indicate that Americans on average are commuting 25 to 26 minutes each way to work. That’s across the US. Once you get into larger cities like Los Angeles and New York you see that number skyrocket. But let’s take that number for now.
That’s about 50 minutes per day, five days a week. That’s 4 hours 6 minutes per week, or 208 hours 20 minutes per year. That’s almost five 40-hour weeks in the car. What a colossal waste of time, money, and energy.
Couple that with this astonishing data from the Tax Foundation:
Americans will spend more than 8.9 billion hours complying with IRS tax filing requirements in 2016.
All in all, tax compliance will cost the U.S. economy $409 billion this year.
The article goes on to explain how they arrived at this, and it is even more disheartening than just these two points alone.
The solution: getting the hell out of places that impose either or both. Independence, and reclaiming your time and wealth is a huge threat to the status quo. Whether you leave one state for another that is more tax and regulation friendly, or leave one country for another for the same reasons, you’re doing yourself a HUGE service.
This is the real revolution. While the establishment digs its heals in for more taxes and restrictions on how you grow your wealth and freedom, individuals do the opposite: they pull themselves up and vote with their feet and wallets.
Word to the wise: get out and stay out of states and/or countries that put the shackles on gig and contract workers. How can you ever become your own boss if the government is still telling you what you’re allowed to do to earn your way?
Click here to schedule a consultation or here to become a member of our Insider program where you are eligible for free consultations, deep discounts on corporate and trust services, plus a wealth of information on internationalizing your business, wealth and life.