Issues & Insights
Gary Riggs

The Buttigieg Plan To Kill American Jobs

I&I Editorial

The most destructive force to hit California in 2019 wasn’t a natural disaster, but a legislative assault that threatens to kill the gig economy. It’s so baleful, so coldly cruel that Democratic presidential candidate Pete Buttigieg wants to take it national.

California’s Assembly Bill 5 is a job killer. It virtually outlaws freelance and independent contract work in the state. All workers, with a few exceptions and exemptions, now have to be hired employees so they can secure the costly basket of government-imposed benefits. Only those who can meet the standards of a three-pronged test concocted by a court are free to continue to earn their freelance and contract income. It’s a bar so high few can even see it.

Nearly 2 million Californians out of a labor force of about 19.5 million rely on freelance and contract work for income. It gives them the freedom to make their own schedules, balance work and school, make extra money to see them through financial emergencies, supplement their other income, and avoid supervisors and even tasks they don’t like.

Says the Bureau of Labor Statistics: “Fewer than one in 10 independent contractors would prefer a traditional work arrangement.”

The law is a gift to unions. But workers of California are uniting against AB5, which disproportionally harms women, especially minority women, and are demanding lawmakers reverse their error. Under the #AB5 twitter handle, a self-identified female entrepreneur says she supports “anyone working to repeal #AB5,” and tells politicians they “should not be able to interfere with” people’s “freedom and ability to work.”

“This is unacceptable, unAmerican and must be overturned.”

Another AB5 victim says the legislation “didn’t solve the gig problem,” but instead “torpedoed almost all freelance and consulting work in CA. #FixAB5.”

Even the stubborn Blue State politicians who boiled up this rancid stew have to acknowledge a raw nerve has been exposed.

AB5 is likely a business killer, as well. In today’s highly regulated labor-management climate, some companies have had to build their business plans around contract workers. Many startups simply cannot afford the steep costs wrapped up in the labyrinth of government rules regulating hired employees.

“Independent contractors, on average, cost about 66 cents on the dollar for every hour they work compared to a full-time employee,” says the R Street Institute’s Jarret Dieterle.

The group expects California businesses will be paying an additional $1.3 billion to nearly $7 billion a year under the AB5 regime. Imagine the costs across 50 states.

It’s unclear if Uber, Lyft, DoorDash, TaskRabbit, Postmates, and many other businesses that have made life more convenient for consumers, and provided incomes for workers, can survive AB5. They feel it’s an existential threat and are justifiably fighting back. Uber, Lyft, and DoorDash have little choice but to spend $90 million of the revenue they’ve earned to fund a 2020 California ballot initiative they hope will save their businesses.

Buttigieg, meanwhile, is promising that he will keep workers and businesses in line. No freedom for them the operate as they wish.

“Misclassifying workers as ‘independent contractors’ is fraud,” he tweeted last week, “and it punishes our entire economy. I will empower the Department of Labor to hold employers accountable while expanding protections to 15 million more workers.”

It’s an ongoing theme for him.

“If elected, the mayor of South Bend, Indiana, said he would guarantee gig-economy workers the right to unionize,” Business Insider reported last summer.

“He would also make it more difficult for Uber and Lyft to classify their drivers as independent contractors, therefore granting them minimum wage and overtime pay.”

Workers could retain their freedom under a Buttigieg administration only if they are able to pass the same nearly impossible-to-pass test that California has.

Not unexpectedly, Democratic presidential Sen. Elizabeth Warren of Massachusetts aggressively supported AB5, while fellow candidate, and frontrunner in Iowa according to at least one poll, Sen. Bernie Sanders of Vermont introduced a Senate bill in 2018 that would require the AB5 test to be applied to federal labor law.

And while it might seem former Vice President Joe Biden is not as eager as the others to force AB5 on the rest of the country, given that the hasn’t been as loud about it as his rivals, he’s promised to “aggressively pursue employers who violate labor laws, participate in wage theft, or cheat on their taxes by intentionally misclassifying employees as independent contractors.”

AB5 is a nasty piece of legislation, as malign as any that has emerged from California’s anti-liberty lawmaking machine. The freelancer who tweeted “the income that enabled me to pay bills & eat was wiped out practically overnight” well summarized its destructive effects. That the top Democrats want to inflict AB5 on an entire nation clearly shows they are no friends of America’s workers.

— Written by J. Frank Bullitt

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  • The Progressive goal: More government dependent unemployed people, more failed businesses. The Minimum Wage law wasn’t effective enough by itself.

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