No Gigs in the Gig Economy
May 10, 2021
Would an economy with less-flexible work schedules benefit workers? The Biden Administration appears to think so.
Legally, workers are either employees or independent contractors. Employees work for an employer that controls their schedule. Independent contractors work for themselves. Both arrangements have advantages. Being an employee provides the stability of a set schedule and predictable income. Independent contractors can largely pick their own hours—they are their own boss.
Self-employment opportunities have grown rapidly with the growth of the “gig economy” – arrangements where customers contract directly with workers for a specific job. Anyone with a smartphone can now easily connect to potential clients. Companies like Uber and Lyft allow Americans to work when they want, and as much (or as little) as they want.
This helps Americans who value flexibility. Some Americans have family obligations, school, or a main job they must schedule work around. Traditional 9-to-5 jobs may have difficulty accommodating these needs. But gig economy workers pick when they work. A full 85 percent of Uber drivers say they partner with Uber “to have more flexibility in my schedule and balance my work with my life and family.”
Gig-economy flexibility particularly helps women. Studies find women value flexible schedules more than men. Gig-economy jobs meet these needs. Alan Krueger, the former Chair of President Obama’s Council of Economic Advisers, found 42 percent of female Uber drivers primarily partner with Uber because their family, education, or health obligations mean they can only work part-time or flexible schedules.
Without flexibility many gig workers would work much less, if at all. Economists find that rideshare drivers—a large portion of the gig economy—would work two-thirds fewer hours if they had to commit to a fixed schedule. Large majorities of Uber drivers say gig work has improved their incomes, their financial security, their work-life balance, and their quality of life. Traditional jobs work for many Americans, but self-employment works better for many others.
Unfortunately, the Biden Administration is trying to restrict this flexibility. The Trump Labor Department issued regulations clarifying when workers are employees or independent contractors under the Fair Labor Standards Act. The Trump Rule said workers are usually independent contractors if they control how and when they work and if they can earn profits (or take losses) based on their investments and initiative. The Trump rule would classify most gig economy workers as independent contractors.
The Biden Administration just rescinded that rule. Biden’s Labor Secretary also indicated the administration will reclassify many gig workers as employees. If so, gig workers will lose much of the flexibility they value.
Turning gig workers into employees requires the platforms to pay at least the minimum wage and overtime. But companies cannot let employees assign themselves unlimited overtime work. Nor can they pay workers to work whenever they want, irrespective of customer demand. If gig workers become employees, the platforms will have to control their schedules to control their labor expenses. Platforms would start assigning schedules instead of letting workers pick them at will. This would destroy the flexibility that attracts workers to the gig economy in the first place.
Three-quarters of rideshare drivers say they would rather have a job where they can choose their own schedule and be their own boss to a steady 9-to-5 job. The Biden Administration may not give them that choice for much longer.
James Sherk is Director of the Center For American Freedom at AFPI. Previously, he served as Special Assistant to the President for Domestic Policy on the White House Domestic Policy Council and was a fellow at the Heritage Foundation.