Coronavirus-related shutdown orders and quarantines have created an immediate need for flexible and low-cost ways of delivering goods to customers—not to mention a need for creative ways to earn income from home-based work. But AB-5, California legislation enacted late last year, inhibits these essential needs and is hurting California workers.
Even under ordinary conditions, regular labor laws, especially for large firms, disincentivize companies from making long-term commitments to traditional jobs. But now we can’t project what our economic needs and capacities are going to be even two months ahead. Hiring someone in a traditional job, with hours and benefit requirements, is too expensive to contemplate given that employers do not know whether they will be able to fill any permanent jobs at all and, if so, when.
Employment decisions hinge on the costs of distributing risk. While employers are not doing regular hiring, gig workers could shoulder a host of tasks that are needed to flatten out the effects of the temporary emergency. After all, it doesn’t really matter how great the pay is, how predictable the hours are, or how generous the benefits may be, if the law prevents a job from existing in the first place.
AB-5 unintentionally has pushed all of the risks and costs of a vibrant gig economy onto lower- and middle-income individuals, those who would benefit most from flexibility to work around the current restrictive emergency policies.
Blocking work that is needed and impoverishing workers laid-off from other jobs are not the intentions of AB-5, but the law is having these unintended consequences.
The Open Letter, signed by 151 California PH.D. economists and scholars, proposes that the California State Legislature and Governor Gavin Newsom suspend AB-5.
Join us to learn more about ending the huge problems AB-5 is causing.