ARTICLE
The Changing Economics The Gig Economy and the Future By Lucy Miller, Chamber intern and Casey Beyer, CEO We are in a period of change. Changing populations, technologies and economies are constantly giving way to new, creative solutions for how businesses can run more effectively and more efficiently. Needless to say, some of these innovative ideas face controversy as they shape our present and how we move into the future. One such change that has sparked recent political debate is the “gig economy," a term that is relatively new to common vernacular within the last decade but that describes a concept that has been in existence for a long time. In short, it is a labor force based around the concept of being an independent contractor, technically beholden to no boss, who performs a series of small tasks over a long period of time for a variety of clientele (Forbes). This is counter to being an employee of a company and thus receive benefits such as PTO or insurance, and be required to report for specific hours of duty to perform work on behalf of an employer. Many of us know the benefits of an employee-employer relationship but in a changing economic picture where young professionals, stay-at-home mothers (and fathers) and retirees are looking to supplement their income with more flexibility – the gig economy is key. Classic examples of independent contractors include Uber and Lyft drivers, but the same principals of being an independent contractor in many cases also apply to jobs such as business consultants, tradespeople and freelance writers. To give a sense of the scale of the effect that this economy has on the lives of workers, in 2018 the Harvard Business Review reported that there were approximately 150 million individual workers in North America and Western Europe who were part of the “gig economy.” In California, where many of these gig industries are thriving, action has been taken to begin the process of potentially regulating what was previously an industry independent from uniform guidelines. The state Supreme Court’s Dynamex decision created an “ABC test” to determine who, under these new specifications, qualified as an employee versus an independent contractor. With the recent signing of Assembly Bill 5 by Governor Newsom the ABC test -- with a few alterations to the original language, such that many independently contracted professions like doctors, architects and accountants were granted exceptions -- is now becoming law in California (Cal Matters). Gig companies feel that AB 5 will act to restrict their ability to do business in the most effective manner. Gig workers on the other hand, are less unified in their opinion of the new legislation. While some feel that it will greatly benefit them by setting a standard for pay, time off, working hours, etc., others actually enjoy the flexibility that being an independent contractor provides them. In response to Governor Newsom signing AB 5, some of the biggest gig based companies such as Uber, Lyft and DoorDash, each pledged millions of dollars to fight the new legislation via state ballot initiative. Additionally they have proposed lighter restrictions on their modes of operation than AB 5 would create, such as setting minimum income guarantees and providing some sort of stipend to cover vehicle damage, with the hopes that these compromises will satisfy those on the other end of the spectrum fighting for full employee status (Cal Matters). It seems doubtful that when the legislation goes into effect in January 2020, that we will see any immediate changes from the likes of Uber and Lyft. Instead it is more likely that legal and political battles that are already underway will continue as these companies push back against employee designations for their drivers (Vox). With drivers themselves on either side of the fight, it will be interesting to see who ends up on top and how these changes will affect our local economy. The Santa Cruz County Chamber did not take a position on AB 5 during the last legislation session. As a business organization that represents nearly 600 members, many of our member are small one person operations or in some cases independent contractors. It should be further noted that in Santa Cruz County nearly 2/3 of all businesses are small consisting of one to ten employees. As a Chamber advocating for all businesses, we hope that AB 5 or any legal or ballot initiative challenge best serves the changing economy of our region.
The Changing Economics The Gig Economy and the Future By Lucy Miller, Chamber intern and Casey Beyer, CEO
We are in a period of change. Changing populations, technologies and economies are constantly giving way to new, creative solutions for how businesses can run more effectively and more efficiently. Needless to say, some of these innovative ideas face controversy as they shape our present and how we move into the future.
One such change that has sparked recent political debate is the “gig economy," a term that is relatively new to common vernacular within the last decade but that describes a concept that has been in existence for a long time. In short, it is a labor force based around the concept of being an independent contractor, technically beholden to no boss, who performs a series of small tasks over a long period of time for a variety of clientele (Forbes). This is counter to being an employee of a company and thus receive benefits such as PTO or insurance, and be required to report for specific hours of duty to perform work on behalf of an employer. Many of us know the benefits of an employee-employer relationship but in a changing economic picture where young professionals, stay-at-home mothers (and fathers) and retirees are looking to supplement their income with more flexibility – the gig economy is key.
Classic examples of independent contractors include Uber and Lyft drivers, but the same principals of being an independent contractor in many cases also apply to jobs such as business consultants, tradespeople and freelance writers.
To give a sense of the scale of the effect that this economy has on the lives of workers, in 2018 the Harvard Business Review reported that there were approximately 150 million individual workers in North America and Western Europe who were part of the “gig economy.”
In California, where many of these gig industries are thriving, action has been taken to begin the process of potentially regulating what was previously an industry independent from uniform guidelines. The state Supreme Court’s Dynamex decision created an “ABC test” to determine who, under these new specifications, qualified as an employee versus an independent contractor. With the recent signing of Assembly Bill 5 by Governor Newsom the ABC test -- with a few alterations to the original language, such that many independently contracted professions like doctors, architects and accountants were granted exceptions -- is now becoming law in California (Cal Matters).
Gig companies feel that AB 5 will act to restrict their ability to do business in the most effective manner. Gig workers on the other hand, are less unified in their opinion of the new legislation. While some feel that it will greatly benefit them by setting a standard for pay, time off, working hours, etc., others actually enjoy the flexibility that being an independent contractor provides them. In response to Governor Newsom signing AB 5, some of the biggest gig based companies such as Uber, Lyft and DoorDash, each pledged millions of dollars to fight the new legislation via state ballot initiative. Additionally they have proposed lighter restrictions on their modes of operation than AB 5 would create, such as setting minimum income guarantees and providing some sort of stipend to cover vehicle damage, with the hopes that these compromises will satisfy those on the other end of the spectrum fighting for full employee status (Cal Matters).
It seems doubtful that when the legislation goes into effect in January 2020, that we will see any immediate changes from the likes of Uber and Lyft. Instead it is more likely that legal and political battles that are already underway will continue as these companies push back against employee designations for their drivers (Vox). With drivers themselves on either side of the fight, it will be interesting to see who ends up on top and how these changes will affect our local economy.
The Santa Cruz County Chamber did not take a position on AB 5 during the last legislation session. As a business organization that represents nearly 600 members, many of our member are small one person operations or in some cases independent contractors. It should be further noted that in Santa Cruz County nearly 2/3 of all businesses are small consisting of one to ten employees. As a Chamber advocating for all businesses, we hope that AB 5 or any legal or ballot initiative challenge best serves the changing economy of our region.