This article was originally published on Real Clear Markets.
More than a year after the COVID-19 pandemic first disrupted daily life, local economies are reopening and vaccine distribution is exceeding expectations. The country is poised for a historic economic recovery.
Despite this exciting potential, however, there is a growing risk that public policy could derail the pursuit of the American Dream just as it gets back on track. Embedded in the PRO Act, which recently passed the House of Representatives, is a provision that would all but destroy the gig economy and significantly damage the livelihoods of many freelancers—diminishing opportunities for everyone.
To say that 2020 was a tough year for Americans would be putting it lightly. Yet most Americans never lost hope that the situation would improve. According to a survey conducted last summer, although 45 percent of Americans reported that COVID-19 had pushed the American Dream further out of reach, only 11 percent said that it was unachievable. The same survey asked Americans what they thought was essential in achieving the American Dream: Contrary to popular belief, becoming wealthy was the least common answer. Instead, the vast majority of respondents—82 percent—rated freedom of choice in how to live as essential to their vision of the American Dream.
Given these findings, perhaps it’s to be expected that a growing number of Americans are choosing to join the gig economy or do freelance work. From writers to rideshare drivers and independent graphic designers, 57 million Americans—about 35 percent of the US workforce—did at least some freelance work in 2019. It’s clear the flexibility that such work arrangements allow is key to their growing popularity. Nearly 80 percent of full-time freelancers (and 73 percent of part-time freelancers) reported doing freelance work in order to have a flexible schedule, while 51 percent said that there was no amount of money for which they would definitely take a traditional job. While working in the gig economy or doing freelance work may not be for everyone, a major slice of Americans have chosen to take advantage of these opportunities.
But those arrangements could disappear if the “ABC test,” which narrows the definition of independent contracting and is embedded in the PRO Act, were to become law. While the PRO Act is primarily concerned with making changes to policies affecting labor unions (changes which have significant tradeoffs of their own), the provision to limit the scope of independent contracting and force companies to reclassify independent contractors as employees is a direct threat to work arrangements enjoyed by many freelancers and gig economy workers. Lifted from an unpopular California law (AB5), the ABC test implements stricter criteria for who can be classified as an independent contractor, expanding the definition of who must be considered an employee—with all the attendant costs and risks that go along with that legal designation.
Not surprisingly, California’s freelancers and gig economy workers preferred to keep the arrangements they had chosen for themselves. In California, a variety of different sectors lobbied to be excluded from the new law that would reclassify them as employees and ultimately, last November, voters approved a ballot measure that (mostly) kept the traditional definition of independent contractor intact. This saved tens of thousands of jobs.
Despite substantial opposition from the very people the law is supposed to help, California’s model for narrowing the definition of independent contracting is gaining traction in other states and, for now, in federal legislation. While laws like California’s AB5 and the PRO Act are certainly well-intended, they deny people the opportunity to make their own choices about their preferred work arrangements and instead impose the arrangements that lawmakers would prefer they have.
The nation is primed for a robust recovery and Americans are ready to get to work. Lawmakers should recognize that individuals are in the best position to decide what work arrangements best suit them and respect those choices. Doing so would not only aid in the post-pandemic recovery, but would also afford Americans the opportunity to pursue the American Dream in the way that works best for them.Ben Wilterdink is the director of programs at the Archbridge Institute, a Washington-based think tank focused on economic mobility.
