When President Joe Biden named Lina Khan to chair the Federal Trade Commission (FTC), the conventional wisdom predicted a focus on Big Tech. In practice, however, Khan has proven hostile not just to the tech sector, but to innovators generally, including those in the gig economy. If the FTC continues down this road unchecked, there will be damaging and far-reaching repercussions that hurt consumers and imperil economic opportunities.
Even as the economy struggles with 40-year-high inflation rates, the gig economy remains a thriving sector that has maintained its recent momentum. In fact, the gig economy experienced 33% growth in 2020 and is expanding faster than the U.S. economy as a whole, which has only just barely returned to growth after two consecutive quarters of decline.
It’s easy to understand why: the gig economy benefits workers, businesses, and consumers alike.
For workers, the gig economy offers the flexibility to choose when and how long to work, while creating access to a huge number of potential jobs. Workers can readily ramp up their hours when they need to earn more money, which is particularly convenient at a time when, for many consumers, the rising costs of essentials have outpaced their income.
This flexibility has been especially beneficial for women, who have been hit harder than men by pandemic-related job disruptions. And gig work has been a boon for underserved communities by eliminating barriers to entry. According to a 2021 Pew Research study, 28% of gig workers cited lack of access to job opportunities as a major reason (and 30% cited it as a minor reason) for engaging in gig work.
For businesses, gig platforms provide innovative technologies and a more robust customer base. This has helped small businesses lacking the scale, resources, or manpower to develop their own services. For these businesses, the gig economy has meant a new, innovative pipeline to stimulate growth and generate revenue.
For consumers, gig-economy platforms have served as a critical lifeline during the pandemic and have extended access to services such as reliable short-term housing, transportation on demand, and in areas lacking traditional options, home delivery of meals and other goods and services that have traditionally been hard to find and inconvenient to use.
But rather than acknowledge the considerable benefits of the gig economy and adapt its approach to these new developments, the FTC is launching a misguided effort to stifle it. In September, the commission issued a policy statement vowing to “use its full authority” to protect gig workers from “unfair, deceptive, and anti-competitive practices.” Under this vision, the FTC takes a significant enforcement role in a host of gig-industry labor issues that fall well outside its statutory authority and could harm the consumers it is charged with protecting.
The FTC’s statutory mandate to root out “unfair or deceptive practices” is not a freewheeling license to regulate all aspects of the economy. By law, the FTC’s unfairness authority may be deployed only when conduct causes substantial injury to consumers. The policy statement that Khan’s FTC issued contemplates a far more invasive, wholesale intervention into the labor relations between gig workers and platforms, virtually ignoring the effect on consumers.
The statement expresses unguarded distaste for a number of labor-related practices common in the gig economy without establishing how any of these practices meet the requisite consumer-harm standard.
Thus, the classification of workers as independent contractors is deemed “misclassification” even though it is in compliance with existing labor laws. Arbitration clauses and take-it-or-leave-it contract terms, which are widely used throughout the economy, are labeled as “lopsided” by the FTC. The use of algorithms to determine compensation — a fundamental and essential feature of many gig-work platforms — is characterized as an example of “power imbalances.” And technology that powers the ability to match consumer offers with available workers — a core innovation behind the gig economy — is derided as “surveillance technology to monitor workers’ every move without transparency.”
Distasteful or not, these practices are all matters of labor regulation, and none can be presumed to hurt consumers. Instead, the FTC’s policy statement represents an attempt by the agency to give itself the power to regulate the American labor market, which Congress has specifically entrusted to agencies like the Department of Labor and the National Labor Relations Board.
Even the FTC itself is divided on its regulatory authority. At its Sept. 15 meeting, two commissioners voted against the policy statement, with Commissioner Noah Phillips arguing that it “meanders in and out of our jurisdiction into matters of employment law, collective bargaining, and labor regulation.”
The FTC’s incursion into labor regulation is distracting the agency from the job Congress actually gave it: protecting consumers, including from unfair or deceptive business practices. And the current perilous economic environment is precisely the wrong time for the FTC to pursue policies that would hurt the very consumers the agency is charged to protect.
As technology has lowered the barriers to entry to independent work, record numbers of Americans are choosing the gig economy for the flexibility unavailable in traditional employment. Policies responding to this change are worthy of exploration, but this complex policy debate is well outside the FTC’s expertise. If the FTC’s forays into labor-market regulation are left unchecked by Congress, the result could be serious, unintended consequences that harm and disrupt gig workers and the businesses and consumers who rely on this innovative industry.
CLICK HERE TO READ MORE FROM RESTORING AMERICA
Geoffrey A. Manne is the president and founder of the International Center for Law & Economics.
