Even before the coronavirus pandemic, people had shifted the way they purchased goods and services in radically transformative ways. Where we once hailed a cab, we learned to use a ride-sharing app. Groceries and other packages are delivered to our homes on a regular basis. We can hire people to mount televisions or put together bookshelves while we work. You used to have to live in Manhattan, New York, to get anything delivered to your door — now, you can even do it in Manhattan, Kansas.
By the beginning of 2019, more than one-third of us reported using apps to hail cars. During the shutdown, millions of us learned to enjoy our favorite foods courtesy of a handful of competitive restaurant delivery options. As a result, thousands of small, family-owned restaurants are in business today that would not have been.
There are no losers here. Companies that innovate and can deliver these services become major financial entities. Drivers and other platform partners are able to earn supplemental income for their families. Many of these nearly 60 million workers are first-generation immigrants or single mothers making extra money. And all of us, the consumers, have far cheaper and more convenient options for all sorts of things than we ever had as recently as a decade ago.
This freelance economy adds more than $1.4 trillion to the economy every year. By the end of this decade, the majority of workers will be freelancers, not W-2 employees. Already, nearly half of millennial workers are at least partially self-employed.
Senate Republicans advanced a package of legislative responses to the pandemic in late July, known as the “HEALS Act.” Several of these initiatives are aimed at getting out of the way of this innovation success story. In particular, so-called “gig economy” companies will be able to offer their partners financial assistance, personal protective equipment such as masks, and cleaning supplies without fear that the relationship they have will be recast by the government as “employer-employee.”
This is a great first step, but Congress needs to do more. States across the country are trying to make freelance platforms, including Uber, Lyft, DoorDash, TaskRabbit, and Grubhub, “employers” and the service providers who partner with them “employees.” It doesn’t stop there. These same states often go further, seeking to reclassify virtually all self-employed people and freelancers as “employees” of those paying them for services. This loops in every columnist, every wedding singer, and every dog walker in the state.
This bad idea started in California, but it is quickly spreading to other states, and we will soon have dozens of fights on our hands. In addition, House Speaker Nancy Pelosi, Senate Minority Leader Chuck Schumer, and presumptive Democratic presidential nominee Joe Biden have all endorsed legislation that would do nationally what California and other states are doing locally.
If the entire freelance economy is transformed from a flexible working arrangement with self-made hours into an inflexible gray army of nine-to-fivers, we will have lost a great deal of the progress we have made in the last decade. Imagine going back to a world of smelly cabs whose air conditioning doesn’t work, having to pick up food every time you have a late-night craving, or never being able to find someone to figure out how to put that swingset together. A big reason life has gotten more convenient is because of the flexible nature of this freelance economy.
That’s why the Center for a Free Economy, a conservative nonprofit organization that I have been president of since 2018, this week is launching the “Economic Mobility Network.” The idea behind this project is to work on behalf of legislative and other policy initiatives that help this freelance economy — gig workers, the self-employed, and regular customers — continue to get better. We will also fight against government policies that make this new economy worse, including mandating an employer-employee legal arrangement.
What is needed to help the freelance economy is certainty. The federal government needs to guarantee that states cannot reclassify self-employed people as employees for purely political reasons. In turn, and building off of the HEALS Act, gig economy platforms ought to be able to provide a broader range of compensation than they can now without fear of being reclassified as employers. On top of cash, gig economy payers would prefer to provide additional things, such as health insurance and family leave, but cannot out of fear the government will upend their entire legal structure and business model. There is no reason more certainty and better compensation choices shouldn’t be a win-win for everyone.
To that end, the Center for a Free Economy’s “Economic Mobility Network” will bring together customers, the self-employed, workers in the gig economy, free-market think tanks, conservative activists, and others who value these services and don’t want to see them go away. We were happy to partner with Americans for Tax Reform, Heritage Action, the National Taxpayers Union, FreedomWorks, and more than a dozen other conservative organizations on a joint letter in support of the HEALS Act and further congressional action to protect and grow the freelance economy. We will continue to educate the public about the government threats to the many conveniences modern freelance innovation has brought to people’s lives.
Ryan Ellis (@RyanLEllis) is president of the Center for a Free Economy.
