A broad group of economists, including Nobel prize winners, advisers to US presidents and California governors, former US Treasury officials, and advisers to the Federal Reserve and other central banks agree that California’s destructive Assembly Bill 5, which prevents many health-care workers and delivery drivers, among others, to work as independent contractors, should be suspended immediately.
The Independent Institute is collecting signatures from PhD-level economists and other social scientists on a letter that began circulating last week.
The letter, which is addressed to California governor Gavin Newsom and the state’s legislature, argues that AB5 is damaging the ability of the state to respond quickly and flexibly to our rapidly changing economic needs, and is creating long-term economic harm to our most vulnerable individuals:
By prohibiting the use of independent contractor drivers, health care professionals, and workers in other critical areas, AB-5 is doing substantial, and avoidable, harm to the very people who now have the fewest resources and the worst alternatives available to them. . . . The current situation of voluntary (and mandatory) self-isolation has created an immediate need for flexible and low-cost ways of delivering goods to customers.
The letter also argues that hiring regulations compound the problems that companies face in managing their current workforces, and that AB5 is killing off many productive and mutually beneficial work relationships:
Hiring laws . . . mean that companies are unwilling to make long-term commitments to traditional jobs, because they are presently 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.
The letter points out that suspending AB5 could be a potential game-changer for California:
It doesn’t really matter how great the pay is, how predictable are the hours, nor 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 all of the costs of a vibrant gig economy onto lower and middle-income individuals, those who would benefit most from flexibility to work around the restrictive policies.
The letter concludes by emphasizing just how important our needs are and how policy must facilitate the best decisions during this national emergency:
A mountain of work needs to be done, deliveries made, and people stranded at home helped to receive groceries and medications. Meanwhile, furloughed Californians stand on the verge of being wiped out financially because the law prevents them from working part time in a variety of positions.
Blocking work that is needed and impoverishing workers laid-off from other jobs are not the intentions of AB5, but the law is having these unintended consequences and needs to be suspended.
The Independent Institute is focusing on gathering signatures from economists and other social scientists within California. But I have shared the letter and the background of AB5 with economists outside of California, most of whom identify as politically moderate or left-leaning. Their responses clearly articulate why this law must be suspended, and ultimately repealed and replaced.
From an economist at the University of Texas: “Why would Californians stand for such an awful intrusion on their ability to earn a living? What a terrible law!”
From an economist in Spain: “I am constantly fighting the Spanish government to adopt better economic policies. Even Spain would not pass a law this destructive today.”
From an economist at the University of Maryland: “California’s woes are all self-inflicted from a legislature that clearly cares not a whit about their constituents.”
From an economist in England: “I can’t imagine any group that benefits from this other than trade unions. There is simply no other explanation for passing such a ruinous law.”
From an economist in Canada, whose quote forms the basis for the title of today’s column: “Lee, you are kidding, right? California is not permitting health-care workers to work as independent contractors? Despite an extraordinary and rapidly rising demand for their services? What happens when someone dies, sitting in an ER, when hundreds of nurses and respiratory therapists are sitting at home?”
Exactly. What will happen when this horror occurs, if it hasn’t already?
Interestingly, and importantly, the governor has suspended some significant regulations in dealing with this crisis, including waiving medical certification for health-care workers. Yes, medical and nursing students can work now, thanks to suspending certification regulations. The governor made the right call here.
But what about suspending other regulations, such as AB5, which make much less sense than medical licensing? Nope, not going to happen, at least not now.
And what about all those other workers who are desperately needed, such as gig drivers to deliver food and medications? Will the governor create separate bureaucracies to hire those individuals? And all the other individuals who can’t work as independent contractors?
Or, Governor Newsom could just suspend AB5. With a stroke of his pen, he could do a world of good for so many. Fingers crossed.