WASHINGTON, D.C.—A leading conservative economist who ran the Congressional Budget Office in the George W. Bush administration says in a new analysis that “sometimes it is no fun to be right,” after he earlier predicted that the California “gig worker” law AB5 would “lead to massive reclassification, which is costly to employers, hurts small businesses, and significantly limits worker freedom.”
“Reclassification” in this case is the process of redefining freelance workers as company employees. That reclassification is at the heart of AB5, which freelance workers have said costs them their livelihoods.
A report by The Wall Street Journal last week said that the law was intended to “make these workers eligible for health insurance, paid time off and other benefits.”
Instead, however, it “hasn’t worked out that way,” with magicians, comedians, freelance journalists and interpreters all losing work as companies simply refused to hire them at all, rather than bring them on board as employees, according to the Journal report.
But according to Douglas Holtz-Eakin (pictured above) who also served as the top economic adviser to Republican Senator John McCain’s 2008 presidential campaign, there are “lessons” to be learned from the law, which after passage of a supplementary bill, AB2257, in August now exempts more than 60 industries from the reclassification requirements.
“Ultimately, one might imagine that AB5 is fully repealed and California reverts to the status quo in 2019,” Holtz-Eakin wrote in an essay published by the conservative American Action Forum, of which he is president.
“It seems to me that there is a fondness for the idea that every job should be well-paid and accompanied by full benefits—health, pension, retirement, vacation, and sick leave,” Holtz-Eakin wrote. “That’s a nice vision, but perhaps not realistic for every job in the 2020’s labor market.”
The economist, in the essay published this week, went on to say that “in particular,” providing full benefits “may not be realistic for independent contractors, gig workers, and others who have multiple entities contributing to their full earnings.”
Supporters of the AB5 approach, including many prominent Democrats—among them the presidential ticket of Joe Biden and Kamala Harris—say that the law would provide exactly that: full benefits for workers now classified as independent contractors. But Holtz-Eakins in his essay suggests a new model, which he calls “portable benefits.”
“Instead of forcing these economic relationships into a cookie-cutter employer-employee framework, it seems more useful to pursue ways to provide portable benefits financed by multiple employers,” he wrote. “That should be the agenda instead of trying to turn back the clock.”
Photo By Michael Jolley / Wikimedia Commons
