California Helped Create and Grow the Sharing Economy, Hopefully it Won’t Destroy it
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Commentary

California Helped Create and Grow the Sharing Economy, Hopefully it Won’t Destroy it

California's Supreme Court "gig economy" ruling will likely prove to be an unfortunate change for many California workers.

The California Supreme Court recently ruled that many types of independent contractors, including a lot of workers in the “gig economy,” should be treated as employees — with all the benefits and restrictions that come with being an employee of a company.

This will likely prove to be an unfortunate change for many workers in California. It will highlight how important gig companies — like Uber, Lyft, Airbnb, GrubHub, Instacart, and hundreds more — have become to the state’s economy. And it will also show why foolish attempts to turn back the clock and prevent emerging alternatives to traditional types of work are doomed to fail.

Businesses are changing in response to an economy where nearly every company has to compete not just locally, but often online and globally. In this competitive environment, more and more companies need, and favor, low-cost workforces that offer flexibility in hours, sizes and skill sets.

Meanwhile, workers have similarly changed what they want. There is a change in attitude from “jobs” to “work.” Today’s workers take an average of more than 11 different jobs between the ages of 18 and 48. Whereas older Californians might have wanted to find one stable job and stay on that job for 40 or 50 years to secure its benefits, today’s workers are likely to consider staying in one life-long job more of a cage than a refuge. Many workers want flexibility and they’re increasingly prioritizing it over more traditional employment.

Apps and digital platform companies, such as Uber and TaskRabbit, allow customers to eliminate the middleman and hire workers directly or almost directly. They allow customers, and future customers, to see and share reviews and payments to be made securely and digitally.

California’s economy has evolved and increasingly centers on work done through independent contractor arrangements. This alternative work comprises what’s called the “gig economy,” the “sharing economy” and the “fissured workplace.” The scope of these terms often overlaps, creating confusion, but what’s important is what the workplaces have in common — they have thus far not been subject to the regulations of traditional workplaces.

As a result, the gig economy ranges from less-secure but more-flexible, task-oriented short-term work with high worker autonomy to long-term contracting with more security and less autonomy. Examples include driving for Uber or Lyft, selling crafts on Etsy, or doing freelance work through TaskRabbit. Today 32 percent of the U.S. workforce is in an alternative work arrangement — and the numbers are growing.

The most comprehensive research of late, from McKinsey Global Institute, finds that the majority of gig workers, 54 percent, are supplementing their primary incomes with additional work. Seventy-two percent of gig workers are working independently by choice. These independent workers also report higher satisfaction levels than traditional workers across the board.

For the gig economy to continue to flourish, policymakers should embrace the independent nature of gig work and the shifting economy. Rather than threatening the entrenched traditional work model, much of the gig economy fills niches in the goods, services and labor market. This allows more workers to serve more customers more cheaply and on their own terms, increasing the workforce and the standard of living for all.

Powerful forces have driven the growth of the gig economy, and have been since the 1970s. Trying to force gig economy companies, which are often not employers, to mimic the traditional workplace models will end up harming workers and consumers. If the California Supreme Court ruling forces companies that have been building the sharing economy to hire contractors as full-time employees, many of those jobs could disappear and some companies could cease to exist.

The gig economy emerged from market-driven autonomy and flexibility that was beneficial for both companies and workers, and it thrives despite a few challenges. The market will likely address these challenges — as long as we let it.

This column originally ran in The Orange County Register.

Adrian Moore

Adrian Moore, Ph.D., is vice president of policy at Reason Foundation, a non-profit think tank advancing free minds and free markets.