Employee or Independent Contractor?

Why Do We Have Labor Protection?

fair labor laws sign

From Demos, Matt Bruenig discusses why we have labor laws that protect employees and how this factors into the debate about classification in the on-demand economy.  Matt writes:

Timothy B. Lee has this to say about labor protection:

The bottom line is that conventional labor laws are based on the assumption that employers dictate employees’ hours and working conditions, and so we need things like mandatory breaks, sick leave, and safety regulations to ensure employers don’t take advantage of workers. But in an on-demand economy model, rules designed to “protect” workers don’t necessarily do that. Uber drivers can take breaks whenever they want. Uber doesn’t care. So a rule requiring employees to take breaks after working for a certain number of hours simply reduces drivers’ freedom for no good reason. If Uber drivers are going to be subject to employment law, there needs to be a legal category for employees who genuinely set their own schedules.

This just-so story about labor laws is not correct. It fits into a neat one-off individualist story for why these laws exist and what they hope to accomplish. This makes it helpful for a Vox-style explanation and even for economics textbooks. But it’s totally detached from historical reality.

Lee’s analysis falls into that old libertarian trap that corrupts almost all of our economic discussion in this country. Under this trap, laissez-faire economic arrangements operate as the baseline and then economic rules that diverge from those arrangements come in specifically to correct some market problem (here the outsized power of a boss in a specific kind of employment relationship).

Here, if Uber is legally placed under conventional employment rules, those who’d prefer to work for Uber under an independent contractor arrangement are out of luck, but likewise if it’s placed under independent contractor rules, those who’d prefer to work for Uber under a conventional employment arrangement are out of luck. A preferred choice is being taken off the table for some set of people no matter what route you go. If you try to solve this by letting the parties decide whether to have an independent contractor or conventional employment relationship, you can declare that you’ve achieved actual true freedom, but in reality we know that will just mean Uber and similar companies offering take-it-or-leave-it independent contractor arrangements, effectively eliminating any other choice for would-be app-based drivers.

Of course, you don’t necessarily have to share in these particular views of what a good economic life looks like. And, even if you do share in those views, you don’t have to believe that reasserting the employment-based model is the best way to achieve the good economic life (I personally think there are better ways, and that there have always been better ways). But if we are going to have this debate, it’s important that we actually do so on accurate terms. Backfilling narrow rationales for labor protection that you can possibly say no longer apply is helpful for reaching certain conclusions, but it’s dishonest about the historical reason labor protection exists.

Read the full story at Why Do We Have Labor Protection?

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