Legislation should help rather than hinder the gig economy

By: Mark Thornton

Peter St. Onge, senior economist at the Montreal Economic Institute co-wrote an Op-Ed in the Globe and Mail (Toronto) that highlight the increasing importance of part time workers and the benefits they provide customers over traditional lines of work. 

Casual or “gig” work has been around a very long time, but the sharing economy has put freelancers in the spotlight. It’s especially important for workers who can only work part-time: single parents, college students, the elderly and seasonal workers. These groups have long counted on the ability to work flexible hours when they really need to, be they waiters, nannies, deliverymen or translators.

So far, labour laws have helped by sheltering casual workers from the hassle of paperwork, and employers from the risks inherent in hiring permanent employees. Unfortunately, regulators are becoming hostile to this new job creation. California Assembly Bill 5 (AB 5), which took effect on Jan. 1, effectively turns freelancers into employees. The goal was to improve conditions for gig workers, but, in practice, it has meant the disappearance of their jobs. Mass layoffs of part-time and full-time freelance workers have occurred in the media and the film industry, with fears of more to come.

The experience of California illustrates why governments should avoid interfering in the sharing economy. Despite good intentions, forcing employers to provide benefits to contract workers risks pricing low-wage workers out of employment altogether. Studies have also shown that even when the company is paying for the benefits, the costs get directly passed along to the employees. So even workers who don’t lose their jobs end up paying for the mandated benefits through reduced wages.

Empirically, job losses from mandatory benefits disproportionately target low-income workers. A similar phenomenon occurred in Ontario where an Montreal Economic Institute study estimated that 50,000 young workers lost their job in the wake of a hike in the minimum wage from $11.49 to $14 on Jan. 1, 2018.

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