Biden Wants To Restrict Work and Flexibility for Freelancers

Most independent contractors don’t want the PRO Act anyway

By Liya Palagashvili of Mercatus.

"In last week's State of the Union address, President Joe Biden, who once vowed to be "the most pro-union president you've ever seen," took the opportunity to endorse the "Protecting the Right to Organize Act," more commonly known as the PRO Act. The long-discussed legislation, which was passed by the U.S. House of Representatives back in 2021, would represent one of the most sweeping labor reforms in recent history. By seeking to end right-to-work laws in 27 states and drastically restrict employer-employee relationships in other ways, it's an attempt to bring union power back to its golden age.

One key feature of the PRO Act, however, has a distinct 2023 flavor: It would impose a stricter test for determining whether a worker is an independent contractor for the purposes of union organizing. This includes inevitable confusion as to a worker's status and hefty fines if the worker is "misclassified" under the new definition. Despite proponents trying to distance the PRO Act from California's failing Assembly Bill 5 (AB5), a legal report reveals that it would functionally have the same impact nationwide.

Even if a worker is properly classified, the complexity of the rule and its violations would still deter organizations—especially small businesses that cannot afford extensive legal counsel—from working with contractors altogether. That's bad news in an economy where gig work is sometimes the best option for part-time, secondary, entry-level, or flexible jobs (regardless of whether the labor movement acknowledges it). 

The renewed support for the PRO Act comes at a time when the Department of Labor is also finalizing a new rule that narrows the definition of an independent contractor under the Fair Labor Standards Act. One thing driving these changes is the fact that policy makers have a limited understanding of the independent contractor work force.

For example, while gig platforms like Uber, Lyft, and DoorDash are ubiquitous in our everyday lives, work­ers at those types of online labor platforms amount to only 8.6 percent of the overall independent contractor work force. At the same time, the exponential growth of online labor platforms is driven almost entirely by individuals whose primary incomes come from traditional jobs and who supplement those incomes with platform work. This should alleviate some concerns about most of the gig work force lacking access to common workplace benefits such as health insurance.

Furthermore, according to tax data, the industries with the greatest share of independent contractors are "professional, scientific, and technical services," followed by "other services" and "health care." This is a far different picture than the one we're sold about the conquest of the American work force by app-based ride-sharing and delivery-driving jobs.

Beyond these misunderstandings, there is a key question that PRO Act proponents have failed to directly answer: Over a dozen surveys—including the Bureau of Labor Statistics' Contingent Worker Supplement—have found that a majority of independent contractors would prefer their current arrangements over an employment arrangement. Workers cite dependent care obligations, personal circumstances, or a strong preference for job flexibility (over job stability) as the primary reasons. Beyond surveys, in a recent study published by the Journal of Political Economy, economists estimated that UberX drivers would require almost twice as much pay to accept the inflexibility that comes from adopting a taxi-style schedule. And for the top 10 percent of DoorDash drivers, losing flexibility is equivalent to a 15 percent pay cut.

But these flexible job arrangements can be particularly transformative for women who are the primary caregivers in their households. One research paper found that self-employment rates are higher for women who have young children and that self-employed female workers have more flexibility in their work location, hours, and schedule as compared to women in traditional employment. In fact, the study concludes that independent work opportunities give mothers "more control over their work environment allowing them to better manage their household while working." In surveys, women consistently indicate that they engage in independent work roles precisely because they require flexible work arrangements.

This directly challenges the overarching narrative that the way to help independent contractors is to make them employees. Instead, there are other options that can help this work force. In a high-profile survey, 80 percent of self-employed workers indicated that they would like to have access to portable benefits—benefits that are flexible and not tied to one particular employer. This is long overdue for all kinds of American workers.

There has been some bipartisan support for these types of solutions. Sens. Mark Warner (D–Va.), Todd Young (R–Ind.), and Rep. Suzan DelBene (D–Wash.) have introduced legislation to test a portable benefits program for independent workers. At the state level, just this week, Utah introduced a new portable benefits bill that would remove the legal barriers preventing companies from voluntarily giving benefits to their independent contractors.

These types of innovative policy solutions are more forward-looking and welcoming for the millions of Americans who choose to engage in independent contracting work. Rather than reducing work opportunities and flexibility for those who desire or require it, policy makers should seek to better meet worker needs."