The AFL-CIO is meeting in San Diego to shape its policy initiatives for the upcoming year. One increasingly popular type of work arrangement is in its crosshairs—independent contracting, specifically in the sharing economy.
As Politico reports, the nation’s largest union federation wants lawmakers to consider more workers in the sharing economy as employees, not contractors. The AFL-CIO claims it wants all Uber drivers and similar workers to “enjoy the rights and protections of employees.” Translated, that means unions want the chance to extract dues payments from sharing economy workers, and the only way to do that is national policy that considers these workers employees. Right now, Seattle is only city in the country to pass legislation to allow rides-haring workers to organize.
Randi Weingarten, President of the American Federation of Teachers, said workers in the sharing economy “need voice, they need an ability to raise their wages.”
But it is uncertain whether unionization is the best path to raise wages and create good work opportunities. Increasing the amount of workers eligible to unionize would have detrimental impact on the lot of all workers. As I wrote in Real Clear Policy, “an analysis by my colleagues at the Competitive Enterprise Institute emphasizes that unionization causes ‘deadweight loss’: ‘By raising the cost of labor, unions decrease the number of job opportunities in unionized industries. That, in turn, increases the supply of labor in the nonunion sector, thereby driving down wages in those industries.’”
In addition, a recent Gallup poll shows non-union workers are more satisfied with many aspects of work than their union counterparts. For example, non-union workers were more satisfied with their safety conditions, recognition for a job well done, flexibility of hours, and job security.
What will certainly happen if sharing economy workers are all suddenly labeled as employees and able to organize is a sharp decline in the flexibility of these new opportunities. No one claims that union collective bargaining agreements give workers flexibility; they are one-size-fits all. In addition, employers will have less incentive to offer flexible schedules if they are on the hook for all the employer-employee related taxes, costs, and liability.
A problem with the AFL-CIO’s approach is that today’s workers highly value flexible work arrangements, and are more productive with them. A recent study by EY conducted by Harris Poll shows that globally, after compensation, workers’ top priority is flexibility.
Employers do not just want to offer flexible schedules because workers like them. Even the White House Council of Economic Advisors reports that “by increasing productivity and job satisfaction, work flexibility is good for our economy at large.”
Furthermore, the economy is still struggling—four states are currently in a recession. As the Charlotte Observer reports, “Even as U.S. employers added 2.7 million workers in 2015, job cuts last year totaled 18,800 in North Dakota, 11,800 in West Virginia and 6,400 in Wyoming, according to the U.S. Labor Department.”
So policymakers should wary of burdening a burgeoning sector of the economy with greater regulation. While the sharing economy is small—estimates say 1 percent of workers earned income via a sharing economy company—it has grown tenfold since October 2012, according to the Wall Street Journal.
With job opportunities scarce, lawmakers should tread carefully. The sharing economy is an easy way for workers who have been displaced from traditional employment to keep income coming in while looking for another job opportunity.
The problem is that the Obama administration seems determined to bow to union interests. The administration has made it a priority to get an increase in funding for FY 2017 for the Department of Labor’s Wage and Hour Division, the agency that enforces employee misclassification cases.
A better method of improving the lot of all workers is to remove burdensome regulations that do more harm than good. If the motivation for saddling an emerging industry with regulation is to prop up the special interests of labor unions, it’s probably a bad idea that degrades the job prospects of workers.