The country’s economic recovery from the pandemic is underway, and Arizona is among the states leading the pack.
Still, nearly half of Arizona households saw someone lose work during the pandemic, and many Arizonans are still unemployed. The last thing Arizona needs is to take a page from a failed California strategy on gig work.
California’s Assembly Bill 5 (AB 5), which became state law in 2019, reclassified most independent contractors as full-time employees. From its inception, AB 5 was mostly aimed at rideshare companies like Uber and Lyft—even though most rideshare drivers didn’t want to be reclassified as employees. In fact, 71% of Uber and Lyft drivers surveyed last year said they wanted to remain contractors, valuing their flexibility.
Since then, we’ve seen the negative unintended consequences of AB 5 play out in California.
The law impacted workers in industries far beyond its intended targets, threatening the independence of janitors, housekeepers, truck drivers, health aides, and even rabbis.
California’s nonpartisan Legislative Analyst Office estimated that AB 5 affected 1 million independent contractors, only some of whom would go on to be hired as employees. Others simply lost their jobs.
Employers struggled to adapt to the law, as well. Home health care agencies and arts nonprofits, which rely heavily on independent contractors, couldn’t bring on all of their workers as full-time employees. Firms that used to hire Californians looked to other states to hire contractors.
As gig workers voiced their opposition to the new law, California policymakers hurried to pass more than 100 exemptions for select professions and industries. And then last November, California voters took matters into their own hands, overwhelmingly passing a ballot measure to enshrine protections for rideshare drivers’ contractor status.
In fact, that vote saw voters in all but seven of California’s 58 counties reject the AB 5 approach. It even passed in the home district of AB 5’s chief author in the legislature.
While California wrestled with its self-inflicted problems, Arizona thrived, adding hundreds of thousands of jobs and reducing poverty faster than any state in the country. The state continues to attract new residents, ranking among the top three fastest growing states in the country in 2020. Arizona’s success is no accident. It is a result of smart policy choices.
Other states should learn from California’s failed AB 5 experiment—mandating full employment status for contractors isn’t what workers or a majority of voters want. Yet, legislation is currently pending in Congress that would impose this misguided policy in every state.
That could affect 13 million gig workers, who are collectively responsible for 8.5% of U.S. GDP. Gig workers play a critical role in our economy, and their importance will only grow as technology creates more opportunities for workers to set their own hours and be their own bosses.
Instead of trying to roll back the clock, lawmakers should help workers adapt to our new economy. One bipartisan proposal would help modernize our employee benefits system by establishing a portable benefits fund for independent contractors.
Before the pandemic, Arizona was the third fastest growing economy in the nation, frequently attracting jobs and businesses from California. By staying the course, Arizona can pick up where it left off and continue its recovery — all while taking care of its workers.
Adam Kovacevich is CEO and Founder of the Chamber of Progress (progresschamber.org), a new center-left tech industry policy coalition promoting technology’s progressive future.