Last year, California enacted law AB5, which eliminated or greatly restricted independent contractors’ ability to work in the state.
The passage of the law had devastating effects on the country’s largest state economy, but the brunt of that burden was suffered by women. Now the PRO Act, which is the federal version of AB5, has passed the House and if passed by the Senate will again have a disproportionate effect on women throughout the United States.
Like AB5, the intention of the PRO Act is to change the classification of independent contractors to employees, which would then make them eligible for benefits like health care. But intention and results are not the same things, and this law inevitably subjects businesses to excessive costs. Rather than pay this increased overhead, businesses in California simply ceased contracts with freelancers, and we can expect much of the same when implemented at the federal level.
The Undue Burden on Women’s Work Preferences
According to PayPal’s “U.S. Freelancer Insights Report,” two-thirds of U.S. freelancers are women. This should come as no surprise as multiple research papers consistently show that one of the top reasons women prefer freelancing or independent contracting work is due to flexibility.
Two-thirds of U.S. freelancers are women.
Professional freelance writer and marketing consultant Mary Kearl already fled California to evade AB5 and is now concerned that the PRO Act will destroy her income. Kearl wrote about the potential upending of her employment in Business Insider.
“For me and my husband, who is also a freelancer, the pros include earning more per hour than when we worked full time, setting our own schedules, sharing in being the primary caregivers to our toddler, deciding the companies we work with and projects we take on, and the flexibility to work from and live anywhere — even traveling through South America for six months.”
Can Us Ladies Get a Break, Please?
The COVID-19 pandemic has devastated the economy with double-digit unemployment figures in some municipalities. Yet, here again, we saw that women disproportionately represented those job losses, whether it be through lay-offs, business closures, or mothers simply being forced to drop out of the workforce because they had no other childcare option. In fact, in September 2020 alone, four times as many women as men dropped out of the labor force.
In September 2020, four times as many women as men dropped out of the labor force.
Ratifying the PRO Act on top of this economic wreckage will only further limit women’s economic freedom. The flexibility of the marketplace has afforded women the best of both worlds: staying home and still generating an income. That flexibility does come at a cost in the form of a lack of employee benefits, but many women are happy to make that trade. It’s not the government’s job to take that choice away from women under the guise that they know what’s best for them.
COVID-19 Priority Changes
While the pandemic caused widespread redundancy, certain areas of the economy still grew. One of those areas, interestingly enough, was freelancers and independent contractors. According to research firm Edelman Intelligence, 57 million people worked as freelancers in 2019. By July 2020, that number had risen to 59 million, despite 10% of freelancers dropping out of the workforce. The pandemic revealed to employers that more of the workload can be done remotely and contract employment is an ideal way for businesses to rebuild on the cheap.
The PRO Act is in direct contrast to the method in which the market is attempting to self-correct.
Moreover, these pandemic priority changes aren’t only limited to best business practices. School closures have bred discontentment between parents and their children’s educational providers. As a result, homeschooling has more than doubled in the past year. And overwhelmingly, mothers take on the homeschool teaching responsibilities.
One of the top reasons women prefer freelance work is its flexibility.
This combination of an increased desire among businesses to outsource work to contractors in tandem with the shift in women taking over childcare and homeschool responsibilities indicates that the desire for freelance work and workers will only further increase. But the PRO Act will eliminate these economic possibilities.
Will My Stay-at-Home Mom Side Hustle Be Outlawed with the Stroke of a Pen? It Depends…
When AB5 was drafted, it carved out several exemptions for different professions such as real estate agents, hairdressers, direct sellers, and more. However, per federal IRS regulations, these professions are all classified as independent contractors and must report their income as such. The passage of the PRO Act will put the two forms of federal legislation at odds with each other.
One could reasonably speculate that federal exemptions will be doled out based on which industries can successfully lobby, a.k.a. pay off regulators, for that exemption. In California, Uber and Lyft had to engage in lengthy and expensive court battles to remain operative but ultimately were saved by California voters via Proposition 22.
It’s reprehensible for the federal government to tell women how, when, and where they can work.
Amway, the world’s largest multi-level-marketing (MLM) company, is currently being sued in California due to its classification of the MLM freelancers it employs, which is contrary to the AB5 legislation. The PRO Act could lead to litigation and potential elimination of MLM jobs nationwide. No longer will women be able to sell skincare or essential oils from the comfort of their home.
This past year has been a nightmare for everyone. The stresses put on women have been particularly extreme. As the economy and schools open back up, a respite was on the horizon. Quite frankly, it’s reprehensible for the federal government to now intervene and tell women how, when, and where they can work.
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