Economy Archives

In 60 Seconds: AB5

Today, 1 in 5 jobs in America is held by an independent contractor. Over half of these workers say no amount of money could convince them to pursue traditional jobs instead.

California’s law, AB5, sets strict guidelines for who may qualify as an independent contractor versus an employee. Proponents of AB5 argue that it protects workers’ rights.

In reality, AB5:

Kills workers’ preferred flexible work arrangements.
Leaves businesses with less resources overall for wages and jobs.
Causes layoffs when businesses cannot afford the high cost of reclassifying workers as employees.

Here’s the issue with AB5 in 60 seconds:

What’s at Stake

Today, 1 in 5 jobs in America is held by an independent contractor. Over half of these workers say no amount of money could convince them to pursue traditional jobs instead.

Independent contractors value being their own boss. Flexible contract work is especially attractive to stay-at-home mothers, students, and those with health conditions that inhibit them from working in a traditional setting.

California’s new law, AB 5, sets strict guidelines for who may qualify as an independent contractor versus an employee. Proponents of AB 5 argue that it protects workers’ rights.

In reality, AB 5:

Kills workers’ preferred flexible work arrangements.
Leaves businesses with less resources overall for wages and jobs.
Causes layoffs when businesses cannot afford the high cost of reclassifying workers as employees.

Other states are considering legislation similar to AB 5, and the proposed PRO Act would adopt this misguided policy at the federal level.

Keeping Independent Contractors from Working

Fifty-seven million Americans have worked as independent contractors. Technology has greatly expanded the sharing economy including rideshares, deliveries, and tasks, but many workers across a wide variety of professions choose to work as contractors, including event planners, optometrists, artists, writers (freelancers), and so many more.

This work is not simply a last resort for individuals, many of them seek it and prefer it. For example, 75 percent of freelancers are working independently by choice.

AB 5 takes away this choice. For many, it takes their jobs and incomes away entirely.

Reclassifying workers as employees raises labor costs for businesses by an estimated 20-30 percent. As a result, companies are either hiring a much smaller number of fulltime employees or reducing or eliminating their independent contractor workforce.

AB 5 is a fundamentally bad policy that should be reversed and abandoned.

Addressing Misperceptions:

In 60 Seconds: Earned Leave For New Parents

*PDF Download: In 60 Seconds – Earned Leave for New Parents

We all want American families to have the time and resources they need to welcome a new child. A new federal entitlement program would:

Require a new payroll tax,
Disrupt existing paid leave arrangements,
Leave all workers with less money in their paychecks,
Result in fewer job opportunities, particularly for women.

In reality most full-time employees have some paid time off. But this doesn’t mean all families have the time and resources they need when welcoming a child. Those who lack paid leave often end up leaving their jobs and using public assistance.

Here’s the breakdown of earned leave in 60 seconds:

What’s at Stake:

We all want American families to have the time and resources they need to welcome a new child.

Bad Solution:
A new federal entitlement program would:

Require a new payroll tax,
Disrupt existing paid leave arrangements,
Leave all workers with less money in their paychecks,
Result in fewer job opportunities, particularly for women.

A Better Path Forward: Earned Leave

Budget neutral and gender neutral
Does not raise taxes or expand government
Completely voluntary, doesn’t affect others

Qualifying workers can opt to receive benefit payments following the birth or adoption of a child. Workers’ retirement benefits would then be delayed or they could pay additional taxes to offset the earned leave benefits’ costs.

How This Helps:
All workers decide for themselves when they need benefits most, benefits they’ve earned.

Expands access to leave for those who are most vulnerable today (low-skill, low-wage workers). Family leave is critical because it:

Is associated with better health for mothers and babies.
Encourages greater involvement of fathers.
Encourages workers to return to work rather than leaving work force for government aid.

This is fair to workers who do not want and will not use earned leave benefits. They will not have to pay for someone else’s benefits. Employers would still have an incentive to offer employees paid leave benefits. Instead of making government bigger, this makes it work better.

Addressing Concerns:

In 60 Seconds: Minimum Wage

*PDF Download: In 60 Seconds – Minimum Wage

Democratic lawmakers want to increase the federal minimum wage from the current level of $7.25 to $15.00 per hour to provide workers a “livable” wage that they can raise their families on.

Increasing the federal minimum wage to $15 would lead to:

Anywhere from 1.3 million to 7 million jobs lost.
Fewer opportunities for low-skilled workers, young people, and women.
Reduced hours/smaller paychecks for workers.

We want every American to experience upward mobility and achieve his or her American dream. For many, it starts with that first minimum-wage job.

Here’s the issue of minimum wage in 60 seconds:

What’s at Stake

Democratic lawmakers want to increase the federal minimum wage from the current level of $7.25 to $15.00 per hour to provide workers a “livable” wage that they can raise their families on.

Bad Solution:
Increasing the federal minimum wage to $15 would lead to:

Anywhere from 1.3 million to 7 million jobs lost.
Fewer opportunities for low-skilled workers, young people, and women.
Reduced hours/smaller paychecks for workers.

We want every American to experience upward mobility and achieve his or her American dream. For many, it starts with that first minimum-wage job.

Most minimum-wage workers are women and young people working part-time jobs to build skills and gain experience.

Raising the federal minimum wage makes hiring and retaining these workers more expensive. Employers have few options when their labor costs increase. They can:

Forgo hiring new workers.
Lay off current staff, reduce staff hours, or cut benefits.
Raise prices on the goods and services.
Close their doors.

A Better Path Forward: A Strong Labor Market

When jobs are plentiful, workers can negotiate for higher wages or find better-paying opportunities. Policies that foster a strong labor market will truly help low-skilled workers:

Safe Reopening: Deem all businesses essential and allow them to reopen with reasonable safety protocols.

Low Taxes: The Tax Cuts and Jobs Act reduced corporate taxes from 35 to 21 percent, which was projected to increase long-run GDP by 1.7 percent, create 339,000 jobs, and raise wages by 1.5 percent. Individual tax cuts also directly boosted take-home pay. Congress should keep the tax cuts.

Deregulation: Excessive regulation has cost the U.S. an average of 0.8 percent of GDP growth per year since 1980. This is a waste of resources that could benefit workers.

Occupational Licensing Reform: Licensure to work in specific industries has grown exponentially over the past few decades and is associated with 2.8 million fewer jobs.

Earned Income Tax Credit: The EITC is a “refundable” tax credit that encourages poor workers to seek employment and augments their wages. It is credited with lifting 4.1 to 5.8 million people out of poverty in 2016, including up to 3 million children.

Addressing Misperceptions:

In 60 Seconds: The Pay Equity Debate

*PDF Download: In 60 Seconds – The Pay Equity Debate

We all want women (and men) to be treated fairly in the workplace, but the Paycheck Fairness Act would not be good for paychecks or fairness.

Here’s the issue of the pay equity debate in 60 seconds:

What’s at Stake:

We all want women (and men) to be treated fairly in the workplace, but the Paycheck Fairness Act would not be good for paychecks or fairness. This bill would:

NOT outlaw sex-based wage discrimination, which has been illegal since 1963.
NOT boost women’s paychecks, but those of trial lawyers by:
- Allowing unlimited damages against employers.
- Requiring workers to opt out of (rather than into) any class action lawsuit.
- Putting the burden of proof on employers to justify any pay disparity.

This increased legal exposure would:

Threaten workers’ existing flexible work arrangements. Businesses will be more likely to adopt more rigid, one-size-fits-all practices to protect themselves.
Discourage the hiring and advancement of women, who would be viewed as a legal risk.

The PFA also takes aim at “pay secrecy” policies in the workplace that ban employees from discussing pay. This will be ineffective because pay secrecy policies are already illegal, and most pay disparities are not the result of discrimination. Therefore, greater transparency is not likely to close the wage gap.

The raw wage gap is not a measure of “equal pay for equal work” or a sign of widespread discrimination against women.

The wage gap is largely driven by different career choices NOT discrimination.

Compared to men, on average, women:

Work fewer hours, in safer conditions, with greater flexibility.
Study/train for and work in lower-paying professions.
Take longer leaves of absence from the workplace due to childbearing and rearing.

When controlling for decisions men and women make about work, the pay gap shrinks to 2 cents.

This isn’t to say that sexism or bad bosses don’t exist, but discrimination is already illegal under the Equal Pay Act (1963) and the Civil Rights Act (1964).

We all want fairness in the workplace, but as the Washington Post editorial board wrote in 2009, the PFA “invites too much intrusion and interference in core business decisions…Discrimination is abhorrent, but the Paycheck Fairness Act is not the right fix.”

Addressing Concerns:

In 60 Seconds: Occupational Licensing

PDF Download: In 60 Seconds – Occupational Licensing

Most occupational licensing is unnecessary: Consumers are perfectly capable of deciding who is capable of doing most services, especially in this age of online reviews.

Easing the mobility of licensed professionals is a good start, but it does not address the fact that onerous regulations keep many out of stable jobs that could provide good incomes and careers.

Here’s the issue of occupational licensing in 60 seconds:

What’s at Stake

Across the states, occupational licensing:

Prevents people from working because of unnecessary and arbitrary requirements.
Creates costly hurdles for those who want to work in a licensed profession. The
average license requires around 9 months of education and training, a process
that workers must often restart if they move to a new state.
Reduces competition in a profession, protecting entrenched interests and increasing costs for consumers, while decreasing choice and quality.
Applies to far too many jobs, beyond the scope of health and safety. The number
of licensed professions has ballooned from 1 in 20 jobs in the early 1950s to one in
four jobs today.

Most occupational licensing is unnecessary: Consumers are perfectly capable of deciding who is capable of doing most services, especially in this age of online reviews.

Unnecessary occupational licenses hold back the entrepreneurial spirit of hard-working
Americans.

Reducing Barriers to Work

Reviewing and Eliminating Unnecessary Licenses
State lawmakers should review their specific occupational license requirements. This
review should result in repealing unnecessary licenses or replacing them with less
burdensome alternatives. By identifying the overly burdensome licenses that do not
protect public health and safety, lawmakers will help enterprising Americans find
meaningful work and will provide better services to the public.

Universal License Recognition
Arizona, Montana and Pennsylvania have all passed laws that help people to move
between states by recognizing out-of-state licenses, also known as “universal license
recognition.” Other states have allowed for this for military members and spouses, who
must move every couple years. This should be expanded to all Americans.

Easing the mobility of licensed professionals is a good start, but it does not address
the fact that onerous regulations keep many out of stable jobs that could provide good
incomes and careers.

Addressing Misperceptions:

In 60 Seconds: The Tax Reform Debate

*PDF Download: In 60 Seconds – The Tax Reform Debate

The Tax Cuts and Jobs Act (TCJA) reduced taxes for American workers and businesses, but the individual tax cuts and provisions will expire in 2025.

Congress should make the TCJA provisions permanent for individuals. This would give taxpayers certainty that their taxes will not suddenly rise in 2026 and empower them to budget and plan for the future.

Here’s the issue of tax reform in 60 seconds:

What’s at Stake:

The Tax Cuts and Jobs Act (TCJA) reduced taxes for American workers and businesses, but the
individual tax cuts and provisions will expire in 2025.

Bad Solution: Repeal the tax cuts or allow the individual tax cuts to expire.

The TCJA:

Delivered a tax cut to 90 percent of taxpayers. (IRS tax withholding tables)
Cut income taxes for individuals across all income levels—by more than $500 for almost half
of taxpayers. (Joint Committee on Taxation)
Saved households $1,400 on average and married couples with two children $2,917 in 2018.
(Heritage Foundation)
Cut taxes for taxpayers in every state in 2019. (Institute on Taxation and Economic Policy)
Increased taxes for only 6 percent of taxpayers. (Tax Policy Center)
By 2025, will allow the typical American household to keep $26,000 more in take-home pay,
or $44,697 for a family of four (Heritage Foundation).

Companies passed tax savings from the TCJA on to workers:

At least 3 million U.S. workers received wage increases and bonuses.
New parents in low- and middle-income jobs now have paid parental leave at companies
including Chipotle, Dollar Tree, Lowes, and CVS.

The tax cuts boosted economic growth to 3.2 percent and are projected to add 1.5 million
cumulative full-time jobs to the economy by 2025.

A Better Path Forward: Make the tax cuts permanent.

Congress should make the TCJA provisions permanent for individuals. This would give
taxpayers certainty that their taxes will not suddenly rise in 2026 and empower them to
budget and plan for the future.

Extending the tax package would also have a positive long-term impact. It’s projected to
increase long-run GDP by 2.2 percent points, increase wages by nearly 1 percentage point, and
add 1.5 million full-time jobs.

Addressing Concerns: