How the Gig Economy Will Accelerate Under Donald Trump
Estimates of how many freelance workers are in the gig economy today vary between 20% to around 34%—partly because there is no universally accepted definition of what a freelance, or “gig” worker is. Most estimates define traditional freelancers as temps, part-timers, and contingent workers. The gig workforce also includes consultants and people from labor platforms such as, Uber, TaskRabbit, Upwork, and Topcoder, among others. In addition, some estimates include those involved in capital platforms, such as eBay, Etsy, or Airbnb, through which people sell goods or share capital, not labor. But no matter how you define the gig economy, the percentage of the labor force that is identified as gig or freelance worker could more than double to represent 50% to 60% of the labor force by 2020.
The main driver for rapid growth in this segment of the labor force will be regulations—or rather, the possible loosening or elimination of regulations. Recent legislation under the Obama administration has made it easier for people to participate in the gig economy. For example, the passage of the Affordable Care Act and access to other portable benefits, such as retirement plans and health savings accounts, enabled workers to forgo the need to rely upon employers to provide that security.
On the other hand, a growing body of regulations have made it more difficult for employers to hire freelancers. So too has litigation, for example, the Microsoft and FedEx cases, and complaints from Uber and Lyft drivers, all of which centered on classification of employees as independent contractors. And the historic National Labor Relations Board (NLRB) Browning-Ferris ruling, placed strict limitations on employers. Indeed, almost every company i4cp interviewed in the past year on the topic of the future of work said the current regulatory environment prompts them to be cautious in how and why they tap into this growing nontraditional labor force.
Enter the Trump Administration.
The Obama administration could be defined as employee-friendly. Generally speaking, Obama’s policies sought to protect workers from powerful employers, who, without regulations, could exploit workers. The Lilly Ledbetter Fair Pay Act, overtime reform and attempts to raise the federal minimum wage are a few examples. The Trump administration, however, appears to want to take the government in the opposite direction, establishing a more business-friendly government with a goal to eliminate regulations that are perceived to stunt business growth. This will probably include eliminating, revising, or ignoring regulations related to co-employment.
The primary issue is the distinction between who is an employee and who is a contractor and whether the employer has “control” over the work being done. But defining where control begins and ends can be confusing and complex. This may come to an end, based on who is appointed to lead three key departments: the Department of Labor, the Internal Revenue Service, and the National Labor Relations Board. Trump’s nominees to lead two of these three agencies have one thing in common: while they have little to no government experience, they have strong business backgrounds.
The nominee to be the next Secretary of Labor is Andrew Puzder, the former CEO of CKE Restaurant Holdings, Inc., parent company of Carl’s Jr. and Hardee’s. According to Mr. Puzder, who is vigorously opposed to the proposed $15 minimum wage increase, his mandate is to eliminate, in his words, burdensome "regulations whose costs bear little or no relationship to their financial or societal benefits and which impose government-created barriers to free enterprise." The result will probably create a whole different view concerning co-employment regulations, making it easier for employer to tap into the gig economy for talent.
The Internal Revenue Service reportedly has a list of twenty factors it considers when determining who is an employee and who is a contractor. The IRS is part of the Treasury Department and the nominee for Treasury Secretary is former Goldman Sachs banker Steven Mnuchin. As with other recent nominees, Mr. Mnuchin is a controversial pick. He was the chairman of OneWest, which was sold to CIT Group in 2015. Before the sale, OneWest faced a string of lawsuits over its home foreclosure practices. In addition, Mr. Mnuchin would bring no government experience to Treasury, something that could prove a hurdle in navigating the politics of Washington. Despite this, he will most likely be confirmed, and then appoint a business-friendly Chairman of the IRS.
The National Labor Relations Board is an independent federal agency vested with the power to safeguard employees' rights to organize and to determine whether to have unions as their bargaining representative. The agency also acts to prevent and remedy unfair labor practices committed by private sector employers and unions. President Trump will eventually nominate all five members of the labor board, as well as its general counsel, who typically has the final say on whether or not to issue formal complaints against employers.
The actions that these three bodies take over the next four years will most likely make it easier for employers to tap into the growing gig economy for a source of valuable talent. But the Affordable Care Act will not be “repealed and replaced” easily. The task will be a long and difficult one. Repealing the ACA without a replacement would mean cutting off 20 million potential voters from their health care benefits—something politicians are loath to do. So, Congress would need to come up with a replacement that would be put in place when the ACA is formally repealed. Unfortunately, unraveling the current ACA and then designing something to replace it will not be easy and could take years. While the impact this will have on the gig economy remains to be seen, bottom line: I believe it will continue to be easy for people to become freelancers and join the gig economy, and over the next four years, the elimination of regulations will make it easier for employers to take full advantage of this and increase their use of freelancers.