Involuntary reclassification could amount to nearly half the job losses seen during the Great Recession
Today Chamber of Progress released a new economic analysis finding that a national rule reclassifying independent contractors as full-time employees could result in a loss of direct income for approximately 3.4 million American workers.
The report, titled “The Many Ways Americans Work and The Costs of Treating Independent Contractors As Employees,” details the impact on workers and wages if the United States were to implement sweeping changes to reclassify independent workers as employees. The report finds that such changes could cost the nation’s most vulnerable communities more than $31 billion.
Specifically, the study examines the “ABC Test,” which is used in a variety of state and federal proposals to determine whether a worker is an employee or an independent contractor. The new study finds that a national rule reclassifying independent contractors as employees could result in approximately 4.4 million people being involuntarily reclassified.
“A national reclassification of independent workers could single-handedly force the biggest loss of work and wages we’ve seen since the start of the pandemic,” said Chamber of Progress CEO Adam Kovacevich. “And the biggest burden would fall on independent workers who are unable to secure traditional jobs because of disabilities, chronic illness, or family obligations. Policymakers need to understand the harmful impact this could have on vulnerable communities.”
Despite the sweeping nature of proposals to reclassify independent workers, little research has been conducted to date on the possible employment and economic impacts of such a law.
This economic analysis released today was conducted by two former White House economists, Dr. Robert J. Shapiro and Luke Stuttgen. Dr. Shapiro advised President Bill Clinton, President Barack Obama, and Vice President Al Gore, and he currently serves as a Fellow of the Georgetown University Center for Business and Public Policy. Luke Stuttgen is an economist for Aceso Global and previously served as a Staff Economist at the White House Council of Economic Advisors.
In the report, Shapiro and Stuttgen project significant work and income loss among involuntarily reclassified contractors for three primary reasons, including 1) the inability of many contractors to do full-time work due to disabilities, chronic illness, or family obligations; 2) the loss of freelance work for contractors who already have a full-time job; and 3) the inability of companies to hire back many of their former contractors due to the high cost of maintaining full-time employees.
Read the full analysis:
The Many Ways Americans Work and
The Costs of Treating Independent Contractors As Employees
KEY RESEARCH FINDINGS
- 4.4 million workers could be involuntarily reclassified, including:
- 1.5 million people working as full-time contractors
- 2.0 million people working part-time as contractors with no other jobs
- 1.1 million people doing freelance work while also holding regular jobs.
- 3.43 million reclassified contractors could suffer substantial, direct income losses, including:
- 1.52 million people who chose independent contracting because disabilities, chronic illness, or family responsibilities precluded working in traditional jobs. Involuntary reclassification would cost this vulnerable community an estimated $31.4 billion.
- More than 1.14 million additional contractors could forfeit the freelance work they do outside of their regular jobs.
- 769,000 contractors or 43 percent of the 1.78 million people able to take regular positions could not find such jobs, losing $9.1 billion in earnings
- Job losses due to involuntary reclassification could be nearly half the number of losses seen during the Great Recession, when non-farm employment fell by 7.39 million full-time and part-time positions.
In February, Chamber of Progress released a new study examining voter support for the Prop 22 ballot initiative in California, which protected app-based driver flexibility while providing access to benefits and protections. The study found that Black communities, Hispanic communities, and women voters were more likely to support the initiative to allow drivers to remain independent contractors. Read the full report here.
Chamber of Progress (progresschamber.org) is a new center-left tech industry policy coalition promoting technology’s progressive future. We work to ensure that all Americans benefit from technological leaps, and that the tech industry operates responsibly and fairly.
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