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Why New York Wants To Regulate The “Abusive” Gig Economy

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New York Governor Andrew Cuomo recently called the gig economy “abusive” and a “fraud” and proposed new rules to regulate the growing sector. The fear is that companies falsely call their workers independent contractors to skirt protections and benefits extended to traditional employees. A new report by my colleagues at the New School’s Center for New York City Affairs cuts through the name-calling to describe how workers would be affected by the new regulations Cuomo is calling for. I interviewed one of the co-authors, New School economics graduate student Lina Moe. Her coauthors are James Parrott and Jason Rochford. 

TG: What’s happening with regulating gig workers right now?

LM: When Governor Cuomo highlighted the plight of gig workers, he did so in the wake of the California legislature passing a law to regulate gig work. So we’re in a moment in which states with powerful economies are scrutinizing how gig workers are treated. 

When we talk about gig workers, we’re often thinking about app-based work—people who get jobs through online platforms like Uber or TaskRabbit. But our report shows that app-based gig workers are only part of a larger group of independent contractors who also lack basic worker protections and benefits—they make up maybe 150,000 workers out of 1 million independent contractors across New York State. True independent contractors have control over their work and they generally have multiple companies that they work for. But many low-paid independent contractors, like nail salon workers or for-hire drivers, often work full-time for a single employer. The question is how to separate true independent contractors from the misclassified workers—and how to make sure that those misclassified workers get the benefits and protections that they deserve. 

TG: When you say low-paid independent contractors, who are you talking about?

LM: First, it’s hard to make a precise estimate of gig workers because many independent contractors juggle multiple jobs and they might report their wage work as their primary job, even though they rely on both an hourly job and gig earnings to make ends meet. 

When we looked at workers whose primary job was as an independent contractor, two groups emerged. One was low-paid—those with median yearly earnings less than $20k—and another group was higher-paid, including, for example, finance or tech consultants. We focused on those low-paid independent contractors who are most vulnerable to being exploited. 

The industries with the biggest numbers of these low-paid independent contractors include personal care services, like nail salon workers, construction, and transportation. The number of independent contractors in construction has actually decreased over the past decade, likely because of tougher scrutiny on hiring practices—which shows that enforcement works! But compared to payroll workers in the same industries, these low-paid independent contractors tend to have a slightly higher percentage of men, and also tend to be older and foreign-born. 

What’s remarkable is that although independent contractors and standard payroll workers tend to be demographically very similar within industries, they have very different earnings. And over the past ten years, they’ve missed out on all of the minimum wage increases in New York and their median earnings have plummeted. One exception is the for-hire vehicle sector, for which NYC instituted a pay standard at the beginning of 2019 that raised hourly wages to the minimum wage.

TG: How does enforcing laws preventing employers from misclassifying employees as independent contractors affect the state’s economy?

LM: When New York state put together a task force on worker exploitation and employee misclassification, they identified the same industries that we found to have large numbers of low-paid independent contractors. There’s reason to believe that many of these workers are likely misclassified and working without the labor protections and benefits they are due. These benefits—including minimum wage coverage, unemployment insurance, overtime pay protections and safety and anti-discrimination laws—would transform working people’s lives for the better and in a way that they deserve. It would also be fairer to employers who properly hire their workers as employees.

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