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Tipsheet

Destructive: Biden Administration Moves to 'Californize' US Labor Rules

AP Photo/Rich Pedroncelli

Let's start with a few headlines from just this week. CNN Business: "‘The worst is yet to come’: IMF issues stark recession warning." CNBC: "JPMorgan’s Jamie Dimon warns U.S. likely to tip into recession in 6 to 9 months." Washington Post: "The job market is slowing, and this could just be the beginning." Money: "Most U.S. CEOs Think a Recession (and Layoffs) Are on the Horizon."  Here's part of the New York Times story about growing recession fears -- beyond the technical recession that we're already experiencing:

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The International Monetary Fund said on Tuesday that the world economy was headed for “stormy waters” as it downgraded its global growth projections for next year and warned of a harsh worldwide recession if policymakers mishandled the fight against inflation. The grim assessment was detailed in the fund’s closely watched World Economic Outlook report, which was published as the world’s top economic officials traveled to Washington for the annual meetings of the World Bank and the I.M.F...“In short, the worst is yet to come, and for many people 2023 will feel like a recession,” the International Monetary Fund report said.

Of course, a large majority of Americans say it already 'feels like a recession,' per recent polling.  With that as a backdrop, the Biden administration is rolling out new rules that would raise the cost of creating and maintaining jobs, which would be a bad idea at any time, but especially with more economic pain looming.  It at least somewhat resembles a disastrous California policy that has destroyed lives and livelihoods in that state.  Details:

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The Labor Department on Tuesday unveiled a proposal that would make it more likely for millions of janitors, home-care and construction workers and gig drivers to be classified as employees rather than independent contractors. Companies are required to provide certain benefits and protections to employees but not to contractors, such as paying a minimum wage, overtime, a portion of a worker’s Social Security taxes and contributions to unemployment insurance. The proposed rule is essentially a test that the Labor Department will apply to determine whether workers are contractors or employees for companies...The new version of the test lowers the bar for that employee classification from the current test, which the Trump administration’s Labor Department created...The proposal would apply only to laws that the department enforced, such as the federal minimum wage. States and other federal agencies, like the Internal Revenue Service, set their own criteria for employment status. But many employers and regulators in other jurisdictions are likely to consider the department’s interpretation when making decisions about worker classification, and many judges are likely to use it as a guide. As a result, the proposal is a potential blow to gig companies and other service providers that argue their workers are contractors, though it would not immediately affect the status of those workers.

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This is a limited (but broader signal-sending) version of California's destructive AB5 law, which was implemented three years ago, throwing many residents' lives and careers into chaos. The Hill published an unpleasant reminder of the wages of AB5:

Three years ago this month, California Gov. Gavin Newsom signed California Assembly Bill 5 (AB5) into law, essentially outlawing freelance journalism and most other independent contracting. Opponents of the bill warned the law would devastate the longstanding careers of many independent businesspeople in the Golden State. Three years later, it’s clear the critics had it right: AB5 has proven to be among the most ill-conceived state labor policies in recent memory. If AB5’s restrictions were limited to California, that would be bad enough. But the Biden administration appears determined to bring these destructive labor restrictions to the national stage in the form of the Protecting the Right to Organize Act (PRO Act). Policymakers should pay heed to the damage AB5 has wrought in California and stop this disastrous policy in its tracks.

AB5 created a three-part “ABC” test used to determine whether a worker is an independent contractor or employee. The key provision of the test is that anyone performing work within the “usual course of the hiring entity’s business” must be classified as an employee, rather than a contractor. The outcome was predictable: Many businesses and nonprofit enterprises that relied on independent contractors stopped using those workers — both because workers who had built self-sufficient careers did not want to trade the freedom of freelance work for the false benefits of employment, and because many companies couldn’t afford to convert them to full-time employees. Countless self-employed Californians suddenly lost work opportunities and faced steeply declining incomes. Making matters worse, AB5 took effect in January 2020, mere weeks before Newsom locked down the state in response to COVID-19. Just when Californians most needed the freedom and flexibility that independent contracting provides, they were frozen out of the labor market.
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The state legislature, dominated by labor union influence, has frantically handed out dozens of exemptions, due to the cascading mess the policy created. Rather than look at this as a problem to be avoided, the Biden administration is moving the country closer toward it. Indeed, Biden specifically endorsed AB5 and supported a national version of it. In my piece about California earlier in the week, I pointed out that no matter how badly progressivism fails in that state, national Democrats view California as a model for the country. They dream of a similar one-party ultra-progressive dystopia based in Washington, DC -- with no idea so demonstrably bad that they'd hold back. Biden's regulatory move toward an AB5-style environment is just another example of this phenomenon. And remember, Biden was the alleged 'moderate' of the 2020 field.  I'll leave you with another instance of harmful and unfair progressive governance in action:

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