Redefining the Gig Economy: Policy Changes and Implications for the Industry

The gig economy has blossomed into a transformative force in today's labor market. Platforms such as Uber, Airbnb, and DoorDash have not only changed how people work and earn but have also instigated a significant shift in policy discourse. According to the most recent Gallup research, in 2018, 36 percent of U.S. workers had a gig work arrangement in some capacity. That number is expected to be much higher and continue to grow.

Given its pervasive role, it is important to dissect the evolving policy landscape affecting the gig economy, providing government affairs professionals with insights and strategic approaches to navigate this dynamic environment.

Policy Changes Impacting the Gig Economy

The introduction of the California Assembly Bill 5 (AB5), which sought to reclassify many gig workers as employees rather than independent contractors, highlights the kind of legislative changes impacting the industry. There are similar efforts across different jurisdictions, which reflect a global reassessment of the gig economy's regulatory treatment.

Labor rights have been the main driver of policy change. The rise of the gig economy has brought flexibility and opportunity but also uncertainty and insecurity for workers. Policymakers are concerned with creating a safety net for gig workers, ensuring access to benefits such as healthcare, unemployment insurance, and labor protections customary for traditional employees.

Additionally, economic considerations are equally potent motivators for policy intervention. With the gig economy contributing significantly to so many individuals’ incomes, governments are keen on securing fair tax contributions from both gig platforms and gig workers.

Exploring Newly Proposed Legislation and Regulations

Newly proposed legislation is often aimed at enhancing worker protections. For instance, proposals may include ensuring a minimum wage, the right to organize, and standard employee benefits. A recent report noted that there are at least 10 states where programs have been considered that would make it easier for gig economy workers to gain common workplace benefits. Such regulations could fundamentally alter the operational models of gig economy platforms, which have traditionally relied on flexible labor costs.

However, these legislative efforts are not one-dimensional. Some in recent years have proposed creating a third category of worker — neither employee nor independent contractor — that would provide benefits, such as healthcare, while retaining flexibility.

The Impact on the Sector and Preparing for the Future

These policy changes carry significant implications for the gig economy. For one, the reclassification of workers could lead to increased operating costs. There could also be a consolidation of players in the industry as smaller platforms might not withstand the increased financial pressures.

Conversely, the legitimization of gig work through clearer regulations could lead to market expansion and increased investment. Workers could see improvements in job security and benefits, potentially attracting a more stable workforce to the industry.

“For those working in a government affairs capacity, I think it would be prudent to monitor the regulatory space with the same vigor that legislative affairs are monitored,” says Xavier Hopp, a policy associate at FiscalNote Professional Services.

“In the age of partisan gridlock, it is becoming increasingly common that major reforms, particularly on labor policy at the federal level, come by way of regulatory action,” Hopp says. “Just in the last year, the Biden administration has pushed through union election reforms, union-franchise bargaining reforms, and most recently, the Department of Labor rule requiring contract employees who are ‘economically dependent’ on their contract employer to be classified as bona fide employees, rather than contractors.”

Government affairs professionals need to stay ahead of the curve, anticipating and influencing policy changes. This involves active engagement with stakeholders — from gig workers to policymakers — to shape a regulatory environment that balances the needs of all parties.

Companies can adopt a proactive approach by auditing their practices against potential regulatory changes and considering voluntary shifts toward improved worker rights and benefits. By leading with innovation in policy compliance, gig economy platforms can set industry standards and potentially mitigate restrictive regulations.

To stay ahead of this, here are a few strategies that companies and workers can adopt to navigate the reshaped industry:

• Engage in public policy discussions to shape the narrative and outcomes of proposed legislation.

• Invest in technology and business models that accommodate greater worker protections without compromising on flexibility.

• Develop partnership models with government bodies to create new frameworks for worker classification that benefit all parties.

• Offer educational resources to workers about their rights and the implications of policy changes on their earnings and job security.

Ultimately, the gig economy is at a critical juncture, with policy changes presenting challenges and opportunities. For government affairs professionals, the coming years will be complex and require an agile, informed approach to policy management. It is crucial to continue advocating for a balanced regulatory framework that nurtures the gig economy's innovative spirit while providing a safety net for its workforce.

The ability to forecast policy trends, engage in constructive dialogue with regulatory bodies, and advise companies on compliance and strategic planning will be key in shaping the future of the gig economy. By embracing these changes, the industry can continue to thrive and contribute to a vibrant and fair labor market.