The PRO Act is back

If it becomes law, it could smother both the recovery and the gig economy

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The Biden administration wants to get people working again. The president and his team are hammering home the argument for more jobs — along with direct payments to people — as they pitch the $1.9 trillion COVID stimulus plan. 

While making the Sunday chat show rounds, Treasury Secretary Janet Yellen said the U.S. economy could reach “full employment” sometime next year if Congress passed the COVID package. Without some government goosing, she said, the Congressional Budget Office predicts it’ll be 2024 before “number of people employed returns to its pre-pandemic level.”

Biden made a case for moving ahead, with or without Republican support, in a Friday meeting.

“The best anti-poverty program is a job” may be a cliché, but it’s on point. The challenge Biden and Democrats face is their insistence on imposing new regulations on workers and employers that would impede job growth rather than enable it. One of those obstacles was in the Biden package: a $15 hourly federal minimum wage. Another is the PRO Act — union-backed legislation that would kneecap the gig economy, one of the 21st century’s greatest generators of worker independence.

The minimum-wage hike appears to be out of the COVID package, or at least that’s what the president said during his pre-Super Bowl interview. (He added that he doesn’t want it to derail the stimulus bill and would back a wage hike in separate legislation.)

Good. Biden’s original plan would have boosted the minimum wage immediately to $9.50, phasing in the $15 amount over a few years. A factcheck in The Dispatch disputing Biden’s statement “all the economics show” a minimum-wage hike would help the economy cited this, again from the CBO:

The CBO estimated that while a $15 minimum wage would increase the wages of 17 million workers and reduce the number of people living below the poverty line, it would also eliminate 1.3 million jobs. The CBO’s projections also indicated a $15 minimum wage would reduce business income while causing prices to increase, concluding that “the $15 option would reduce total real (inflation-adjusted) family income in 2025 by $9 billion, or 0.1 percent.”

Behind The Dispatch’s paywall, Raleigh resident and Cato Institute scholar Scott Lincicome points out that Clemson’s Micale Makowsky and some other progressive economists, see raising the minimum wage as a lousy anti-poverty program. Makowsky:

To my mind, the minimum wage is a policy failure strictly on the terms of (my own) left-of-center preferences. It is a victory of both political framing and strategy for coalitions against economic redistribution and the social safety net. That most of the left doesn’t even see this as a defeat makes it all the more devastating. Those outside the workforce are quietly placed outside the discussion and, in turn, are of secondary concern. More subtly, and perhaps more importantly, though, it builds into the policy construct a bargain that must be repeated and updated as national and local price levels change. Those repeated bargaining events force supporters to expend resources in each new iteration while, at the same time, giving their antagonists votes they can dangle when trying to secure support for their own pet policies. You want a higher minimum wage? Well, I’ve got a military procurement bill coming up next month that is slated to build 4 more F-16s in my district...

So the forced wage hike it out, for now. Good.

The Protecting the Right to Organize (PRO) Act is much more troubling. It’s modeled after AB5, a California law which nearly (ahem) drove Uber and Lyft out of the Golden State. The PRO Act not only would scrap right-to-work laws nationally, but also would redefine independent contracting. It would force most people who work as freelancers or take on gigs — ridesharing, food delivery, furniture moving, yard work, repair jobs, and other “side hustles” — to be reclassified as employees and force the people who pay them to hire them and provide benefits.

Or drop their side hustles and the money and freedom that come with them … unless they take those hustles underground.

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The American Society of Journalists and Authors fought AB5. The group noted that, even with a carve-out for writers, anyone who got more than 35 submissions per year published by a newspaper, ad agency, studio, and the like must be considered an employee of the publisher. It also was unclear if an independent contractor could get around the California law by creating a Limited Liability Company or some other legal entity for protection. (Here’s a fantastic summary for nonlawyers from the employment law firm Fisher Phillips.)

The California law generated a backlash in Proposition 22, a successful ballot measure that exempted workers in transportation — rideshare services like Uber and Lyft and food delivery businesses like Door Dash and GrubHub — from being classified as employees. 

(Sorry. Couldn’t resist.)

But Prop 22 wasn’t a clean win for the gig economy. It requires rideshare services to boost driver wages and offer some benefits.

PRO Act proponents (unions and other left-wing activists) want to put as much of the workforce as possible under union control, especially independent contractors, who by choice and disposition prefer flexible working arrangements to more formal settings with rigid job schedules. Or who may have to work irregular hours to accommodate children, elderly relatives, or other family needs.

As the U.S. Chamber of Commerce put it, “The PRO Act would impose on the full country California’s stringent definition of ‘independent contractor‘ — denying individuals the ability to work independently, threatening the emerging ’gig‘ economy, and taking away the flexibility that has allowed American businesses of all sizes to grow.”

The U.S. House passed the PRO Act by a party-line vote last year, but it died in the GOP-run Senate. The three N.C. House Democrats voted for the PRO Act.  

The PRO Act is back. And Democrats control both chambers of Congress. Getting it through the House again may be a no-brainer. When it reaches the Senate, it’ll provide a test of whether centrist but generally pro-union Democrats such as Joe Manchin of West Virginia (who rejected the minimum-wage hike in the COVID package) or Kyrsten Sinema of Arizona will stand up for a dynamic labor market or union-mandated conformity.

If the PRO Act becomes law, the Biden administration is likely to dampen rather than fuel the post-COVID recovery. As John Locke Foundation regulatory analyst Jon Sanders said last year, “given that the PRO Act could devastate the ‘platform revolution’ here and elsewhere, who knows how many brilliant ideas and job opportunities it could prevent.”