Something huge just happened, imperiling American workers

At the end of last week, as news of the government shutdown and Roger Stone’s arrest dominated the news cycle, a federal agency made a move that has the potential to inflict severe damage on the economic security of workers all over the country.

The National Labor Relations Board made it much easier for businesses to consider workers independent contractors rather than employees. The upshot: They won’t get benefits and won’t be allowed to organize.

This doesn’t just imperil those workers who will be affected immediately. In making this decision, the NLRB has given businesses a huge incentive to stop hiring employees, and to only hire contractors instead. It’s another nail in the coffin for workers’ rights and job security.

The 3–1 decision turns back the clock on progress made during the previous administration. The lone dissenter said the board had failed to recognize reality.

To understand what happened here, you first need the big picture.

As I recently explained in Barron’s and Forbes, the rosy descriptions you often hear about the state of jobs in America don’t reflect what workers are actually going through. Anyone who does even just a couple of hours of work is counted as “employed” in the “job” figures reported. And these days, more and more people are reliant on part-time, contingent and shift work to pay the bills — jobs that go far beyond what most people think of when they hear the term “gig economy.”

A few key stats:

• 36% of U.S. workers have a gig work arrangement.
• Nearly 5 million people are working part-time because they can’t get full-time work.
• Even among people with full-time jobs, 30% have taken on an extra job for pay.
• Evidence suggests that a monthly survey often cited in news reports “misses many instances of multiple job holding,” economists from Princeton and Harvard say in a new report.

People need jobs in order to live. They’re dependent on employers. And 78% of U.S. workers live paycheck-to-paycheck. That brings us to where the NLRB went wrong.

An independent federal agency, the NLRB made its decision in a case involving franchisees of SuperShuttle, a company at Dallas-Fort Worth Airport. The board ruled that because these drivers lease or own their vans and make certain decisions including their hours, they have “significant entrepreneurial opportunity for economic gain” — and are therefore contractors, not employees.

These drivers are actually under a long list of requirements from the company and depend on it for their livelihood, just as the company depends on having drivers. As Quartz explains, this case goes far beyond just one company. It has “staggering implications for Uber and companies like it.”

Uber is one of many companies pushing to ensure that its workers are classified as independent contractors. And because of Uber’s size and popularity — and the attention it gets — it’s become a focal point on this issue.

“Are Uber Drivers Employees? The Answer Will Shape The Sharing Economy,” a Forbes headline explains. The piece by University of Chicago Law Professor Omri Ben-Shahar notes that while Uber “does not control or direct its drivers,” some courts have found that it “does have meaningful control” over them. “In reality, many of the drivers are economically dependent on Uber for continued work.” (The New York Times has also explored how Uber prods “drivers into working longer and harder — and sometimes at hours and locations that are less lucrative for them.”)

As non-traditional work arrangements become a bigger part of the economy, more and more Americans are left without stable income, benefits, or the ability to negotiate collectively for better wages. It’s an economic fact: the only way workers have power is through working together. You can only create an impact if many threaten to walk out the door.

This lack of security is made even worse by the possibility that a recession could be on the horizon. Independent contractors often don’t receive severance or, in most cases, unemployment — a nightmare scenario.

There is some good news at the state level. For example, California and New York have been taking steps to require certain workers be treated as employees, and be given worker protections.

In the long run, better off workers improve the economy. Businesses can only succeed if people have enough money to afford goods and services. A white paper from Prudential calls on policymakers to “encourage exploration of both public and private sector solutions” to deliver benefit to gig workers, which can reduce reliant on government programs. “Financial wellness” among employees also increases productivity, Prudential says.

But for now, the federal government is busy rolling back all kinds of worker protections — and this decision from the NLRB is one of the biggest yet.