You're Probably Getting Screwed by Misclassification
And how labor and competition policy can help address it
Welcome to You’re Probably Getting Screwed, a weekly newsletter and video series from J.D. Scholten and Justin Stofferahn about the Second Gilded Age and the ways economic concentration is putting politics and profits over working people.
Last month the Department of Labor announced a new rule that will go into effect in March meant to combat worker misclassification. This is the practice of classifying employees as independent contractors and robbing workers of the rights and benefits they are entitled to. The misclassification of workers is a rampant issue that could impact anywhere between 10% and 30% of the workforce, resulting in wage losses of anywhere from $6,000 to $18,000 and is often the most prevalent in low-wage occupations.
David Weil has called this the “fissuring” of the workplace, and saw how it could lead to wage theft while leading the Wage and Hour Division at the Department of Labor under President Obama. Weil wrote that the agency saw janitors, cable installers, carpenters, housekeepers, home care workers and distribution workers being denied overtime costing them three to four weeks of earnings. One form of this fissuring is the expanded use of staffing companies for ancillary functions like office cleaning and is growing to include more core functions, but the rise of Big Tech and the so-called gig economy has put misclassification on overdrive.
Gig work has created an army of “small businesses” in name only. Independent contractors with none of the flexibility actual entrepreneurs enjoy, but all of the risks they face. This model has saved companies a ton of cash. For example, a study in California found that misclassification allowed Uber and Lyft to avoid paying $413 million in state unemployment insurance taxes between 2014 and 2019. A Frontline documentary about Amazon’s sprawling monopoly looked at how their use of independent contractors for delivery drivers allows them to avoid accountability for safety violations.
Like the Labor Department rule, much of the work to date to address the problem of misclassification has focused on changes to labor law. New York City has a minimum wage for rideshare drivers and Seattle expanded theirs to include delivery apps like InstaCart and Grubhub. Around the country states are considering measures to make it easier for gig workers to access traditional workplace benefits while Colorado and Connecticut have proposed new protections for these workers. Beyond gig work, Kansas is dedicating additional funding for labor inspectors and Minnesota has a misclassification task force developing recommendations.
However, another tool is now being considered to address this problem and that is antitrust law. Last week Alvaro Bedoya, one of five commissioners on the Federal Trade Commission, gave a speech outlining that worker misclassification is an unfair method of competition and a violation of the antitrust laws. Cory Doctorow summed up Bedoya’s argument in a must-read piece.
“Misclassification is a scam that hurts workers and creates oligarchic power — and it’s also a mass-extinction event for good companies that don’t cheat their workers, because those honest companies can’t compete.” - Cory Doctorow
Bedoya’s speech is not the only example of looking to antitrust law to deal with the fissuring of the workplace. Washington Attorney General Bob Ferguson used his state’s antitrust law to end the use of no-poach clauses, which are agreements among companies to not hire each other’s workers. These kinds of agreements allow franchisors to use their power over franchisees. For example a study in Rhode Island found that no-hire agreements within the fast-food labor market reduced the effective number of fast-food employers from 261 to six.
What this demonstrates is that dealing with misclassification, the fissured workplace and the restraints it places on workers will require utilizing labor law and antitrust law in tandem. Antitrust enforcers are beginning to do that, but plenty of work remains.
YOU’RE PROBABLY (ALSO) GETTING SCREWED BY:
Shrinkflation
Shrinkflation is real! Have you noticed at the grocery store corporations keeping the prices the same but you’re getting less? Here’s what it is, reasons for it and how to spot it!
Walmart
1 out of 4 dollars spent on groceries is spent at Walmart.
Republicans Relaxing Child Labor Laws…
Judd Legum and the folks at Popular Information show how huge corporations that have claimed to be champions for Dreamers are donating large checks to Republicans pushing the great replacement theory.
Drug Companies
Like many other prescription drugs, the companies’ inhalers sell for hundreds of dollars in the U.S. but for only fractions of that same cost overseas. The companies charge between $200 and $600 each for inhaler products that are typically purchased monthly.
2nd Gilded Age
What are We Doing for the Kids
Credit Card Debt
Americans now owe a collective $1.13 trillion on their credit cards, according to a new report on household debt from the Federal Reserve Bank of New York. Credit card balances increased by $50 billion, or roughly 5%, in the fourth quarter of 2023!
GOOD NEWS
Here’s a headline I could get used to… “Ford UAW employees get bigger profit-sharing checks for 2023 despite strike”
BEFORE YOU GO
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Break Em Up!
Justin Stofferahn
The bill in the Iowa legislature that allowed for counties to vote to set aside some property tax money to help pay for ambulance service certainly was so poorly written. If you already were paying for ambulance service through city taxation, you now are going to get taxed twice if you own property in the city! Further, the law specifically does not allow this money to be used to pay wages, insurance, retirement and several other large expenses that plague local ambulence seervices who have 24 hour coverage with a paid staff. Property values for farmland are also lower than homeowner land, which still puts the larger percentage of the taxes collected on non-farmland owners. Not to forget, those who vote no have their votes valued more since it takes a 60% yes vote to even collect the tax. The vote is only good for ten years and then has to be voted on again to renew the collection of the Emergency Services tax. Check it out!