The gig economy, following the self-employment trend, has grown tremendously over the last decade. A big slice of the American workforce consists of gig workers who are fighting for their right to be considered independent contractors.
A reliable source states that the majority of workers in the US will be contract workers by 2027. This goes to show the tremendous impact of technology on our professional lives, especially since the development of remote workspaces enabled people to think outside the box.
The birth of the gig economy in the modern age has also shown us that there are many gray areas in the law that don’t precisely pinpoint the rights and obligations of gig workers. However, looking at what the future might bring, it seems like the gig economy is here to stay.
With that in mind, we will take a look at the new Prop-22 regulation and how it will impact gig workers in the upcoming years.
What Is the Gig Economy?
Even though the gig economy is considered a term of the new age, its beginning actually goes way back to 1915 when gig jobs were extremely popular. Throughout history, people referred to gigs as one-time projects that would bring them immediate income.
The modern term “gig economy” has become more common after 2009 when it was first used to describe part-time freelance work. Most simply put, the gig economy is considered to be a free market system where you can find temporary jobs, one-time projects, and similar gigs.
Unfortunately, in some countries gig workers are referred to as unemployed because of the lack of official employment status. However, with the Prop-22, the participants of the gig economy in the US have gained the right to be considered independent contractors.
The Prop-22 Regulation - Role and Impact on Freelance Hiring
California has recently passed Proposition 22 with more than 58% of the vote as a regulation that will positively impact the app-based economy and US freelancers in general. The Prop-22 campaign was supported by some of the most popular tech giants including Uber and Lyft.
While the proposition directly impacts gig workers who deliver people and food via Uber and Lyft services, it will also pave the way for a better future for freelancers in general. Most simply put, this state ballot measure will make Uber and Lyft drivers independent contractors according to California law.
Gig companies, such as Uber and Lyft, were concerned that the costs of the traditional employment model would hinder their growth and profit on a massive level. As a response, they joined forces to push forth the Prop-22 regulation, which officially puts app-based gig workers into a more favorable position of independent contractors.
More specifically, this regulation guarantees freelancers limited healthcare subsidies, accident insurance, a minimum earnings guarantee that equals to 120% of the minimum wage, as well as reimbursement for gas and vehicle costs (for gig drivers). In essence, the ballot classifies app-based drivers as independent contractors and grants transportation and delivery companies an exemption from the Assembly Bill 5.
Moreover, the proposition limits app-based drivers from working more than 12 hours in one day and requires companies to provide occupational accident insurance that covers at least $1 million in medical expenses. The occupational accident insurance also provides disability payments of 66% of the driver’s weekly earnings during the time of suffering from an injury.
The healthcare subsidies benefit goes as follows: the drivers who work at least 25 hours per week during a calendar quarter will get 82% of the average California Covered premium for each month. Those who average between 15 and 25 hours of work will gain 41% of the CC premium healthcare coverage.
How the Prop-22 Regulation Impacts Freelance Hiring in General
Although the Prop-22 regulation directly affects app-based drivers, it will also impact other freelancers in the US. By securing victory for this ballot, California’s voters let the authorities know that the previous A.B. 5 law was widely unpopular. Namely, this law was meant to classify freelancers as employees, which doesn’t benefit the hiring party nor the freelancers.
If this was the case, the gig economy would slowly die out because companies would be forced to hire freelancers traditionally. On one hand, these companies would face much higher hiring expenses since they would be obligated to pay for health insurances, taxes, and additional fees.
On the other hand, the freelancers would not have the freedom to work with multiple clients to increase their profits but they would be tied down to a traditional full-time position, most likely at minimum wage.
It is not only California that brought to question the status of independent contractors. Namely, other states including New Jersey, Massachusetts, Illinois, and New York have also considered pushing forth a legislation that would deem freelancers as full-time employees.
The Prop-22 victory in California will serve as an example to other states that considered establishing a law similar to A.B. 5. These states will now be aware of the risk such law could cause and, thus, they will be obligated to support freelancers as independent contractors to avoid conflict.
"This is not just about Uber and Lyft. It’s about people who want to build their own business. High-end knowledge workers generating six figures should be happy about the decision," said Miles Everson, the CEO of MBO Partners.
Although the Prop-22 regulation does not serve as a firm solution for freelance status in the US, it is a good step toward a better future for the gig economy. As for the freelancers outside California, this regulation won’t have a direct impact but it will encourage other states to consider supporting gig workers as independent contractors.
There are millions of gig workers and freelancers in the US who would be negatively affected by the A.B. 5 law. The good news is that the voters are aware that the law should give these workers a voice and the right to freedom they chose.
The reality is that millions of freelancers are benefiting from being independent contractors and having laws that prohibit such work models could seriously impact their lives. Luckily, the Prop-22 regulation prevented the A.B. 5 law from taking away millions of people’s freelance jobs.
The Future of Freelance Hiring
Being self-employed used to be a dream of many people in the US and across the world. In the last couple of years, the gig economy has grown so much that self-employment went from being an unreachable goal to something as ordinary as a full-time job.
Freelance hiring is now easier for businesses than going through the process of hiring a full-time employee. Moreover, there are dozens of high-demand jobs for freelancers that not only provide a reliable income but also an opportunity to start a successful business.
Among the most popular categories in which freelance hiring happens are copywriting jobs, freelance jobs for video editors, and bookkeeper services for small business, along with many other niches. The nature of the gig economy has proven to be the most favorable option both for companies and workers.
For example, if you are capable of providing bookkeeper services for small business, it is a much better option for you to work as an independent contractor, since you will get to work with multiple clients.
Thus, the gig economy allows workers to expand their reach and increase their profits, whereas traditional employment limits them to a fixed income and an even more fixed schedule. With that said, it is clear that the gig economy is bound to make some serious changes in the way we work.
As far as the future of the gig economy goes, there is no doubt that more and more workers are going to shift to freelance opportunities. However, this also means the competition is going to grow and that it will become more challenging to fight for gigs on the market.
We can expect a higher demand for various modern skills, including an increase in job positions across freelance websites. For example, the number of freelance jobs for video editors or copywriters will continue to grow, as companies are starting to understand the importance of establishing an online presence.
Overall, the gig economy and freelance hiring can only go upward from here. The Prop-22 regulation is just another step toward a better and brighter future for freelancers in the US.