Congress is fast on its way to passing severe restrictions on independent workers in America. That would likely lead to the loss of contracts, employment income, and opportunities.
Millions of people are freelancers or work for themselves as independent contractors. Just who would be affected and why do they choose this form of work? New research answers these questions and provides new insight into why women especially choose independent contracting.
Liya Palagashvili, a Senior Research Fellow at the Mercatus Center at George Mason University, joins She Thinks to share her new research findings. Her primary research interests include entrepreneurship, regulation, and the gig economy. In 2016, Liya was named one of the Forbes’ “30 under 30” in Law & Policy. Liya earned her Ph.D. in economics from George Mason University.
Hey everyone. It’s Beverly Hallberg. Welcome to a special pop-up episode of She Thinks, your favorite podcast from the Independent Women’s Forum, where we talk with women and sometimes men, about the policy issues that impact you and the people you care about most. Enjoy.
Welcome to a pop-up episode of She Thinks. I’m Patrice Onwuka, director of the Center for Economic Opportunity at Independent Women’s Forum. So independent contracting is a hot topic right now. From gig workers, driving Uber to freelancers like mall Santas, language interpreters to truck drivers. This is hot, because the House of Representatives, the US House, just passed the Protecting The Right To Organize Act, also known as the ProAct. And this has tucked into it, a new definition for independent contracting that would reclassify that status for millions of workers and turn them into employees, which would inevitably lead to the loss of contracts, loss of employment income, loss of opportunities. So we have two forthcoming research papers about the gig economy that’s going to shed some light on why many women in particular, but also workers choose to be independent contractors over traditional W2 employees.
Today, our scholar is Liya Palagashvili, and she is here to explain her work. Liya is a senior research fellow at Mercatus Center at George Mason University. Her primary research interests include entrepreneurship regulation and the gig economy. She’s published academic articles, book chapters, policy papers everywhere. And in 2016, she was named one of the Forbes 30 under 30 in law and policy. She has a Ph.D. in economics from George Mason University, and we are delighted to have her here. So Liya, welcome to She Thinks.
Hi Patrice. Thanks for having me on the podcast with you.
Awesome. Well, Liya, tell us, how did you start studying and researching the gig economy? That’s a unique niche.
So, when I was doing my Ph.D. in economics, I did some labor-related research, for example, we looked at overtime regulations with a colleague of mine. But I got interested in the gig economy because I was living in New York in early 2013. Actually, I was living in Queens and it was just impossible to get a cab from Manhattan to Queens. And you had to go through like an hour, or train ride in the evenings to get back home. And all of a sudden, I just saw my world change when Uber and a bunch of other ride-sharing companies came into New York, and it just instantly became so much easier to get back home in the evenings. And I was like, “Wow, I can’t believe in just a couple of months I saw as a big difference in this.” And I started to get fascinated by it. And I was like, “Okay, what’s Uber? What’s the gig economy.” So that was about five or six years ago when I started getting interested in the gig economy.
I love that your research was based on necessity. And I think some of the greatest inventions are too. So speaking of your research, you’ve got two forthcoming papers, and let’s talk about the first one. Tell us the headlines from that first economic paper that looks at the gig economy.
So, the first paper is called Employee Versus Independent Worker, A Framework For Understanding Work Differences. And what my coauthor and I try to do in that paper is we want to ask the question, are there real economic or work differences between people who are independent workers or independent contractors, Patrice, versus those who are employees. And we test over 900 occupations, thanks to the Department of Labor sponsor database called Own It. And we were able to basically pool together 122 roles in the United States that we classified as independent worker roles.
And we found that employees are individuals who do more interdependent team production, coordination roles, and independent workers are much more engaged in roles that are individual worker based. So the type of work that they do, is more individual output based versus the type of work that employees do is much more interconnected team production, which is how we call it. And we did find statistically significant differences across independent workers and employees.
So, in short, employees tend to be people whose work depends on other people being may be right there, whether physically or virtually, but really connecting with them on a day-to-day basis just to get projects done. That’s what it sounds like versus independent contractors, who can kind of go off. They’re told what work needs to be done. They go off do it however they want whenever they want, and then bring it back to the hirer. So I think that’s really interesting, and I’m guessing maybe part of the reason why certain types of folks are attracted to independent contracting is because of flexibility. But I’m going to lead into the second question, which is about the second paper, which is women in the gig economy. And I’m going to guess. I don’t want to be a spoiler, but I’m going to guess flexibility is really important for women in the gig economy. Is that true?
Yes. So we did two main things in that paper. First, we did a review of all the literature of women working as independent workers, and women in quote-unquote, the gig economy. And by the way, just one thing I wanted to point out is there’s whole research of women as independent workers, even before the gig economy, right? Even before a gig economy conquered America, so to speak. And it’s exactly what you said, Patrice is that women are attracted to these types of independent work opportunities, precisely because it allows them greater flexibility.
And women may need to take particular hours of the day off, or need to be able to schedule the hours how they see fit because some of them are primary caregivers. So it’s difficult to work nine to five jobs, so to speak. And so first, we find that review of the literature and both, survey research on this about women preferring flexibility… And even more so than men, by the way, there is survey research that had asked, “What are the main motivations for why women and men go into independent work opportunities?” And women more so than men say, do it for the flexibility it affords them, or it gives them. There was one study that looked at… It was a recent survey that looked at 2000 working women. Excuse me, working women in the gig economy. And 96% of them, almost all of them said that the primary reason they work on these gig economy platforms is because of the flexibility it gives them.
And by the way, a quarter of those respondents had recently just voluntarily left their traditional jobs, and the majority of them said they did so because they needed more flexibility, or more time to take care of a child or an elderly parent or both.
So I mean, I think that’s really interesting because I mean, it shows us number one, that women are moving towards the gig economy, and I can imagine what these numbers or surveys could look like based on the pandemic, and how women who’ve lost their jobs in maybe the service occupations and had to switch over and maybe found work through the gig economy. But what were two surprising observations from your research about women in the gig economy?
Well, first what we wanted to do… Well, what motivated us, I should say, is that we saw there was a large variety of women participating across different gig economy platforms. So for example, if you look at Uber, you’re not thinking, women are participating in Uber as much as men, for example. But when you look at platforms like Etsy, year after year, over 86% of women are independent workers on Etsy. Care.com, 95% women. And you’re asking what’s going on? And one of the things we found this as a study that has already been done, but it found that if you take out the transportation sector entirely, that’s ride-sharing, driving, food delivery, women actually comprise a greater share of the independent workforce.
But let me tell you what we did specifically in the paper. So we saw this variation and we wanted to ask, “Okay, so how do women choose between different independent work opportunities? Why is it that more women are going towards Etsy and maybe Care.com and some of these other platforms versus other platforms?” And we used, what’s called the concept of temporal flexibility and the gender and economics research that says women will self select into the types of jobs that give them, so to speak, greater flexibility. And so we actually empirically test this and quantify this, and we say, okay, is that the case? And we do find that women in the independent work contexts, self-select into the types of independent work jobs, or the types of gig economy jobs, that do reflect greater temporal flexibility.
And these are jobs that exhibit greater independence we found, that allow more freedom to the individuals to make decisions. They’re less structured for the worker, and they have shorter workweeks. So in a sense, women are self-selecting into these types of jobs, even within the gig economy, the ones that give them more temporal flexibility.
So those are probably more than two, but those are really interesting, surprising observations, what you just said. Number one, that across the gig economy, women are not equal in all of these different platforms. They’re using some more than others. Like Etsy is more than maybe the Uber, Uber driving, or rideshare driving. So I think that’s very interesting. And number two, you talked about not just women, not wanting just flexibility, but also greater autonomy, or freedom in how they get the work done. And I think that’s also interesting. And so, as we think about the debate right now, and if you are avid, She Thinks listener, you are very familiar with AB 5, California’s Assembly Bill 5, or AB 5, which reclassified many of their independent contractors as employees.
And you’re probably familiar with the ProAct, which is what I led the lead off in. Your research Liya, is very important to this debate because a lot of these laws that are about reclassifying workers are based on the idea of, well, we’ve got to hit the tech companies, we’ve got to hit the gig economy companies because they’re not treating their workers right. And I think your research speaks to that. So talk a bit, and remember our listeners are definitely not economic theory folks. So, just basically, how do you think your research informs the debate about whether we need greater laws to protect independent contractors?
Well, Patrice, I think you hit the nail on the head when you said, the policies like the pro acts or California’s AB 5, they’re going after like the gig economy, right? They say that’s the villain, like Uber and DoorDash and some of these others. But the problem the collateral damage ends up being women. Because first of all, think about this. Like I mentioned earlier, in the transportation sector, most of those people working and most of the people working in the transportation sector are not men… Are not women. Excuse me. They are men. But that’s the target role, but we forget that women are across all different sectors as independent workers. And I just want to highlight a couple of roles where we see women as proofreaders, and copy makers, writers, massage therapists, phlebotomist, animal trainers, nannies, fitness trainers, tutors, and these are all different types of roles that are all impacted by things like California’s AB 5 and the ProAct.
And I think one, so just one main thing I want to point out, and then we can discuss a couple of other implications later. So again, to the extent that some specific platforms, or some specific roles, right, they provide flexibility of work to those women who need it. And again, they extend work opportunities to women who would be otherwise unable to take on traditional employment. And that’s really important to emphasize. So any challenges to the legal classification of independent contractors, or independent workers, could disproportionately hinder women’s participation on these platforms, and in the labor force more broadly. Because I mentioned, women are voluntarily leaving traditional employment, or they’re voluntarily deciding that they can’t take on traditional employment and going to these independent work opportunities. But when we’re doing analysis of rules, like California’s AB 5 or the ProAct we’re not thinking about them, and we’re not including in our analysis, how rules like this could harm women’s participation in the labor force via independent work opportunities.
Well, so the headline from this discussion today, women would be the collateral damage of the ProAct. Liya, you said it so well. But I’m going to play devil’s advocate just for a moment. And a lot of the proponents of the ProAct, or California’s AB 5 or people who think that support this kind of legislation, say, “Well, wait a minute, these companies are ripping off workers. They are intentionally misclassifying workers that should be employees as independent contractors, so they don’t have to pay over time. They don’t have to pay minimum wages. They don’t have to provide benefits.” And that unfortunately then falls on the state. So, you know, how do you respond to those proponents who say that there’s widespread misclassification of workers in the gig economy or independent contractors at large.
So, I think that’s a great point, Patrice, that you bring up. So we should acknowledge what’s the intention, or what’s the justification. And I’m going to discuss a bit more about the intention, but I wanted to also bring up that, that’s why it’s important to do the type of work that a lot of economists do, which is we want to acknowledge the intentions, but also understand that intentions… Like you can’t hang your hat on the intentions. We have to also talk about implications and consequences. And so you’re right, is that the intention of the rule is okay, there might be misclassification in the US, but I would like to point out that a lot of the misclassification, I should say is limited, and it’s in the transportation sector. Again, that’s not where most women are working, right? As we discussed today.
And the second thing I want to point out is, so if the intention of the rule is okay, if we make it harder for workers to be independent contractors, then organizations will be forced to hire them as employees. And then therefore they’ll have access to benefits, and other employment-based protections. So the intention sounds really great. The problem is, and as we saw what happened in California, Patrice is that a lot of people lost their job opportunities, and to an extent that different media outlets, excuse me, like New York Times, Washington Post, and LA Times, they had to highlight the impact that this had on a bunch of different jobs, and bunch of different roles, like the LA Times, did a heartbreaking story about all the different types of roles in the creative community that lost their jobs.
And we just have to acknowledge that not all of those independent workers will become employees, and that’s clearly what we saw happen in California AB 5. And not only do they not become employees, but then they lose their independent work opportunities. So Uber, for example, released their analysis on what would a nationwide forced reclassification, something like the ProAct, look like for them? And they said we would only be able to hire a quarter of the current drivers working with Uber. So, that means 75% of individuals would lose their jobs completely. So they won’t become employees. That’s the intention, right? And then they’ll lose their independent work opportunities. And that’s why it’s really important to highlight the consequences and the reality. And I understand the intention, but I just want to point out that, you can’t hang your hat on the intention. We have to understand the consequences. And we already saw this happen with California’s AB 5.
And it happened to such an extent that as you saw California, then exempted a bunch of different occupations from California’s AB 5. We saw the entire music industry lobby and say like, “Hey, we’re all freelancers here. This is destroying our industry.”
But it still wasn’t enough because there are still so many workers, unfortunately, that are under AB 5.
I think you’re spot on Liya. You are spot on. I think our discussion today, my two, three big takeaways. Number one is ProAct would have collateral damage. And that damage would be women. The loss of opportunities for women. I think you articulated that so well. You talked about flexibility being a driving force for women in the gig economy in general. And I think there are some surprising observations from your research that we talked about today, which is there were some other things, some nuggets of information in there that I read, that I think is also going to be very interesting. And I think most importantly, it’s that we have to push back against well-intentioned policies that will do more harm than good.
And you said that so well in your last answer there. So, Liya, you are fantastic. Your research is great. I’m looking forward to the final papers being released very soon, and we’ll be sure to link to it so readers can view your research and also visit you at the Mercatus Center, on your website to learn more. So thank you for joining us this afternoon, Liya. And thank you for our listeners to today’s She Thinks pop-up podcast.
I would implore you if you want to read some of those stories that Liya talked about. Heart-wrenching stories, people who have lost their livelihoods, lost their businesses, lost their income because of California’s reclassification of independent contractors, go to our website at iwf.org/ab5 iwf.org/ab5. We’ve got some of those stories and videos right there for you. So with that, until next time, we hope you will be back to listen to She Thinks podcast and do like us on every and any platform where you download your latest podcast. Have a good day.