When Thanksgiving rolls around each year, Black Friday is one of the most anticipated days for consumers. However, the holiday with one of the most significant impacts on the local economy is Small Business Saturday.
Small Business Saturday was created in 2010 and established by American Express to drive consumer spending to small businesses. In 2022, an estimated $17.9 billion was spent. This year, a staggering 72% of shoppers plan to shop with a small business.
Independent contractors, frequently the unheralded champions of small businesses, play a pivotal role in job creation, income generation, and the stimulation of local community economies.
A survey reveals that for every dollar spent at a U.S. small business, $0.68 stays within the local community, contributing to an additional $0.48 in local business activity. These contractors act as catalysts for local economic growth. Small businesses outsource functions such as HR, accounting, legal, supply, administration, and maintenance to other professionals they know from within their local or regional communities.
Younger generations can actively contribute to local economic growth as well. Research by American Express, released earlier this month, indicates that $10 spent by each Gen Z and Millennial shopper at a small business on Small Business Saturday could translate into a substantial $2 billion surge in local economic activity throughout the U.S.
Government Policy Shouldn’t Hamper Small Business
As we celebrate this year’s Small Business Saturday, it is crucial to address the policy points that can significantly impact the backbone of our local economies: protecting independent contractors.
According to the Internal Revenue Service, an independent contractor is defined as someone with the “right to control or direct only the result of the work and not what will be done and how it will be done.”
Protecting independent contractors is vital not only for the local economy but for many vulnerable populations.
Despite small businesses’ critical role in the economy, numerous measures have been introduced that threaten their existence.
My home state of California has implemented the most stringent restrictions on independent contractors. One of the most harmful laws implemented is AB5, which forces many independent contractors to be listed as employees, compelling them to adopt the new title or not to work at all.
The reclassification comes with a hefty price tag for businesses by forcing them to ensure that independent contractors are complying with California’s strict wage and hour laws, resulting in an increase in labor costs by an estimated 20-30%.
To avoid these hefty new labor costs, some businesses have opted to not hire independent contractors. These laws especially have an impact on Gen Z, who prefer to work as freelancers.
On a national scale, the U.S. House of Representatives approved the Protecting the Right to Organize Act (PRO Act), which aimed to enforce California’s AB5-style restrictions nationwide. This would shift control away from individuals desiring flexible work arrangements and place it in the hands of the federal government for regulation.
The Department of Labor is expected to finalize a new rule that could impose new restrictions on who can be classified as an independent contractor. IWF submitted a public comment pushing back on this rule and highlighting how it will uniquely negatively impact women.
Safeguarding independent contractors is not just a policy consideration; it is an investment in the sustainability and lifelines of our local economies.
As consumers, advocates, and policymakers, we must continue protecting independent contractors who contribute significantly to the success of Small Business Saturday and the economy of our local communities.