Alphabet Stew
For years, we've said freelance busters are weaponizing the ABC Test to hurt independent contractors. A new study suggests we were right to be angry.
Last week, I published a widely read Q&A with the only independent contractor who had a seat on Minnesota’s misclassification task force. There were a lot of notable nuggets in what she told me about the unionist influence and shenanigans that went on behind the scenes, but this bit, right now, stands out like a bright spotlight:
“The ABC Test, for most of the life of the task force, was held up as the be-all, end-all way to stop misclassification, until the messaging shifted and task force members were suddenly reluctant to name or discuss the ABC Test outright.”
The ABC Test is freelance-busting regulatory language that all of us independent contractors have been saying, for years now, is being weaponized to threaten and destroy our incomes and careers. I’ve written about it here and here and here and elsewhere. Other freelancers have written about it here and here and here and more. Even one of the most progressive media voices in the country has written personally about it, calling the ABC Test regulatory language a “fatal flaw” in a bill that Democrats supported en masse.
All of these protestations fell on deaf ears as the freelance busters relentlessly pushed and praised the ABC Test in everything from California Assembly Bill 5 to New Jersey Senate Bill 4204 to New York Senate Bill S6699A to the federal PRO Act to the U.S. Labor Department’s notice of proposed rulemaking about independent contractors.
Why, then, did the Minnesota task force members suddenly not even want to speak the name of the ABC Test out loud?
Right around the time that saying “ABC Test” became akin to uttering “Beetlejuice” or “Voldemort,” a woman named Liya Palagashvili from the Mercatus Center at George Mason University gave a presentation before that task force. Her presentation included a sneak peek at a study she’d been working on, a study whose results she officially previewed late last week.
That study is described as a first-of-its kind causal analysis of state ABC Test laws on labor-market outcomes. Palagashvili’s findings, in collaboration with co-author Markus Bjoerkheim, are that:
The introduction of an ABC Test caused significant declines in traditional W-2 employment, self-employment and overall employment
The ABC test reduced traditional W-2 employment by 4.73%
Self-employment fell by 6.43%
Overall employment fell by 4.79%
Occupations with high shares of independent contractors experienced the largest reductions in employment
She says the full results will be published next month for everyone to review. For now, though, she says the main takeaway is this:
“These results suggest that contrary to the intended goal, ABC tests are not altering the composition of workers and leading to more workers becoming traditional W-2 employees, but they are reducing employment for both W-2 employees and self-employed workers.”
If this study is right, then contrary to the freelance-busting brigade’s claims that they’re just trying to stop employees from being misclassified as independent contractors, they’re actually hurting all kinds of hardworking people in more ways than we even realized.
Watch the Lines Nosedive
The way Palagashvili and her team did this study was to look at employment changes that happened in ABC Test states relative to states that used other regulatory language to determine independent-contractor status.
The study displays this information in graphs. The vertical dashed lines in these graphs represent the time the ABC Test went into effect, and the y-axis coefficients show the estimated change in employment relative to the period of time before the ABC Test went into effect.
You can clearly see the lines nosedive for self-employment, W-2 traditional jobs and overall employment after a state introduces an ABC Test:
These findings contrast starkly with what unionists have been claiming about the ABC Test for years now, with those claims becoming the basis for all the state and federal legislation I linked to above.
A sponsor of one of those bills, unionist New Jersey Senate President Steve Sweeney, was so determined to get the ABC Test into a new law that he claimed, “There are no threats to employees from this legislation”—at the same time he smeared those of us who objected, likening us to Russian operatives trying to interfere in elections.
Sweeney’s fellow unionist, then-California Assemblywoman Lorena Gonzalez, took to Twitter to attack people who pointed out the problems with her ABC Test bill: “[S]top saying this is a bad bill. It’s not. It’s a great structural reform we’ve needed since the 1940s.”
The SEIU championed the ABC Test, saying California’s freelance-busting law should be a model for other states.
The Teamsters championed the ABC Test, saying it would lead to more union organizing by expanding employee rights.
The AFL-CIO cheered the idea of inflicting the ABC Test on the whole country via the federal PRO Act, stating that the “ABC test provides a clear and fair method for ensuring that employees receive the [National Labor Relations Act’s] protections—and nothing more.”
Not a damn word of it was true, according to this study’s results.
The data that Palagashvili released last week suggests not only that the ABC Test is failing to create more traditional jobs and union members, but also that it’s harming all kinds of incomes and careers.
I look forward to seeing the full study when Palagashvili and her team release it. Until then, you can read her preview with more information here.