Liya Palagashvill on the ABC Contractor Test
ICLE Academic Afiliate Liya Palagashvilli was cited by Forbes in a story about her recent study examining the effect of the ABC test on employment. You can read the full piece here.
Much of this has taken the nature of anecdotal data that has value but not the weight of quantitative measure. A study out of the free-market-oriented Mercatus Center at George Mason University by labor economist Liya Palagashvili and pre-doctoral researcher Revana Sharfuddin has the first take on the broader implications, and it’s a doozy.
…Palagashvili and Sharfuddin took this approach to look at what different states did at uncoordinated times. Some of the states had implemented an ABC test, others didn’t.
“Our results show that when a state adopts an ABC test, it causes a reduction in traditional (W-2) employment, self-employment, and overall employment in both the short-run and the long-run (15 years),” they wrote.
…The nature of the data didn’t allow Palagashvili and Sharfuddin to pinpoint the reason for the drops, but they noted some potential explanations. Businesses that heavily used ICs in addition to W-2 employees might have been forced out of business or to cut back, resulting in headcount cuts. “This is supported by anecdotal evidence coming out of California where employers started closing down their offices that had both W-2 employees and contractors,” they wrote.
