In a recent post at the (appallingly misnamed) ProMarket blog (the blog of the Stigler Center at the University of Chicago Booth School of Business — George Stigler is rolling in his grave…), Marshall Steinbaum keeps alive the hipster-antitrust assertion that lax antitrust enforcement — this time in the labor market — is to blame for… well, most? all? of what’s wrong with “the labor market and the broader macroeconomic conditions” in the country.

Read the full piece here.

Beware the lurking variable. Even if you didn’t suffer through a semester of college statistics, you’re probably familiar with the adage “correlation doesn’t imply causation.” But if you haven’t had the pleasure, it’s a fairly easy concept to grasp.

Read the full piece here.

Today, thirty-nine different companies and policy experts from a wide swath of the political spectrum signed a letter urging lawmakers to create a “portable benefits” platform that will enable sharing economy companies to continue innovating while simultaneously providing desirable social safety net benefits to workers. This is well timed, as there is a growing consensus among lawmakers (such as Senator Warner) that “something must be done” to provide benefits to workers in the so-called “gig economy.”

In total, the thirty-nine signatories to the letter are pushing for changes to existing law based on a set of principles holding that benefits should be:

1. Independent;
2. Flexible and pro-rated;
3. Portable;
4. Universal; and
5. Supportive of innovation

In a nutshell, this would effectively mean that there is some form of benefits available to gig economy workers that follows them around and is accessible regardless of who employs them (or, ostensibly, whether they are employed at all).

Looking past the text of the letter, this would likely entail a package of changes to existing law that would allow individual workers to utilize some form of privately created platform for managing the benefits that are normally obtained in a traditional employee-employer relationship. Such benefits would include, for instance, workers’ compensation, unemployment, disability, professional development, and retirement. A chief advantage of a portable benefits platform is that–much as in an underlying justification of the ACA–workers would no longer be tied to particular companies in order to enjoy these traditionally employer-based benefits.

Although platform-based work facilitated by smartphone apps is cutting edge, there is historical precedent for this approach to the provision of benefits. Unions have long relied upon multi-employer plans for providing benefits, and the healthcare industry developed portable health savings accounts as a means to free individuals from employer-bound health insurance plans. And the industry has been seeking fully private solutions to these sorts of problems for some time. For instance, Uber recently partnered with Stride Health to provide health insurance benefits to verified drivers.

There will, of course, be some necessary legislative changes in order to make these portable benefits platforms a reality. First, there probably needs to be a provision in the tax code that allows for workers’ contributions to their own plans to receive the same tax-favored treatment that traditional employer-based benefits receive (or, even better, the political give-away would need to be removed from employer-based benefits). Additionally, companies would need to be able to make optional matching contributions with a similar tax treatment. And lurking in the background of all of this is the specter of a large number of employer obligations. Thus, a necessary quid pro quo to get sharing economy companies to pay into these platforms will be some form of safe harbor shielding them from further obligations.

This is a win for both companies and workers. The truth is that our labor market is very fractured–labor force participation rates are at a low, and those who are working remain chronically underemployed. Coupled with this reality, the technology that enables work is becoming ever more flexible and, as shown by their expressed preferences, individuals are clearly interested in the gig economy as a means of easily obtaining work as needed. A portable benefits platform could provide the sort of support to make flexible work a viable alternative to employee status.

And for many employers–sharing economy and non-sharing economy alike–removing antiquated legal strictures from the employment relationship promises a number of increased efficiencies. Particularly in the context of sharing economy companies, this will include the ability to exert some form of control over platform workers without being sucked into an onerous employer-employee relationship.

For instance, Instacart recently moved a number of its platform workers to part-time employee status. Although the decision was very likely multi-faceted, a big part of it had to be Instacart’s desire to give training and guidance to the shoppers who provided services to the platform’s consumers (for instance, instructing them on the best sequence in which to pick groceries in order to ensure maximum freshness). However, to provide any modest degree of oversight would likely mean that Instacart would move from empowering contractors to directing employees, and thereby run into a thicket of labor laws.

Yet why should this particular employee classification be necessary? Platform-based work is a revolutionary way to defeat the traditional transaction costs that justified large, centrally-organized firms. Companies like Uber and Instacart enable what otherwise would have been fallow resources–spare labor, unused cars, and the like–to be fitted to consumer demand.

Moreover, forcing rigid employee classifications upon sharing economy workers will only reintroduce inefficiency into the worker-company relationship. Instead of allowing workers to sign on just for the amount of work they are willing to do, and allowing consumers just to purchase the amount of work they desire, an employee classification essentially requires companies to purchase labor in blocks of hours. At scale, this necessarily introduces allocation and pricing errors into the system. If a smart safe harbor is included in any legislative push for a portable benefits platform, companies could have much more flexibility in directing platform workers.

I am excited to see this development emerging from the industry and from policy makers, and I look forward to the response of our lawmakers (although, this being election season, I don’t expect too much from that response — at least not yet). There is understably a lot of concern about the welfare of workers in the new economy. But it’s important not to lose the innovative new ways of working, producing, and consuming that the modern digital economy affords by resorting to ill-fitted legal regimes from the past.

Filed under: Labor Law, Sharing Economy Tagged: Labor Law, Sharing Economy

When Americans think about governmental regulations meant to protect them against harm, they are prone to making two mistakes in judgment: first, they tend to overestimate the benefits that are supposed to result from regulation (including mandatory licensing) and second, they tend to underestimate (and usually to completely overlook) the costs and problems created by it.

Read the full piece here.

There is a Missouri statute that makes it a misdemeanor, punishable by $100 fine, for anyone who is not licensed by the Missouri bar to “engage in the practice of law or do law business.”  If convicted, violators can be sued by anyone that paid them for their services or by the state of Missouri; successful plaintiffs can recover three times the fees paid to the violator for their services.

Read the full piece here.

A recent article argues “65 percent of today’s elementary aged kids may end up doing work that hasn’t even yet been invented.”  This is a thought provoking number and it points to the disruptive nature of innovation and its impact on a variety of labor markets.  There is a portion of the downturn in legal hiring that is associated with the business cycle.  When economic conditions improve – there should be a rebound.  However, starting even before the recession, it is reasonably clear that a serious structural change was underway.  Expect this broader trend to continue.  As Bruce H. Kobayashi & Larry E. Ribstein have argued, we are at the very beginning of Law’s Information Revolution. Whether we like it or not, informatics, computing and technology are going to change both what it means to practice law and to “think like a lawyer.”

Read the full piece here.

The European Commission, in particular the Directorate-General for Competition, has shown interest in promoting competition in the market for legal services since the early 2000s.

Some countries such as the United Kingdom have taken this matter seriously. After a long review process, the British government has recently implemented a new regulatory set-up for legal services in order to foster competition, innovation, consumer protection as well as a so-called accountable regulatory enforcement (under the Legal Services Act 2007).

Read the full piece here.

The traditional narrative is that Asian jurisdictions have fewer lawyers than in the West because they are much less litigious societies; they don’t need lawyers! Recent evidence has suggested the causation is probably reversed; there are not enough lawyers to provide services to all potential litigants.

Read the full piece here.

Although it has the zing of a slogan that I myself have often used, the call to ‘deregulate’ the legal profession is misleading.  Yes, most of us who argue that the legal profession is excessively closed to competition—in a way that hampers both access and innovation, as I have argued in recent papers—think that the entry barriers are too high.  But the legal profession is not only over-regulated, it is also under-regulated.  The regulatory regime lawyers and judges have put in place is overly protective of lawyers’ interests and insufficiently protective of the public’s interest in an accessible, innovative, and efficient legal system.  So the goal should not be ‘deregulation’ but ‘right-regulation.’

Read the full piece here.