How California Politicians Screwed Up a Perfectly Good Employment and Market Arrangement With Their Economic Ignorance

Just a short post today, one focused on a prime example of how politicians in this country have no economic common sense, education, or real life experience. Not surprisingly, this ignorance has recently come to the surface in the state of California. 

But this California political failure of common sense and inability to resolve any problem should not surprise anyone given the the many, many failures that the California political class has brought down on the residents of that state:

• California has one of the highest, if not the highest, tax burden of any state in the union.
• The state government’s financial situation is a mess with a huge budget gap and billions and billions of unfunded financial liabilities with no way to pay them.
• The state and city politicians have decided it should not be against the law to defecate, urinate, or shoot up illegal drugs in public.
• The state’s public education systems severely under educate most California kids.
• The state’s homeless population is huge and growing everyday.
• The state’s infrastructure is crumbling and the recent attempt to build a high speed rail line was a financial disaster.
• The state’s illogical and wrong headed conservation laws and regulations result in frequent and deadly wildfires.
• The state’s massive amount of silly laws, rules, and regulations on building homes and other structures has resulted in sky high housing prices in the state.
• The state crime rate, especially in the state’s larger cities, is rising.

All of the above problems are causing a net migration loss of state residents, i.e. more are moving out than are moving in, a California reality that has not been present for lord knows how long.

Wow, not a fun place to be. High taxes, low or ineffective government services, crime, homelessness, etc. Much, if not all of this, has to do state politicians doing a horrible job of managing tax dollars, not operating an efficient government bureaucracy, and just passing stupid and counter productive laws and regulations.

Okay, put that dumpster fire aside for a minute. Let’s assume that a new company comes along with a bright new service idea that has the following benefits:

• It creates a whole new industry with a lot of new good paying jobs.
• These new jobs create wages that boost the economy and widen the tax base, something you would think politicians would like.
• The people who decide to take these jobs have the flexibility of working whenever they want for as long or short as they want.
• The people who take these jobs are basically their own boss who do not have to report to an office everyday or put up with a bad immediate boss looking over their shoulder.
• Customers of this new industry get a brand new, more extensive, less expensive and possibly better experience using this new industry than the previous industry they had to rely on.
• This new industry makes the roads and driving less dangerous, saving lives and reducing accidents.
• This new industry has an extensive review process for both employees and customers so that you are aware of the type of service you are likely to experience before using this new industry.

Good jobs, good wages, work flexibility, wider tax base, safer roads, wow, what a great deal. Of course, we are talking about the ride sharing industry that Uber and Lyft created. Uber and Lyft act as a clearinghouse of matching up drivers with people that need a ride somewhere. 

People can decide to be an Uber driver, a Lyft driver or both. They work when they want for as long as they want. The pay is good and they are their own boss, always interacting with real people with real and often interesting stories to tell. 

This allows some people with other responsibilities to work in this new industry without the constraints and requirements of a typical job. Stay at home parents can work while their kids are in school. Retired folks can work and get some extra income into their retired lifestyles. College kids can work and schedule around their classes.

Customers who only had taxi service as their travel alternative, or had no travel option, now have other options which causes competition which drives down consumer transportation costs. People who have had too much to drink while out on the town can leave their cars parked and get an Uber or Lyft ride home, protecting their lives and the lives of other drivers.

Very flexible hours, good wages, interesting customer interactions, safer roads, no immediate bosses, providing a needed market service, the list of positives of this situation is quite long.

Then along comes the California political class. The state politicians decided that they would “help” out these drivers by forcing Uber and Lyft to treat the drivers not as independent contractors, which they are, but as full time employees. And as full time employees, provide the drivers with health insurance and other full time benefits.

Problem is that these folks for the most part don't want to be full time employees: they want to work on their own schedule and needs, not a full time schedule that is dictated to them. These drivers may not even need health insurance for example, they may already have it from another source or through their spouse. Plus, the cost and resultant prices of the service are built off a contractor model, not a full time employee model. 

But these massive downsides to this political class idea went unheeded and the state government passed law AB15 which required that Uber and Lyft drivers (and other independent contractors) be full time employees of any company who hired them. As a result, Uber and Lyft have made it very clear what is likely to happen if forced to live under this ridiculous law:

• Until a recent court hearing gave them some breathing room, Uber and Lyft were hours away from ceasing operations in the state of California.
• This would have and still might, force many, many Uber and Lyft drivers to be out of a job and remove a wonderful service from the market, a service that has proven itself to provide choice, reduce costs, generate jobs and economic growth.
• Uber estimates that if it is forced to go to a full time employee model that 75% of its California drivers will lose their jobs.
• Uber also told the court that if forced to change its business model, the millions of dollars needed to invest in the new business requirements would raise costs 120% for the consumers while reducing the number of consumers who would have access to an Uber ride.
• A full time employee model for the companies will require that employees work 40 hours week which would make sure that stay at home parents, retirees, and college students looking for part time work would be forced out of a job and lose the contractor paycheck that they were happy with.
• This will force both Uber and Lyft to change their business model and make significant investments to the new model being forced on them, resulting in additional costs that will be passed on to the consumers.
• Some people will see a major drop off in service since there will be fewer drivers available at most times since xx% of drivers have been axed.

Great job California politicians. Take a new, vibrant market segment, one that satisfies both contract employee and customer needs, encourages economic growth, grows the tax base and muck it up because of your economic ignorance. 

And it is not just Uber and Lyft drivers that will get screwed in the end. The law applies to ALL independent contractors, e.g. artists, free lance writers, independent truck drivers, etc. If any company wants to hire any of these California folks for a short term job contract, the law requires them to become full time company employees. 

And it is pretty obvious what will happen: a publication looking for a story to be written will not hire a California writer, they will go to another writer in another state where the contract worker relationship still exists. An independent truck driver in California will likely lose out to truckers in other states since a trucking company may want short term contract workers, not full time workers. As a result, a large swath of California independent workers and contractors will suffer significant financial hits because of this economic ignorance.

The free market, when allowed to be free, is the greatest wealth and job creator in the world. The problem is that the ignorance and egos of politicians restrict that freedom and such behavior never results in better economic conditions for anyone. 

Just ask the soon to be laid off Uber and Lyft drivers and those customers that will find it harder to get a lift and those drunks that are now out driving on the streets if life was better now that the political class jumped into something they were obviously clueless about.

Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at:

https://www.amazon.com/Walter-Bruno-Korschek/e/B002KYU08Q/ref=dbs_a_mng_rwt_scns_share

Please visit the following sites for freedom:


http://www.reason.com
http://www.cato.org
http://www.bankruptingamerica.org
http://www.conventionofstates.com
http://www.youtube.com/watch?v=08j0sYUOb5w