LP #33: Digging Moats Between First and Second

Author: Gary Winslett

Some people were born on second but think they hit a double. That can be annoying but so be it. We all must bite our tongues sometimes and constantly denouncing others for their privilege can be grating in its own way too. What is unacceptable though and merits vociferous denunciation is when those people born on second start trying to dig moats between first and second base. This is true even when, and perhaps especially when, the moat diggers claim to be working on behalf of the base runners.

President Biden nominated David Weil for a key post in the Labor Department. His nomination however was defeated in the Senate by a vote of 53-47, with all Republicans as well as Joe Manchin, Kyrsten Sinema, and Mark Scott voting against him. Though Weil was not confirmed, the Biden administration is likely to regroup and nominate someone with less of a paper trail than Weil but who largely agrees with Weil’s wrongheaded views. Given this, it is important to review Weil’s ideas in order to both have a solid grasp on what is mistaken about them and to have a clear understanding of which policy areas the next nominee should be scrutinized on.

When he was in the Obama administration, Weil used his power to curtail three kinds of work that are crucial for people trying to make it from first base to second base economically: independent contracting, gig work, and franchises. He continued to work against those forms of work while outside of government and was set to do even more to constrain them if the Senate had voted to confirm him.

David Weil’s Bad Ideas

Independent contracting is when a person agrees to perform work for a business that is not their employer. That arrangement provides more flexibility for the worker as they will have more control over the work they will or won’t take and provides more financial flexibility for the business. To give an example of how this works, in 2010 and 2011, after I left the Army but before I went to graduate school, I was having difficulty finding full-time employment (this was the bottom of the Great Recession) and so I took three part-time independent contractor positions. By day, I was a Freedom Trail tour guide, at night I was an SAT, GRE, GMAT, and LSAT tutor for a local tutoring company, and in my spare time did freelance political analysis- that third one was technically gig work. For the entertainment of you dear reader, here is a picture of me in my Freedom Trail get-up.

The Freedom Trail would call or email me and ask if I wanted to do a given tour at a given time and date and I could accept or pass. A similar process happened with my tutoring work. It worked for those companies and it worked for me. No one was taking advantage of me. In fact, those three jobs were a crucial lifeline for me during some very difficult years in the labor market.

David Weil, and other economic leftists like him, insist that those kinds of work arrangements are inherently exploitative and that it is the government’s duty to put a stop to them. This is why, in 2015, Weil issued regulatory guidance aimed at severely constraining businesses and workers’ ability to have independent contractor relationships. This is why, after leaving office, Weil helped Massachusetts Attorney General Maura Healey file a lawsuit against Uber and Lyft aimed at curtailing gig work. If Weil and Healey had their way back in 2010 and 2011, they would have deprived me of a meaningful form of economic freedom and in turn prevented me from telling tourists in Boston about how the British denied economic freedom to American colonists. There’s something so very tragicomic about that.  

Meanwhile, Weil was undercutting another group of people trying to move up in the world: people who want to start their own businesses but know that they lack some of the immediately necessary resources to do so. It is worth noting that franchises are particularly helpful for minorities: more than 30 percent of franchises are minority-owned compared to just 19 percent for non-franchises. Just as independent contracting provides benefits both to businesses and to workers, the franchise model provides benefits both to the larger parent company and to the franchisee. The larger company expands its market reach while the franchisee gets key logistical and branding support. As Barbara Brixton, an African-American female owner of a Schlotsky’s Deli franchise says, “I don’t think the lenders would give me the time of day if I had come in trying to borrow as much as I did for my own sandwich shop,” she said. “But this is a proven business with a track record. As a first-time owner, I think it’s the best way to go.”

This support is why the franchise is sometimes referred to as running a business with training wheels. Though that may sound dismissive to some, there are lots of people who have the drive and daring to start a small business but also have the savvy to know that they could use some help. Good for them!

But Weil and people like him do not see it that way. To them, the franchise model is associated with low wages and so they see it as something to curtail where they can. That is why Weil rewrote regulations around the joint employment standard that constrains franchises and their relationships with workers. At the same time, he targeted nonunion franchises for extra scrutiny. Again, this shows a penchant for looking down on work other that unionized 9-5 work.

Who Gets Hurt By the Moats

California’s AB 5 is a warning from the present on just how harmful restrictions on independent contracting can be. In 2019, California passed Assembly Bill 5 which created an “ABC test” that very tightly constrained which workers could be classified as independent contractors. Predictably, this has hurt independent contractors. It bears pointing out that most independent contractors like being able to work in that manner. In fact, 87% say they were happier working independently.

Contrary to the self-delusions of AB 5’s authors, they were not swooping in to save laborers from the depredations of capital but rather were undermining people just trying to make a living. This is why, not long after the law passed, it was clear that: “hard luck stories are everywhere. A nonprofit jazz co-op is struggling because of the law. Sign-language interpreters are losing work. Freelance newspaper columnists who contribute weekly columns — and are unlikely to get permanent jobs with newspapers — can’t continue writing because the law puts a limit on the columns they can produce. All sorts of workers, from court transcribers to home-based entrepreneurs, are losing income. The Times of San Diego says two million workers face uncertain futures.”

Just as AB 5-style restrictions hurt the hardworking but less advantaged, because franchises are such an important avenue of entrepreneurship for minorities and women, so too do anti-franchise regulations. And a majority of franchise owners feel that it is a good model for them. According to one poll, the average income for a franchise owner is $63,000 and 74 percent of them say they would do it again.

And it’s not just the franchisees who benefit. Franchise work, like gig work, is a key source of income for those on the margin of the labor market such as people with criminal records, people with loved ones they need to care for, people who live in rural areas, and the people who live in impoverished parts of inner cities.

Not to put too fine a point on it, but these are the exact kinds of people that Democrats spend so much time claiming they want to help. If they mean that, if they really do want to help these people, they should stop trying to micromanage the labor market. The David Weils of the world may have never needed a side hustle or minimum wage job and so view those kinds of jobs as fundamentally exploitative but many of us who have worked these kinds of jobs don’t think we’ve been taken advantage of at all, we think of these jobs as lifelines when we’ve needed them. Finally, in addition to being out-of-touch, it is patronizing for government officials to proceed from the position that they know what jobs are worth having better than the people who will actually do those jobs.

Whoever the Biden administration nominates next, there is a good chance that they too agree with Weil’s ideas. If David Weil or whoever his replacement nominee is thinks that driving for Uber is beneath them, they are free to not drive for Uber, but it is a different matter entirely for them to use government power to play white knight, and especially if their white knight-ing is actually getting in ordinary people’s way. They can say all they want that what they are doing is pro-worker, what they are actually doing is digging moats between first and second, and for the good of every ambitious American trying to run the bases they have to be stopped.