Hillary Skewers the Gig Economy

Presidential candidate Hillary Clinton wrote an oped in blogpost form at the Wall Street Journal.  Clearly, this was an economic policy stump speech.  In it, she talked about a lot of goals she would have in her administration.  One thing she took time out to do was go after the gig economy.

America is in transition right now.  We are not only moving from the Industrial Age to the Information Age.  The world is moving from a place where medium sized corporations employed people to a place where mega corporations of 10,000+ employ people, and independent entrepreneurial companies of less than 10 employ people.  Most likely, the smaller companies will be a part of the gig economy-and very amoeba like.  People will form up, do a project, then move on.  Teams will have different faces from project to project.  Those kinds of teams are 1099 employees for IRS tax purposes.  Based on Hillary’s statements, she wants to change that.

She also wants to make people that freely choose to work for companies like Uber, Airbnb, Etsy and other companies in the sharing economy 1099 employees.

Fred Wilson blogged about this today here.  Clearly, I am not a Hillary supporter but I think I can safely assume Fred is. Both of us have invested in companies that benefit from the gig economy-of course Fred has been much more successful than me!  But, the companies I am invested in are operating and doing well. (Dabble, Nextspace, Desktime)

There are several points to talk about with regard to Hillary’s platform.  I am not going to delve into each and every one here but will ask a few questions.

  • Hillary talks about fairness.  What’s fair?  What is fair to you might not be fair to me.  Do we want government in the business of choosing what’s fair?  Or, would you rather decide for yourself what’s fair?
  • Hillary wants investment in solar power.  Been there done that.  Why not eliminate all the subsidies for all energy companies and let the market decide?
  • Hillary wants to support union workers.  Public union workers are bankrupting taxpayers.  Private union workers sometimes bankrupt companies.  If free to choose, most people don’t want to be in a union. Make no mistake, the attack on the gig economy is about the unions which own Hillary.
  • She even took a shot at Scott Walker.  He set in place policies in Wisconsin that allowed more people to get a job.  He balanced budgets while reducing taxes.  His policies enabled municipalities to balance budgets.  Wisconsin is seeing economic growth.  Walker’s policies enabled people to create jobs.  Over the same period of time a neighboring state, Illinois, followed the Clinton path and saw economic contraction.

I take huge exception to candidate Clinton and her interpretation of the gig economy as it pertains to companies involved in it. Here is why.

  1. The companies are networks.  They merely connect people to provide goods and services.  They handle payment, and enable delivery of those services.  The companies never own the goods, or the intellectual property created.  Depending on the business, the liability is very different.
  2. Workers are free to choose when they work, where they work and when they don’t, or if they even work at all.  The companies don’t supply the goods or tools that the person uses when working.  Why do we want to stop people from engaging in freedom of choice to work when they want to work and where?  Are we against liberty?
  3. Employees incur expenses when working.  They incur depreciation on the tools they use to provide the service.  They can write that off against their income.  Do any of the sharing companies take depreciation expense on the physical items that individuals use to produce the goods and services they provide?
  4. The gig economy often takes idle assets and turns them into productive assets.  This increases American GDP.  Workers don’t pay withholding taxes, but they pay stiff self-employment taxes.
  5. Workers need to be free to choose their own destiny and accept the benefits and consequences that come with it.  Why should any bureaucratic government choose?  I don’t think someone pushing paper behind a desk knows better than a person deciding for themselves.

My first job out of college was with 3M.  I competed against independent contractors that sold similar goods.  I was an employee of 3M.  They gave me the tools to do my job, collected taxes from me, and provided benefits.  The independent guys all worked for themselves and ate what they killed.  If they didn’t sell, they were out of business.  If I didn’t sell, I was out of a job.

Since 1986 I have been an independent employee.  I pay self employment tax.  When I make money, I pay even more tax.  But, I keep 100% of everything.  When I lose, and it happens-I lose 100% of everything-and I still owe some taxes!  Hillary also has a problem with traders.  She doesn’t understand trading, or its effects on the economy.

She also doesn’t understand employment and how hard it is to start in life for many people.  Hillary said,

I hear this everywhere I go. A single mom talked about juggling a job and classes at community college while raising three kids. She doesn’t expect anything to come easy. But if she got a raise, everything would not be quite so hard.

The grandmother who works around the clock providing child care to other people’s kids. She’s proud of her work, but the pay is fairly enough to live on, especially with the soaring price of her prescription drugs.

The young entrepreneur whose dream of buying a bowling alley where he worked as a teenager was nearly derailed by his student debt. If he can grow his business, he can pay off his debt and pay his employees, including himself, more, too.

Why does she want to stop that single mom from working?  Why does she want to limit that mom to work only at jobs when employers say she can work?  Why can’t that mom be free to choose what she wants to do when she wants to do it?  Why can’t that mom use her knowledge and skill to create jobs for herself in a variety of gig economy jobs?  At Dabble, there are teachers making $20,000-$30,000 per year.  Why would Hillary want those people to go out of business and stop them from creating something for themselves?

The grandmother should be free to choose too.  By the way, if we had competition and an Uber for healthcare, grandma would see increased competition and reduced prices.  But, Hillary and her policies create oligarchy that increases prices and limits competition.

The young entrepreneur wouldn’t have a chance in Hillary’s economy.  In Hillary’s economy, they would have to become an employee of a business.  They’d have to give a lot of their income to the business that employed them.  It would take them longer to pay off student loans, and they probably wouldn’t be able to start.  Perhaps they would have to get in line at the Small Business Administration and hope a bureaucrat would choose them to get a loan.  Instead, why don’t we let people choose themselves?

My friend Andy Swan summed it up succinctly.