• Tag Archives California

  • California’s War on Gig Work Falls Hardest on Women

    Posted on by Azrael Comment


    This year, California’s progressives decided to wage war on the nightmare of being your own boss. A new state law aimed at limiting the gig economy has already cost hundreds of people their jobs—and had a seriously harmful impact on women’s earnings and long-term happiness.

    Assembly Bill 5 curbs the ability of companies like Uber and Lyft to classify their workers as independent contractors. The law, which codifies the California Supreme Court’s Dynamex decision into law, means companies in the $1 trillion gig economy would have to hire freelancers as employees and give them benefits, including healthcare coverage. Governor Gavin Newsom signed the bill into law on September 18. It takes effect on January 1.

    The companies say that kind of change threatens their business model and could mean bankruptcy. It also means their newly designated employees can be unionized, a boon for organized labor. Teamsters organizers have already begun laying the groundwork.

    But the law contains a provision that limits freelance writers to submitting 35 articles per outlet each year. (The bill’s author admits the number is “arbitrary.”)

    Media outlets that rely on independent content producers are scrambling to comply with the law before it takes effect in a few days—and one of them, Vox, announced it will engage in a round of mass firings.

    The bill’s author, Democratic Assemblywoman Lorena Gonzalez, said her goal is to “preserve good jobs,” but only those that pay “a livable, sustainable wage job.” Vox apparently did not fall into that category.

    The hundreds of workers Vox laid off have the opportunity to apply for the new, full-time jobs the company just announced—20 of them.

    Freelancers who love what they do can keep writing, explained John Ness, executive director of the Vox-owned website SB Nation, but they “need to understand they will not be paid for future contributions.”

    Thanks to government intervention, hundreds or thousands of authors will lose their most viable source of income.

    Freelance authors blame the law, not their employers, for turning their lives upside down. CNBC reports:

    A writer named Rebecca Lawson, who covered the NBA’s Dallas Mavericks from San Diego, wrote a post on Monday titled, “California’s terrible AB5 came for me today, and I’m devastated.” Lawson, who was editor-in-chief of the blog Mavs Moneyball, said she would be forced to step down as of March 31.

    “SB Nation has chosen to do the easiest thing they can to comply with California law — not work with California-based independent contractors, or any contractors elsewhere writing for California-based teams,” Lawson wrote. “I don’t blame them at all.”

    The Hollywood Reporter shares the story of Arianna Jeret:

    [Jeret], who contributes to relationship websites YourTango.com and The Good Men Project, says freelance writing has helped support her two children and handle their different school schedules. Her current gigs — covering mental health, lifestyle and entertainment — allow her to work from home, from the office and even from her children’s various appointments. “There were just all of these benefits for my ability to still be an active parent in my kids’ lives and also support us financially that I just couldn’t find anywhere in a steady job with anybody,” she says.

    Similarly, author Kassy Dillon tweeted:

     

    Not all those opposed to the new law are women, by any stretch of the imagination. Aaron Pruner, whose clients include The Washington Post, said, “Working with a baby at home is easier to do when I have my own schedule to work from, as opposed to a 9 to 5.”

    But women bear the brunt of the government-imposed limit. Two-thirds of U.S. freelancers across industries are female, according to PayPal’s “U.S. Freelancer Insights Report.”

    Curiously, the bill carved out vast exemptions. The San Francisco Chronicle revealed that lawmakers exempted a series of higher-paying professions including

    doctors, psychologists, dentists, podiatrists, insurance agents, stock brokers, lawyers, accountants, engineers, veterinarians, direct sellers, real estate agents, hairstylists and barbers, aestheticians, commercial fishermen, marketing professionals, travel agents, graphic designers, grant writers, fine artists, enrolled agents, payment processing agents, repossession agents and human resources administrators.

    But the politicians made no provision for freelance writers, despite months of heavy lobbying.

    Freelance work empowers women to choose how they spend their time. Female workers have repeatedly told pollsters from across the globe—as far as Australia and Denmark—that their top workplace desire is the flexibility to create greater work-life balance. Some 40 percent of women say they would take a lower salary in exchange for more control over their schedule.

    Freelancing lets women choose the hours they work and gives them control over their schedule. They may opt out of working altogether when someone gets ill, only to work night-and-day at other times, based on their needs and wishes. But the right to unionize Uber drivers has denied them that goal.

    Employment is about more than a paycheck. Surveys show unemployment has a longer, more harmful impact on members of both sexes than any other adverse life effect, including divorce and widowhood. “For unemployment, there is a negative shock both in the short and long-run,” reports Our World in Data.

    Unemployment also affects the human person in ways too profound to be measured by an earnings statement, poll, or survey. “Unemployment almost always wounds its victim’s dignity and threatens the equilibrium of his life,” says the Catechism of the Catholic Church. “Besides the harm done to him personally, it entails many risks for his family.” Pope Francis has been outspoken about the dangers of idleness. “There is no peace without employment,” he said on the sixtieth anniversary of the Treaty of Rome.

    There is no peace for California’s freelance writers, approximately two-thirds of whom are women. This is yet another example of how economic interventionism destroys jobs, harms women, and leaves hundreds of families unable to support themselves and saddled with long-term psychological burdens.

    This article is reprinted with permission from the Acton Institute.


    Ben Johnson

    Rev. Ben Johnson is a senior editor at the Acton Institute. His work focuses on the principles necessary to create a free and virtuous society in the transatlantic sphere (the U.S., Canada, and Europe).

    This article was originally published on FEE.org. Read the original article.


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  • California’s Power Problems Are Self-Inflicted

    Posted on by Azrael Comment


    Pacific Gas & Electric (PG&E), an investor-owned utility company serving 16 million customers primarily in Northern California, cut the flow of electricity to 800,000 of those customers last week in what it has deemed “public safety power shutoffs.” According to PG&E, the shutoffs were a necessary precaution to reduce the risk of wildfires in the region as it experienced high sustained winds with gusts of over 70 miles per hour, along with dryer than usual conditions. The shutoffs are an acute reminder for Californians of the fundamental importance of reliable energy, with some analysts estimating that the multi-day episode might have cost the region’s economy over $2 billion.

    The shutoffs, which came with just hours of warning for most of the affected customers, caused Californians dismay and confusion. But, while undoubtedly frustrating, the shutoffs should come as no surprise.

    Last year, according to the official report filed by the California Department of Forestry and Fire Prevention, sparks from a PG&E transmission line in Butte County ignited what became known as the Camp Fire in the early morning hours of November 8. The fire burned over 150,000 acres, destroyed almost 19,000 structures, and killed 85 people. As a result of the catastrophic damages, the company faces more than $30 billion in liability costs and filed a Chapter 11 bankruptcy case in January 2019.

    The Camp Fire, rather than prompting a wholesale evaluation and upgrade of the California utility landscape, has mired the state in paralysis. PG&E states that comprehensive inspections and tree clearance along its 100,000 miles of transmission lines would require a quadrupling of rates—this while PG&E ratepayers already suffer under some of the highest electricity prices in the country, about 20 cents per kilowatt-hour.

    As a result of this logjam, the status quo holds, and Californians are left with the unenviable alternative of high fire risk or high likelihood of imposed blackouts. With last year’s disaster (and numerous other recent fires for which it has been deemed liable) fresh in PG&E’s institutional memory, the application of utmost precaution is understandable. In the words of PG&E CEO Bill Johnson,

    we faced a choice here between hardship on everyone and safety, and we chose safety.

    While Californians should not be surprised, they are justifiably outraged by the shutoffs. One of the hallmarks of advanced societies is reliability in basic services such as sanitation, transportation, and electricity; this episode reveals that California may not be as advanced as it thinks. The question everyone wants answered is how such a failure is possible (and indeed likely again) in a region famed for its technological prowess.

    As Governor Gavin Newsom tells it, this is a failure of corporate malfeasance. “This can’t be, respectfully, the new normal,” Newsom told reporters as the shutoffs continued Thursday. The culprit, he surmised, was “greed and mismanagement over the course of decades.” What Newsom fails to address, and what millions of Californians simply do not know, is that PG&E, with its state-mandated, state-regulated monopoly on supplying power, operates hand-in-glove with the California government.

    This latest California electricity crisis, like its predecessors, is not an instance of market failure but of political failure.

    PG&E does not function as would a company in a competitive marketplace. As a regulated monopoly, it has been granted status as the sole provider of electricity to a swath of the state stretching more than 500 miles from Eureka, north of the Bay Area, to Bakersfield, in the San Joaquin Valley. The company operates in tandem with the California Public Utilities Commission (CPUC), a panel of regulators appointed by the governor. Unlike in a competitive marketplace, PG&E does not need to compete for customers by offering more value dollar-for-dollar than other companies. Instead, PG&E is guaranteed a rate of return on its investments and establishes with the CPUC the corresponding rates that customers will pay.

    The regulated monopoly model leads to some obvious and well-documented problems. The chief problem is the absence of an incentive to innovate and improve service. In a competitive marketplace, upstarts can offer different options, better customer service, or a lower price to prospective customers to entice business away from industry stalwarts. Not so in the regulated monopoly model. If a company in a competitive marketplace fails to adequately account for risk (say, of wildfires) and is then confronted with enormous liabilities that it cannot cover (say, of $30 billion), competitors can learn from the mistakes of others, fill the void, and ensure continued service. Again, not so in the regulated monopoly model.

    Another problem is the phenomenon of regulatory capture, in which bodies entrusted by the government to represent the interests of customers come to represent the interests of the regulated monopoly itself.

    Given the symbiotic relationship of state and company in the regulated monopoly model, to excoriate PG&E for greed and mismanagement, as did Governor Newsom, is to indict the California government itself.

    Meanwhile, the California government exacerbates the challenges for utility companies through policies like the daunting requirement for 100 percent of the state’s power to be generated from zero-emission sources by 2045. Moreover, the state government has itself made fires more dangerous by unintentionally encouraging the build-up of fuels through use bans and by reducing access to forests for emergency personnel through wildlife preservation. The state government has also made damage from fires more likely by barring insurance companies from the nonrenewal of policies in some fire-prone areas.

    Californians are right to feel dismayed in this situation. Basic services like electricity should be the norm despite dry weather and upticks in wind speed. Their ire would be best directed not at PG&E but at the regulated monopoly model that Californians themselves have maintained through their state government. Further, Californians should recognize that the policies their elected officials have instituted in recent years, such as the zero-emissions mandate and the insurance nonrenewal prohibition, will make electricity delivery less certain and fire damage more certain in the future.


    Jordan McGillis

    Jordan McGillis is a policy analyst at the Institute for Energy Research. Follow him on Twitter @jordanmcgilllis.

    This article was originally published on FEE.org. Read the original article.


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  • How We Know California’s New Rent Control Law Will Make Its Housing Shortage Worse

    Posted on by Azrael Comment


    When you see a headline that begins with “Florida man…,” you know it’s more likely to be about some guy trying to take down a tornado with his Colt Python than it is that a resident of the Sunshine State has cracked cold fusion. In public policy circles, the words “California policymakers…” appearing in a headline are attaining a similar status.

    The latest ill-conceived policy from California is a statewide rent cap. As the New York Times reported this week:

    The bill limits annual rent increases to 5 percent after inflation and offers new barriers to eviction, providing a bit of housing security in a state with the nation’s highest housing prices and a swelling homeless population.

    Economists are a famously fractious bunch. Fiscal policy or monetary policy? Stimulus or austerity? Such debates play out among the profession with a level of bitterness that amazes the layman.

    So it is always worth paying attention when you get something like consensus. But that is pretty much what we have on the issue of rent control. In 2012, economists were polled with the following question:

    Local ordinances that limit rent increases for some rental housing units, such as in New York and San Francisco, have had a positive impact over the past three decades on the amount and quality of broadly affordable rental housing in cities that have used them.

    Eighty-one percent of them disagreed. In 2000, Paul Krugman wrote:

    The analysis of rent control is among the best-understood issues in all of economics, and — among economists, anyway — one of the least controversial. In 1992 a poll of the American Economic Association found 93 percent of its members agreeing that ”a ceiling on rents reduces the quality and quantity of housing.”

    If consensus is how you do your science, rent control is a dead duck.

    Why are economists so overwhelmingly against rent controls? One reason is that they mistake the symptom for the problem.

    Look again at the Times quote. It identifies two problems: “the nation’s highest housing prices and a swelling homeless population.”

    Regarding the first, we must ask ourselves why prices are high. They are high because the demand for housing in California is high relative to the supply of it. And why is that? As I wrote in February:

    The bizarre story of Bob Tillman’s five-year, $1.4 million legal battle to turn his coin-operated laundromat into an apartment building shows how regulations constraining supply coupled with rising demand have driven house prices ever higher. Again, when politicians in the Golden State complain about the lack of affordable housing, they themselves are in large part responsible for that lack in the first place.

    Regarding the second problem, the “swelling homeless population,” rent control will do nothing whatsoever for these folks. The problem, remember, is too many people wanting to live in a given stock of housing. Capping the price of that housing by government decree will do nothing to solve that problem. What would help is getting rid of the government regulations that restrict the supply of housing.

    Prices are not problems; they are signals of problems. Trying to solve the problem by treating the signal is like trying to slow down your car by fiddling with the speedometer.

    A second reason economists overwhelmingly oppose rent controls is that they always have unintended consequences. Rent controls are the opposite of minimum wage laws. Where minimum wage laws are price floors, rent controls are price ceilings.

    Economic theory is pretty clear about what the effects of a price ceiling will be. As Figure 1 shows, at equilibrium rents are $600, and 300 units of housing are both supplied and demanded. If you cap the rent at $400, however, you decrease the number of homes supplied to 200 and increase the number of homes demanded to 400. You now have an excess of demand over supply of 200 (demand of 400 minus supply of 200). If you were motivated by a concern for a shortage of housing, congratulations, you just made it worse. It wasn’t intended, but it was a consequence.

    This might sound a little wacky. How can the supply of housing fall? Landlords don’t demolish their houses in response to a fall in rents, so shouldn’t the demand curve be vertical? In this case, a reduction in rents would see no consequent fall in the number of homes available.

    But, wacky as it might sound, the supply of housing is responsive to price changes⁠—it is “price elastic,” in the jargon. An old but excellent and still sadly relevant book titled Verdict on Rent Control examines episodes from a number of countries and finds:

    [I]n every country examined, the introduction and continuance of rent control/restriction/regulation has done much more harm than good in rental housing markets—let alone the economy at large—by perpetuating shortages, encouraging immobility, swamping consumer preferences, fostering dilapidation of housing stocks and eroding production incentives, distorting land-use patterns and the allocation of scarce resources—and all in the name of the distributive justice it has manifestly failed to achieve.

    A recent paper by economists Rebecca Diamond, Timothy McQuade, and Franklin Qian titled “The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco” found:

    [L]andlords of properties impacted by the law change respond over the long term by substituting to other types of real estate, in particular by converting to condos and redeveloping buildings so as to exempt them from rent control. This substitution toward owner occupied and high-end new construction rental housing likely fueled the gentrification of San Francisco, as these types of properties cater to higher income individuals. Indeed, the combination of more gentrification and helping rent controlled tenants remain in San Francisco has led to a higher level of income inequality in the city overall.

    Again, it wasn’t intended, but it was a consequence.

    Rent controls propose using government regulation to solve the symptom—high prices—of a problem—a shortage of housing—which government regulation created in the first place. As public policy, it as ineffective as trying to take down a tornado with a Colt Python.


    John Phelan

    John Phelan is an economist at the Center of the American Experiment and fellow of The Cobden Centre.

    This article was originally published on FEE.org. Read the original article.


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