Employment Outcomes Post California's AB5

Our new study finds that self-employment and overall employment decreased post-AB5

Worker reclassification policy efforts have sprung up in recent years with the emergence of platform-economy companies and concerns over misclassified “gig workers.” These policy efforts are aimed to help more independent contractors become traditional employees who can enjoy various employment-based benefits and protections.

But there is a lingering question about whether reclassification policies simply change the composition of the workforce (with more workers becoming employees and fewer workers as independent contractors), or whether they have an impact on the number of workers and jobs.

My co-authors and I provide the first empirical assessment of recent reclassification policies by analyzing the employment outcomes in response to California’s AB5, which enacted the country’s strictest legal criteria for classifying a worker as an independent contractor.

Proponents of AB5 argue that it induced some employers to reclassify independent contractors as employees to comply with the law, and thus increased the share of workers who received employment-based benefits and protections. Others argue that while some independent contractors may have been reclassified as employees, many more likely lost their jobs because employers cannot reclassify all or most independent contractors as employees.

We empirically examine the employment effects of California’s AB5, focusing on overall employment, labor force participation, traditional employment, and self-employment.  To our knowledge, there has been no empirical assessment of the impact of California’s AB5 on employment.

Our results show that self-employment and overall employment decreased post-AB5. We find no robust evidence that traditional employment increased post-AB5.

Overall our findings suggest that AB5 did not simply alter the composition of the workforce as intended by lawmakers, with more workers becoming employees and fewer workers as independent contractors. Instead, our findings suggest that AB5 is associated with a significant decline in self-employment and overall employment.

The study will be published in the next week or so, and I’ll share it on here.