Labor regulations are stuck in the 1930s

Oct 25, 2024 by AFP

“We don’t want work to be what government defines it as. We want people to be able to work in the way they choose.” 

That’s employment policy expert Austen Bannan on a recent episode of the American Potential podcast, talking about how burdensome regulations hinder workers’ freedom in a changing economy.  

As the labor market is rapidly reshaped by social and technological progress, many of these outdated laws no longer serve the needs of American workers. 

Current labor laws were designed for a different era 

Labor laws like the Fair Labor Standards Act (FLSA) and the National Labor Relations Act (NLRA) were designed for a 1930s workforce and no longer fit the needs of modern workers. These laws were created for an industrial economy, where employment was much more standardized. 

Today’s workforce looks vastly different. 

Millions of Americans work in technology, services, and the gig economy. These types of work are less physically dangerous and less standardized. 

The COVID-19 pandemic accelerated changes in work preferences, with over 70 million Americans engaging in freelancing or independent contracting.  

After the pandemic, things didn’t simply revert to how they were before.  

Millions of workers discovered the benefits of flexible work arrangements. These shifts have redefined how Americans view work, but the government has failed to keep up. 

Regulators are doubling down on outdated employment legislation 

Instead of adapting, regulators have intensified efforts to reclassify freelancers as traditional employees, stripping away flexibility.  

On both the state and federal levels, new legislation further restricts workers: 

  • California’s AB5 forcibly reclassifies many independent contractors as employees of their client companies, whether those workers like it or not. 

When a contractor is forced to classify himself as a full-time employee of his client, the company is forced to comply with a far stricter set of regulations. This reduces flexibility for the worker and raises costs for the company. If the cost of employing a worker rises enough, it may no longer be worth it for the company to keep that worker on at all. 

Defenders of these regulations say that more extensive full-time employment is beneficial for the employees themselves. However, surveys show that those who choose alternative work arrangements to traditional employment overwhelmingly prefer them.  

According to a Bureau of Labor Statistics survey conducted just before the pandemic, 8 out of 10 independent contractors reported they would not return to traditional employment if given the choice. This suggests that when Americans are given the freedom to choose their own style of work, they are perfectly capable of determining the style that works best for them. 

The labor market today demands freedom and flexibility 

It’s time for labor laws to evolve.  

Employment has changed, and laws need to change along with it. Today’s labor market is too dynamic to be governed by rules from a bygone era.  

You can tune into Austen’s full podcast on the changing landscape of American employment here. 

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