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Rubio's Old Ideas for New Gig Economy

Paula Dwyer writes editorials on economics, finance and politics for Bloomberg View. She was London bureau chief for Businessweek and Washington economics editor for the New York Times, and is a co-author of “Take on the Street: How to Fight for Your Financial Future.”
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Marco Rubio gave a nice speech on Tuesday about how much he loves Uber, Airbnb and the rest of the sharing economy -- and how much he wants to free it from government shackles. 

Politically speaking, it was a demographic pitch: Millennials (ages 18 to 35) make up about a third of the electorate, and their livelihoods depend disproportionately on the gig economy. They could swing the 2016 outcome in Florida, Ohio and other swingy states. At age 44, Rubio is the youngest person in the race, and he casts himself as the tech-friendly candidate of the future. There's even a chapter in his book, "American Dreams," called "Making America Safe for Uber." 

QuickTake The Sharing Economy

Rubio's pitch avoids the usual menu of millennial-motivating social issues -- same-sex marriage, climate change, inequality and criminal-justice and immigration overhauls. Instead, he stresses themes like the mistrust of government, big business, the financial system and politicians

But when it comes to national policies for beefing up the sharing economy, these ideas aren't especially relevant. For one thing, presidents don't have much to say about them. Most battles that companies like Uber and Airbnb are fighting are on a local and state level, or in court.

Rubio's paeans to innovation, disruption and rapid-fire economic transformation don't reveal much about where he stands on specific and knotty issues the sharing-economy has raised. One is whether companies can classify workers as independent contractors (and avoid paying them benefits), and still require them to follow rules normally reserved for full-time employees.

If the goal is to win votes, moreover, it doesn't make sense for Rubio to take the side of sharing economy startups. The employee-versus-contractor debate pits far more millennial-age workers dependent on their next gig to pay the rent against a relatively smaller number of peers who are entrepreneur-owners. 

The closest Rubio came in his speech to addressing that issue was to say he likes Germany's solution: It created a new "dependent contractor" classification for workers who are neither full-time nor freelance, yet are able to work a full week for a single employer while retaining control over their schedules and conduct. 

If Rubio likes the German model, why isn't he sponsoring legislation to require the U.S. to recognize the class of in-between worker? Doing so would be timely. Uber, Lyft, Postmates and other companies are being sued over their use of contract workers. Perhaps it would clash with his otherwise strong view that Washington shouldn't dictate to states and cities. 

Rubio instead seems to favor deregulation. He would, for example, cap the amount that regulations can cost the U.S. economy each year, something Mitt Romney proposed in 2012. He also would ask federal agencies to calculate how each proposed rule would affect competition and innovation. 

That wouldn't have much impact on gig-economy companies, which are highly unregulated as it is. Even Rubio recognized this on Tuesday when he said, "We have to realize that all of the best innovation in our economy is happening in the unregulated space." 

Rubio is correct to say that there are state and local regulations that impose costs on gig-economy companies. Occupational licensing is particularly burdensome. But some rules are justified, especially if they protect worker and consumer safety. Most millennials support a higher minimum wage, for example. Would Rubio ban state rules requiring Uber to conduct background checks of drivers? Would he use federal power to keep localities from making homeowners who rent rooms through Airbnb follow minimum standards and pay commercial taxes? 

Ask any Uber driver about the wonders of the on-demand economy, and you'll get an earful about the squeeze being put on them. They have large out-of-pocket expenses -- car payments, gasoline, insurance. They must share their revenues with Uber, which limits the fares they can charge. Uber drivers in Philadelphia, one study found, made about $10 an hour. That would mean they couldn't earn $90,000 in a year, as Uber claims they do in some cities, even if they worked every hour of every day.  

If Rubio and the other candidates really want to see the on-demand economy flourish, they'll consider the ideas in this Kauffman Foundation report, for example, on how to create an economic environment that fosters innovation. Encouraging idea generation, product development and new business requires a lot more than shopworn rhetoric on deregulation.        

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Paula Dwyer at pdwyer11@bloomberg.net

To contact the editor responsible for this story:
Jonathan Landman at jlandman4@bloomberg.net