The way to empower labor is to give people the freedom to work. Many working-class advocates push for higher minimum wage laws and insist that independent contractors must be classified as full-time employees, yet those regulations undermine individuals’ ability to leverage their skills and human capital, ultimately hurting the same people that those laws are supposed to protect.
With the rise of artificial intelligence and increased automation capabilities, minimum wage laws are more harmful than ever before. They actively encourage companies to invest in automation, because the degree to which there is a return on investment for that decision depends heavily on labor costs. A minimum wage law can be the difference between giving a teenager a chance at their first job and simply purchasing a robot to do the same task.
AI-induced productivity gains could prove so large that they bring about deflation, and in a supply-driven deflationary economy, minimum wage laws would prevent wages from responding to lower prices. In a scenario where a banana costs three cents, a twenty-dollar minimum wage would dramatically increase unemployment.
Many states also maintain an archaic approach to benefits by unnecessarily tying health care to a traditional W-2 job. That may sound appealing on paper, but it fails to reflect the complexity of modern work. Large numbers of people operate as 1099 contractors for multiple employers, whether driving for both Lyft and Uber, or working as self-employed contractors with several clients.
Benefits policies should instead be designed around a modern flexible workforce, which is precisely what the portable benefits legislation Libertas helped pass in Utah in 2023 accomplished. That first-in-the-nation measure allowed employers the option to contribute to “portable benefit accounts,” which can be used to purchase health insurance. Doing so tied benefits to the individual, not the employer, enabling companies to provide a competitive benefit to non-traditional workers.
While Utah has done its part to empower workers, states like California have taken the opposite approach. With one of the highest minimum wages in the country, the unemployment rate in the Golden State is among the worst in the nation. In free markets, wages are the product of supply and demand, not government planning. When regulators think that they know better than the market, the result is that jobs become less accessible, stripping people of valuable opportunities to develop their skills and build wealth.
To truly celebrate labor this Labor Day, let people work.
