Independent Contractors Vital, Growing Source of California Economic Strength

Independent contractors are a vital and growing source of strength in California’s economy, according to a new report co-sponsored by the California Foundation for Commerce and Education (CFCE).

Attempts to rein in independent contractors through regulations would have a harmful effect on California’s economic productivity and employment, the study concluded.

Independent contracting is a business arrangement in which a client firm (or government) will contract with, usually, a small business or individual to perform work that might otherwise be performed in-house by staff employees.

Labor unions in California and elsewhere criticize these arrangements and attempt to apply regulations on record-keeping and taxation that would reduce the incentive to employ or become an independent contractor.

The study, prepared by Philip J. Romero, Ph.D., professor of finance at the University of Oregon and former chief economist for Gov. Pete Wilson, found that independent contractors are an important source of economic strength in California, and that arguments aimed at undermining independent contracting are based on myth, not credible data.

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