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Federal Register / Vol. 86, No. 4 / Thursday, January 7, 2021 / Rules and Regulations Federal law separate and apart from any tax law.
Finally, the Department notes that overall state and local tax revenue may increase as a result of the efficiency and flexibility this rule promotes. The Department believes that legal clarity provided by this rule will result in, among other things, lower regulatory compliance and litigation costs, more efficient and innovative work arrangements, and new jobs for individuals who otherwise would not work. All of this could increase firms profits and workers incomes, which results in a larger pool from which state and local taxes are drawn. The overall positive effect on state and local tax revenue may dwarf, for example, any reduction in unemployment insurance or workers compensation taxes. The Department, however, declines to quantify net effects on state and local tax revenue because it believe any such attempt to do so would require too many assumptions.
c. Fair Competition
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Several commenters stated that expanding the scope of independent contractors will fuel a race to the bottom, where companies will feel pressure to classify workers as independent contractor to reduce labor costs in order to compete in their market. UPS claimed that companies misclassifying workers as independent contractors externalize their costs and hurt other businesses through unfair competition.188 The Department believes that this will be unlikely because the risks of losing workers likely prevents businesses from reducing overall compensation, which includes the fully burdened wage rate i.e., with taxes and benefits included.
Any decrease in compensation below this level would likely result in firms not being able to hire adequate labor either quantity or quality. This rule does not, as some commenters claimed, expand the scope of permissible independent contracting arrangements but rather clarifies and sharpens the test for determining proper classification, which is expected to benefit both workers and firms.
188 UPS does not use independent contractors for some of the roles or occupations that its largest competitor, FedEx, does. FedEx relies heavily on independent contractors for its business model, and recently won a legal case against the National Labor Relations Board, in which the court found that certain FedEx drivers were legitimately classified as independent contractors under the NLRA. See FedEx Home Delivery v. NLRB, 893 F.3d 1123No.
141196 D.C. Cir. 2017.

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d. Income Inequality and Impacts on Minorities and Women Some commenters asserted that the rule could increase racial and gender income inequality. NWLC wrote that additional protections other than minimum wage and overtime pay afforded by the FLSA were particularly important for working women, such as employer obligations to accommodate breastfeeding workers 189 and protections against pay discrimination. The Washington Center cited a study on outsourcing that it believed shows independent contracting has contributed to increased wage inequality in the United States. 190 But the cited study actually found something different: the increased concentration of typically low-wage occupations over time can be explained by changes in the characteristics of establishments employing these occupations. 191 In other words, the study linked wage inequality to employers outsourcing jobs to other employers that paid lower wages, and made no attempt to isolate the effects of independent contracting.
The evidence discussed in this analysis shows that independent contractors often earn more than their employee counterparts further undermines the commenters assertion.
UFCW wrote that the proposed regulation fails to address its potential impact on people of color who are overrepresented in low-wage independent contractor positions such as app-based platform work. This rule clarifies for app-based platforms how to properly classify workers, thereby reducing regulatory compliance, litigation, and transaction costs. Some of these cost savings could be shared by app-based workers in the form of increased earnings, bonuses, or more job opportunities.192 To the extent that certain racial groups make up a disproportionate share of app-based workers, those groups will also enjoy a disproportionate share of benefits.
Regarding gender-based inequality in 189 Independent contractor relationships provide flexibility to accommodate individual worker needs, such as child care and breastfeeding.
190 Including E. Handwerker and others.
Increased Concentration of Occupations, Outsourcing, and Growing Wage Inequality in the United States, 2015, https
www.semanticscholar.org/paper/IncreasedConcentration-of-Occupations%2C-and-GrowingHandwerker-Abraham/
f7d0d2c9cfcbf53f961bb07a2542abefe4be84c0?p2df.
191 Id. at 13 emphasis added.
192 If, for example, the platform were to transfer some of these increased earnings to consumers in the form of discounts, the demand quantity for the services and thus the job opportunities for the ICs could increase.

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the gig economy, a recent NBER study found that the gender wage gap among on-demand rideshare workers is lower than that of the rest of the economy and is entirely attributed to differences in experience and preferences.193 The NBER study specifically found that discrimination is not creating a gender gap in this setting, and no other paper has ever estimated such a precise zero gender gap in any setting. 194 Several commenters cited other studies that document measurable benefits of independent contractor opportunities for women. Dr. Liya Palagashvili provided a lengthy review of the literature on the beneficial impacts of independent contract work for women.
She cited a study that finds that women are the main caregivers at home, and 96
percent of women indicate that the primary benefit of engaging in platformeconomy work is the flexible working hours. See also Independent Womens Forum Women find independent contracting appealing because of the flexibility, autonomy, and freedom it provides.. A McKinsey Global Institute study, discussed in an earlier section, found that independent work offers caregivers, who are predominantly women, access to economic opportunity they would otherwise not have, concluding that this type of flexibility can ease the burden on financially stressed households facing logistical challenges. Dr. Palagashvili cited numerous other studies that are consistent in their findings: Women are very much attracted to work arrangements that offer flexibility, including one that finds 75 percent of self-identified homemakers, or stay-athome mothers in the United States, indicated they would be likely to return to work if they were to have flexible options. These studies offer data based on primary research, and several sources are based on economy-wide survey data.
Dr. Palagashvilis comments are supported by many individual women who commented to affirm that independent contracting provides necessary flexibility to balance their work and life priorities. One woman explained that as a work-at-home mom, I ramped up my business to coincide with the time I had available while raising my kids. I worked during their nap times, and then added more hours as they went to school. Another 193 Cody Cook, et al., The Gender Earnings Gap in the Gig Economy: Evidence From Over a Million Rideshare Drivers, NBER Working Paper No. 24732, June 2018, available at https www.nber.org/
system/files/working_papers/w24732/w24732.pdf.
194 Id. at 14.

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