Commentary: Is Classifying Truck Drivers As Easy As ABC?

Darren Prokop

Just when the motor carrier sector thought that deregulation was the established practice at the federal and state levels, along comes a new labor law which harkens back to a bygone era. Even after 40 years of deregulation at the federal level, and over 25 years at the state level, re-regulation is being tested in the courts. How did we get here? Basically, California Assembly Bill No. 5 (AB5) requires motor carriers to “learn their ABCs.”

A regulator’s job is to regulate. Hopefully, any and all regulations have a distinct goal that corrects what economists call market failures. Well-honed regulations create disincentives for negative activities that businesses might undertake. Generating pollution is a good example of such an activity. Environmental regulations represent society’s level of tolerance for such things. These are political questions subject to government’s accountability to the voters. Without such regulations, so the theory goes, there would be too much pollution – meaning a socially unacceptable level – since private businesses may not feel the incentive to invest in pollution abatement, especially if their competitors do not.

In simple terms businesses should care about profit-making while governments should care about social welfare. Business is accountable to its customers, while the government is accountable to its constituents.

Of course, regulators exist within different jurisdictions. Things get trickier in the United States when the issues of state commerce run up against interstate commerce, which is a federal jurisdiction. Regulators, no matter the jurisdiction, have one thing in common – they want their regulations to be effective. For this to occur they need to be relatively easy to enforce. For example, it is easier to regulate a business’ chimneys and drainpipes than it is to provide subsidies for air filters or water purification devices for every home in the vicinity that might be ill-affected. The regulatory effect on quality of life might be roughly the same; but the transaction cost would be much higher if the subsidy method were undertaken.

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