When Gig Workers No Longer Gig: The Impact of California Assembly Bill 5 on the Online Labor Market

The rapid growth of the gig economy has intensified debates over how to classify workers. California’s Assembly Bill 5 (AB5) reclassifies many independent contractors as employees, yet its practical effects on gig workers remain unclear. Using data from a major online labor platform and a difference-in-differences design, we provide one of the first empirical assessments of AB5’s impact on workers’ earnings. We find that California gig workers’ monthly earnings rose relative to workers in other states, but this increase was driven by longer working hours, offsetting a drop in hourly pay. These results highlight the complex trade-offs of reclassification: although workers may gain access to employee benefits, they may also experience reduced hourly rates and increased workloads. For policymakers, our findings offer evidence to guide similar initiatives under consideration in other states and underscore the need for nuanced, context-sensitive regulation. For platform managers, the results suggest opportunities to align platform design and worker education with evolving labor laws to support compliance and sustainable growth. Together, these insights inform future policy and platform strategies aimed at balancing worker protection with flexibility in the gig economy.