In the United States this week the news was filled with accounts of the current supply chain crisis. In particular, the Port of Los Angeles was cited as dozens of cargo ships are literally waiting for weeks to unload their goods. The media blames the California Port situation on a driver shortage. Well, not so fast, as usual there is much more to that story. We took a particular interest in the story since until about five years ago we lived on the Palos Verdes Peninsula directly next to Long Beach and could see the Port of Los Angles in the distance.
California just loves regulation, and the port is no different. Traditionally, ports have been serviced by Owner Operators (non-union) and Union Drivers. Well, California under a law called AB 5 essentially prohibits Owner Operators. The law requires companies which use independent contractors in the state to prove that their workers should not instead be classified as employees. California Governor Gavin Newsom signed Assembly Bill 5 (AB5) into law on September 18th. It is estimated that there are 70,000 Owner Operators in the State, and various lawsuits are now underway trying to overturn this regulation. Furthermore, long term, California will require all new trucks be electric by 2035, and it is very questionable whether this technology even exists, which may be affecting investment into brand new trucks. Some “fact checkers” have attempted to explain away this regulation and claim it is not a contributing factor. Again, not so fast, anyone who has lived in California for any period of time realizes how unfriendly to business it is. Common sense would suggest a moratorium on AB 5 might be in order during this crisis, but I will not hold my breath. Welcome to California, last one to leave, please turn out the lights.
